Industrial Landscapes
I. Manufacturing System:
A. Introduction:
Manufacturing involves the changing of substances into new products. Manufacturing is
carried out by people in all types of economies. Manufacturing does not have to be carried
out in a factory nor does it have to involve the use of power-driven machinery.
A feature of the manufacturing of early societies was its reliance on manual methods.
These activities known as handicrafts and workers are craftsmen. Such industries were
commonly carried on in the dwellings of the workmen and so this became known as the
domestic system of manufacturing. Its great weakness was that total output was limited by
the slow and laborious manual techniques.
Now manufacturing is usually taken to mean the processing of raw materials and the
fabricating of finished products in a factory building using mechanized techniques and
inanimate sources of power. Manufacturing is often equated with secondary industry which is
different from primary industry and tertiary industry.
Manufacturing establishments vary in size. At the lower end of the scale are those small
family works employing one or two men, utilize limited amount of capital equipment, and
involves high inputs of labour. An example of this type of manufacturing is domestic
handicraft industry. At the other end of the scale are those multi-national corporations with
many thousands of employees, involving a high input of capital and equipment, and produce
goods that serve very large markets.
The significance of manufacturing as a major economic activities is even more strikingly
apparent when its contribution to world living standards and population pattern is considered.
B. Classification of Manufacturing Industries:
There are a variety of ways to classify manufacturing industries. Because of Geographers'
interest in location, manufacturing is broadly divided into two groups: processing and
fabricating.
1. Processing industries:
In processing, a material may undergo a change in its physical state, chemical
composition, volume or mass in creating a product more useful to man. An example of
processing industry is the steel industry in which iron ore, coal, limestone and other raw
materials undergo changes in form and state in the manufacturing process.
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a. Initial Processing Industries:
Those processing industries which are first stage manufacturers treating a single raw
material in relatively few manufacturing operations, are example of initial processing,
eg. dairy processing.
Initial processing industries tend to be material-oriented. This is due to the fact that
after processing, there is a considerable weight or bulk loss of the materials thereby
reducing the transport cost for the finished product. A firm can therefore reduce the
total cost of production by locating near to the source of raw materials.
b. Complex Processing Industries:
Some types of processing involve more than a single raw material inputs. Raw
materials are frequently obtained from several different sources and are often
subjected to a series of lengthy and complex processes that involve a high degree of
organization and advanced technology. The processing industry may result in a
product available for immediate consumption, or one that requires further processing
or fabricating, eg. steel making.
However, it is more difficult to classify them into such categories as 'market-oriented'
or 'raw material-oriented'. A variety of location patterns are displayed. For example,
oil-refining industry is found in both Texas and Philadelphia, the former being raw
material-oriented and the latter market-oriented. Some processing industries, on the
other hand, do not belong to either category. For example, the aluminum industry is
strongly for the largest cost component in the whole manufacturing process.
2. Fabricating industries:
Fabricating involved the assembly of a finished or semi-finished product, either from
preprocessed or unprocessed materials, or a combination of both. It involves a change in
the form of the original product but not its state, eg. automobile industry, machinery
making, furniture and clothing.
In general, fabricating industries tend to be market-oriented because the transport cost
for the finished product is much higher than that for raw materials or parts. Cars,
electrical appliances and furniture illustrate this point.
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II. Industrial Location:
A. Weber's Least Cost Locational Theory
1. Assumptions:
Because of the complexity of human economic activities and the variety of factors
which influence location decisions, industrial location theories are based on a number of
assumptions to reduce the complexity of the real world to manageable proportions. They
are: the motive of the entrepreneur in selecting location is to maximize profits;
entrepreneurs have perfect knowledge about all areas; the area in which they seek to
locate is perfectly uniform; transport cost are proportional to distance and volume carried.
Moreover, government policies are disregarded for simplification.
Alfred Weber publishes his theory in 1909, 'Theory of the Location of Industries'. His
model is to seek the least-cost industrial location. He only considers those influences
which seem to have universal application. In essence, his argument is that an industry will
be located where total transport costs are least; but that an industry may be attracted away
from the site of lowest transport costs by sites of cheap labour or by sites where a distinct
advantage gains from agglomeration.
