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Theoretical Considerations

Theoretical Considerations. Chapter 5 -- Location. Location Decisions two parts. Orientation: Site versus Situation Factors effecting a specific decision. Basic Decision Paradigms. Two most basic issue Site Based Situation Based. SITE. Site.

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Theoretical Considerations

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  1. Theoretical Considerations Chapter 5 -- Location Lect 15 -- Location

  2. Location Decisions two parts • Orientation: Site versus Situation • Factors effecting a specific decision Lect 15 -- Location

  3. Basic Decision Paradigms Two most basic issue • Site Based • Situation Based Lect 15 -- Location

  4. SITE Lect 15 -- Location

  5. Site • Localized factors provides site specific advantages • These advantages attract the activity 19th century Coalfields attracted industry Lect 15 -- Location

  6. Site • Examples • Resource attracted • Coalstrip, Montana – Power Plants • Gulf Coast Oil – Petrochemical Plants • Pac NW Forest – Pulp and Paper industry • Columbia River – Hydro dams, Aluminum Industry & Aircraft Manufacturing Coalstrip, Montana The power plants at Colstrip billow out smoke at dusk. Lect 15 -- Location

  7. Site • Examples • Market attracted • Newspapers publication – including local editions of national papers • Bakeries • Especially specialty bakeries • Grocery Chains • Food Co-ops HaggenStores Lect 15 -- Location

  8. Site • Information based • BioTech Industries builds along South Lake Union in the shadow of UW Med School • BioTech Clustersin Scotland Lect 15 -- Location

  9. Site • Cost Based • Outsourcing to India • Manufacturing to Southern China http://www.news.com/i/ne/sr/digiagenda04/offshore/d3/mappingIndianIT.jpg Lect 15 -- Location http://www.novaprodsol.com/location.htm

  10. SITUATION Lect 15 -- Location

  11. Situation Based • Networks based on movement of goods or information dictate local advantages • Activities locate along these networks to maximize the advantage Hub and Spoke system http://www.mapsofworld.com/images/world-airroute-map.gif Lect 15 -- Location

  12. Situation Based Japan Steel Works Inc. • Examples: • Transportation Based • Ports – processing of imported foreign raw materials at the coastline– existing Japanese and new Chinese Steel Plants • Shenzhen Industrial area next to Hong Kong & International links Lect 15 -- Location

  13. Situation • Examples • Transportation Based • Historical – natural transportation routes exploited by the Erie Canal made NYC our largest city Lect 15 -- Location

  14. Situation • Examples • Transportation Based • Interstates: Cluster of “Just in Time” parts producers for major automobile factories • See Figure 7.14 in textbook Lect 15 -- Location

  15. Situation • Examples • Information Based • Finance: Cluster of leading financial institutions and stock markets in Manhattan, NYC • Easy access and communication between firms Lect 15 -- Location

  16. Final Word • All activities benefit in part from both Site and Situation Characteristics, but usually one or the other dominates the location decision Lect 15 -- Location

  17. Factors of Location Choice • Labor • Land • Capital • Skills & Services • Environments/Amenities • Incentives/Disincentives • Market • Resources Lect 15 -- Location

  18. Labor Impacts in a variety of ways • Cost • Hollowing Out Syndrome • Anti-Union Syndrome • China Syndrome? • Skills • High skill pursuit Lect 15 -- Location

  19. Land Highly localized factor, impacts felt through • Zoning • Real Estate Cost • Infrastructure linkages • Roads, communications, utilities Lect 15 -- Location

  20. Capital • Fixed • Infrastructure investment • Existence of roads, airports, ports, utilities, schools… • Variable • Finance – Banks, FDI, Venture Capital, Government Grants and Loans • Risk versus Return – security and price of borrowing Lect 15 -- Location

  21. Skills and Services • Critical mass that provides spatial economies of scale for similar specialized activities • Managerial • NYC, Chicago, LA and company headquarters • Concentration of highly skill people and services to support their work • Research and Development • Silicon Valley, Research Triangle… • Concentration of computer hardware and software firms and spin-off activities Lect 15 -- Location

  22. Environment/Amenities • If you could work anywhere which is better Mississippi or Oregon? Explain why. • Recreation • Climate • Culture Lect 15 -- Location

  23. Incentives/Disincentives • Government gifts to attract or retain activities • Caution – this could be a zero sum game U.S., EU to negotiate on Airbus, Boeing subsidiesA 3-month freeze on help; complaints to WTO deferred SEATTLE POST-INTELLIGENCER STAFF AND NEWS SERVICES …The EU countered, saying Boeing has benefited from unfair support worth as much as $23 billion -- including a multibillion-dollar agreement with the state of Washington. …Billions in tax breaks and benefits that the state of Washington agreed to in its negotiations to entice Boeing to assemble Boeing's new 7E7 jetliner at Everett aren't due to kick in until about 2008, when the 7E7 is finished. Lect 15 -- Location

  24. Incentives/Disincentives • Government gifts to attract or retain activities • Caution – this could be a zero sum game • Disincentives also exist preventing certain types of activities or hindering them • Movement of polluting activities off-shore • Medical device testing occurring in Mexico rather then US Lect 15 -- Location

  25. Incentives/Disincentives • Lax Government Regulation • Environmental 16 year olds put toxic glue onto Keds sneakers with their bare hands coluichedubita.splinder.com/archive/2005-08 Miners in S. Asia One hundred percent of Sun Hwa’s production is for export.  When we visited the factory in July 1999, they were producing Keds sneakers for Stride Rite.  However, in the showroom we saw sneaker and tennis shoe models they had done for Guess, Gap, Tommy Hilfiger and Liz Claiborne.  They also make rubber boots and ski boots. http://www.nlcnet.org/campaigns/archive/report00/kedsinchina.shtml Lect 15 -- Location

  26. Incentives/Disincentives • Lax Government Regulation • No Labor Protection Union Opposition to Free Trade agreements without labor guarantees Lect 15 -- Location

  27. Situation: Tutorial For Hub and Spoke System http://virtualskies.arc.nasa.gov/research/tutorial/tutorial2b.html Tutorial 2.b. Efficiency and Aviation Capacity The hub-and-spoke system has evolved over time under the design of the airline companies for their own ease in operations. It also has served to keep the cost down for maintaining their fleet. http://virtualskies.arc.nasa.gov/research/tutorial/tutorial2b.html Click Here to View Lect 15 -- Location

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