To reduce the complex problem of industrial location to a manageable size, Weber
made the following assumptions:
a. There is the presence of an isotropic plain which is uniform in culture, economic and
political system, and climate. That is to say that the object of the analysis is a single,
isolated nation that is uniform in landforms, climate, race of people and technical
skills, and that the population is under one political authority.
b. Some natural resources are ubiquitous, i.e. they are found everywhere (eg. water, air).
However, many other raw materials are localized and can only be found at fixed
locations, eg. iron ore and coal.
c. Transport cost is a function of weight and distance to be carried and the size of the
shipment. Therefore, the cost of transporting raw material or finished product is
proportional to the distance transported.
d. Labour has a given pattern of distribution, and workers are available at the specific
locations selected by the firm as its location.
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e. Markets for finished products are fixed at certain specific points and do not consist of
continuous areas.
f. Perfect competition exists, i.e. there are a very large number of buyers and sellers in
an industry and no individual buyer or seller can influence the price. Since revenue is
everywhere the same, the best location will be where costs of production can
minimized.
g. Industrialists are 'economic man' who try to maximize his profits and have perfect
knowledge about the industry.
2. Index of Orientation:
Weber devised an index which could be used to separate those industries where much
weight of raw materials is lost during processing from those industries where little or no
weight of raw materials is lost during processing. This material index is defined as:
Weight of localized raw material inputs
Material Index = ---------------------------------------------------------------Weight of finished products
Only those raw materials which tend to occur at particular sites (i.e. localized
materials) are included in the weight calculations - water, sand, clay, which are found
virtually every where (i.e. ubiquitous materials), are excluded.
Industries which use every bit of raw materials in the production process (these are
called pure materials) have a material index of 1.0. In this case, the industry would be
located at either end of the market and the raw material source, or at an intermediate
location. It is regarded as a footloose pattern of location.
Industries which use materials that are greatly reduced in weight during the process of
production (these are called weight-loss or gross materials) have a material index in
excess of 1.0. In this case the industry would be raw material oriented.
If the index is less than 1, there would be a gain in weight and/ or bulk during
processing and the industry would be market-oriented.
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For example, to produce 10 tonnes of cement, the following are required:
Limestone
11.2 tonnes
Clay or shale
2.8
Coal
3.0
Gypsum
0.25
=============================
Total
18.25
Material Index = (18.25 tonnes / 10.00 tonnes)
3. Location Triangle:
A more complicated situation will arise if an industry draws upon two raw material
sources. The point of least cost is a result of the pull from different directions of the raw
material and market. The point tries to minimize the most expensive movement. The
following figure shows the situations resulting in a market orientation for the firm.
However, where the raw materials undergoes weight loss during manufacturing, the
least cost site occurs at some intermediate location between the raw material and the
market. To find the intermediate location, Weber devised his famous location triangle to
resolve the more complicated locational forces. The use of the location triangle in a
simple example is given in the following figure.
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Other location figures other than
location triangles are also used by Weber.
From a comparison of the total costs at
the four locations it can be seen that the
least cost location is the point midway
between the raw materials RM1 and RM2.
More complex location triangles, and
even other geometric shapes, are needed
to resolve the location pulls where more
than two raw materials are involved and
where the raw materials are used in
different proportions or with different
weight losses in the manufacturing
process. Two of these other location figures are illustrated in the beside figure.
4. A cost surface:
Weber devised a useful technique for mapping the spatial variation in transport cost in
order to find the least cost location. He constructed isodapanes - lines joining places of
equal transport costs.
In the beside figure,
R and M represent a
raw material source and
a market respectively.
The thin lines are
isotims which represent
transport cost from the
raw material source or
the market per unit
distance. It can be that it
costs one money unit to
transport the raw
material one km. The
isodapane is shown by
the thicker line joining
points A - F. At all these points the total transport cost of transporting the raw material
and the product is 7 money units. If the 7 money units isodapane is the one that delimits
the area in which a firm can operate at a profit, this will be the critical isodapane outside
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which a factory will not locate. Within the area bounded by the critical isodapane, a
factory is free to locate at any point, although inside this line transport cost still varied.
5. The Varignon Frame:
The best site for a manufacturing firm, where transport costs are expressed on a
weight-distance basis, can be found by a mechanical method devised by Varignon.
It is a simple hardware model known as a Varignon Frame. Pulleys are fixed on a
board at points corresponding to market and raw material sources. Weights proportional
to the weights of raw materials and finished products are attached to three strings. The
position in the location triangle at which the knot where the three weights are balanced.
This position corresponds to the site where transport costs for the manufacturing firm are
cheapest. If the pull of any one corner of the locational triangle is greater than or equal to
the sum of the pulls of the other two corners, the site with the cheapest costs will be the
site with the overriding pull.
A simple example is given in the figure below. C represents the market for 1 tonne of
product X which needs 3 tonnes of the material from M1 and 2 tonnes of the material
from M2. In this example, the pull of M1 is the greatest and the plant will be oriented
towards M1.
6. The effect of cheap labour:
Weber realized that in some industries labour is an important factor in production and
may exert a strong influence upon location. He suggested that in such cases a site of
relatively cheap labour in a region may divert a factory from the site of lowest transport
costs. The diversion will take place, argued Weber, if the saving in labour cost exceeds
the additional costs of transport incurred in moving to the site of cheap labour supply. In
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the case of zinc-smelting assume there is a supply of cheap labour at point L1. At this
point, labour is 25% cheaper than elsewhere, which represents a saving of $16 in total
costs per tonne of metallic zinc.
In the following figure, the isodapanes join points of equal additional transport cost;
they are derived simply by subtracting the transport costs at the least-cost location from
each isodapane. The $16 additional transport cost isodapane is drawn with a heavy line.
Using Weber's word, it is a critical isodapane. For a factory located on the critical
isodapane, the saving of cheap labour somewhere along the critical isodapane, would be
just offset by the additional transport costs incurred in moving there.
Point L1, the supply point of cheap labour, lies outside the critical isodapane. If the
zinc-smelting plant were to move to the cheap labour supply, the savings it would gain on
its labour bill would be eaten up by additional transport costs. Indeed, the savings on
labour would be less than the additional transport costs and the plant would run less
profitably than it would at the point of lowest transport costs.
If, however, the site of cheap labour were at point L2, which lies within the critical
isodapane, the additional transport costs incurred in moving to point L2 would be less
than the savings made in using cheap labour. Under these circumstances, the diversion
from the point of lowest transport costs to the point of cheap labour supply.
Weber found that some industries were more susceptible to differences in labour costs
from one place to another than others. He computed an index of labour cost which, for
any industry, measures the average cost of labour needed to produce a unit weight of
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product, say a tonne. The higher the index, the greater the likelihood of the industry's
diversion from the least transport cost location. But of greater importance in assessing the
pull of labour, thought Weber, is the ratio of labour cost per tonne of product to the total
cost of the weight of materials and product to be transported; this ratio is called the labour
coefficient and it gives an indication of the susceptibility of an industry to regional
variations in the cost of labour. The calculation of the labour coefficient is as follows:
Labour costs per tonne of product
Labour Coefficient = -----------------------------------------------------------------------------Total cost of the weight of materials and product to be transported
If the labour coefficient of a particular industry were high, a pool of cheap labour
would tend to attract that industry to a location different from the one resulting from
calculations based on least transport costs provided the savings from cheap labour
exceeded the extra transport costs incurred in marketing the finished product.
7. The effect of agglomeration:
Agglomeration means the clustering of industrial plants to achieve the type of
economies which can be obtained through the reduction of inter-factory transport costs,
greater possibilities of specialization, the utilization of larger machine units, the
establishment of a pool of skilled labour and managerial expertise, and the development
of localized research and marketing knowledge. Economists describe these savings in
total production costs as external economies of scale or agglomeration.
Weber regarded agglomeration, like labour supply, as a factor which may divert a
factory from the site of cheapest transport costs. Imagine five factories producing
electronic equipment . (The figure above) Each factory occupies the site of cheapest
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transport costs in its own locational triangle. Assume that a factory can save $5 per tonne
of output if it locates near to two others. However, to benefit from this agglomeration, no
one factory must incur additional transport costs of more than $5. In the figure, critical
isodapanes of $5 are drawn around each factory. The areas where just two critical
isodapanes overlap, shown by light shading, are not favourable for agglomeration because
at least three factories must agglomerate for any reduction in production costs to be made.
Where three critical isodapanes overlap, as shown by heavy shading, additional transport
costs are more than offset by the gains of agglomeration, and it would be worthwhile for
factories A, B and C to move near to one another. But of course, and this is not
emphasized in Weber's analysis, it is no use one firm moving to the heavily shaded area
on its own - the boards of all three firms must meet and make a decision to move at the
same time.
8. A case study of the sugar refining in Australia:
The first attempts to grow sugar cane in Australia seem to have occurred in the early
1820's in the Hastings Rivaer area of New South Wales. However, it was not until 1862
that sugar cane was produced successfully from a plantation near Brisbane, and this event
was followed by a period of rapid expansion of the sugar industry. Cultivation spread
rapidly along the Queensland coast and into northern New south Wales with the result
that sugar cane growing is now found in a 2100 km belt extending from Grafton to
Mossman. Production occurs in seven main areas with 95% of the output coming from
Queensland. The figure below shows the location of these districts. The average farm is
45 ha, and the cane harvesting season begins in June and ends in December: the period
when sugar content is at its peak.
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The first stage in the 'industrial processing of the raw sugar is that of milling: the
processes involved are briefly illustrated in the following figure.
Questions:
1. What is the material index of sugar cane milling?
2. Based upon the assumptions of Weber, what predictions can be made about the
location of sugar mills (of which there are 33) in Australia?
The figure below shows the actual distribution of the mills, and this strongly confirms
our expectation: every mill is located in the midst
of its area of cane supply. This close relationship
is accentuated by the facts that the cane must be
processed rapidly before fermentation can take
place, and that the fuel for the processing is
supplied by the bagasse (cane fibre).
The majority of the raw sugar is exported. In
1977 this amounted to something over 75% of the
total production, much under long-term contracts,
the remainder on the free world market. The main
customers for raw sugar are Canada, China, Japan,
Malaysia, New Zealand, Singapore, South Korea
and the USA. The residue is refined within
Australia into a variety of different forms ranging
from the common white refined sugar to cube
sugar, castor sugar, brown sugar and various
liquid varieties. Most of the output is sold directly
to factories to be used in the manufacture of ice cream, canned fruits, soft drinks, jams
and confectionery.
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Let us again apply the concepts of Weber to the refining stage of the industry to see if
the model provides an insight into the spatial pattern of sugar refining.
One tonne of raw sugar produces something slightly in excess of one tonne after the
refining and packaging processes. This increase in weight is largely the result of the
weight of the container, be it drum, glass container or paper packet. Thus, the material
index of sugar refining is larger than 1 which suggests that we could expect the industry
to be market-oriented, with the major Australian cities with their industries and
population forming the major points of consumption. Australia has six refineries.
The following 2 tables show the population pattern and the actual refining pattern .
The correlation between the two tables is quite close. The inclusion of Bundabery in the
list of refineries is the only real surprise. The existence of a refinery at Bundabery may
reflect several influences: firstly that with a material index which is very close to 1. It is
quite understandable that the factory should possess considerable flexibility of choice of
location. However a more probable explanation lies elsewhere. The Millaquin refinery is
owned by the Millaquin Sugar Company, and is the only independent refinery in the
country. The other five plants, plus many of the mills, are under the control of the
Colonial Sugar Refining Company Limited (CSR). Whereas the maximizing of profit
may be a major consideration for CSR, it may be less important to the family-owned
Millaquin Sugar Company. Nevertheless, in spite of this single and fairly insignificant
exception, the Weberian model provides a sound basic framework for understanding the
spatial pattern of sugar refining in Australia.
Cities
Population
Refinery
Output in 1978
(‘000 tonnes)
Sydney
3115200
Pyrmont
282
Melbourne
2694100
Yarraville
237
Brisbane
995100
New Farm
93
Adelaide
930500
Glanville
68
Perth
894000
Cottesloe
48
The Actual Sugar Refining Pattern in Australia
9. Weaknesses and merits:
i. Weakness:
Weber is most heavily criticized for the unreality of some of his basic assumptions.
Much criticism has been levelled at his treatment of transport costs. To be fair,
however, many of the criticisms have only arisen since the technical and economic
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changes in modern transportation have invalidated many of Weber's original
assumptions.
a. Stepping of Freight Rates:
Weber assumed that transport costs increase proportionately with distance and
weight carried. This premise of the Weber model has been most severely attacked
as being unrealistic. What occurs is that freight rates tend to be 'stepped' rather
than increasing progressively with distance.
Later workers, such as E.M. Hoover, have shown that freight rates are not directly
proportional to distance, but tend to taper off with increasing distance. In other
words, transport costs increase at a decreasing rate or the marginal (i.e. extra or
additional) cost of transport decreases with increasing distance.
Hoover recognized that transport costs usually increase through a series of steps.
In many countries, transport rates for a particular mode of transport - rail, road, or
water - are divided into a number of zones, the cost of transport tending to
decrease with increasing length of haul. In other words, whereas it would cost, say
$20 to transport a load of goods 10 km, it might cost only $30, and not $40, to
transport the same load of goods 20 km.
The cost of transport consists of two parts: the cost of loading the goods (terminal
charges), and the cost of moving the goods (haulage costs). Terminal charges and
haulage costs are different for rail, road, and water transport. (The figure above).
Water transport has high terminal charges but low haulage costs and is best suited
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to long hauls. Road transport has low terminal charges but high haulage costs and
is best suited to short hauls.
b. Variations in the Transport Type Used:
Transport costs are not the same tonne-for tonne on finished products as they are
on raw materials, but vary between sea, rail and road carries, depending on the
distances involved. The cost of transport between two points also differs
according to the type of transport used.
c. Reduction in the Importance of Transport Costs:
Although Weber later made allowances for differing labour costs and
agglomeration tendencies, his model is essentially dominated by transport costs,
which are totally unrealistic.
Transport costs: a cornerstone of the Weber model - make up a relatively small
part of the total costs of production for the modern factory. Today, modern
carriers can actually move bulkier raw materials at lower costs per unit of mass for
a given distance than for finished products. Similarly, new freight rates have been
developed for finished products now transported prepacked into steel containers at
special rates. Hence, a model whose central focus is transport cost minimization
would appear less appropriate today than it was a century ago - especially for
'light' industries for which transport costs account for only a very small proportion
of total costs.
d. Weber's Concept of an Isotropic Surface lacks Credibility:
In the real world, surfaces inevitably show variations in one or more aspects of
their character. One major development which Weber did not foresee was the
entry of government as a major economic force, thereby destroying the idea of a
surface possessing economic and political uniformity.
e. Importance of Other Qualities of Raw Materials:
There is no doubt of the validity of Weber's idea that raw materials can be either
ubiquitous or localized and gross or pure. Hoover recognized that in addition to
weight changes experienced during processing, there are certain other qualities
which may be of equal or greater importance. Hoover's ideas are summarized in
the following table.
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Factor
Bulk loss
Bulk gain
Fragility loss
Fragility gain
Hazard loss
Hazard gain
Perishability loss
Perishability gain
Location
Raw material
Market
Raw material
Market
Raw material
Market
Raw material
Market
Example
Sugar milling
Glass bottle manufacture
Packing goods for shipment
Camera manufacture
Micro-film recording
Explosives manufacturing
Palm oil refining
Newspaper printing
Effect of raw materials and products on industrial location
f. Market is not a fixed Point:
Weber saw the market as a fixed point on the isotropic surface. However, many
firms nowadays attempt to diversify their markets as a measure to increase sales
and to provide some degree of economic security.
g. Perfect Competition does not exist:
Weber assumed the unrealistic framework of perfect competition. It is now very
difficult to find places where perfect competition operates. The present century
has witnessed the increasing development of the multi-product, often
multi-national corporation whose aim is to eliminate all competitors as far as
possible. Some of these corporations have secured an almost complete monopoly
in certain fields of manufacturing.
Perfect competition assumes that demand is constant spatially. With increased
transport costs from the plant, demand must logically decline away from the plant
as transport costs push up the price of the product. This assumes, of course, that it
is the purchaser who pays the cost of transport incurred. Thus, demand decreases
as distance from the plant increases.
Good produced by manufactures are not exactly the same, which is one of the
conditions of perfect competition.
h. A Static Model:
The model is a static one taking no account of spatial changes in the supply of raw
materials or demand of markets.
i. Nature of Industries:
Industries today are not merely processing industries. The finished products of one
industry may form the raw materials of another.
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j. Mobile Nature of Labour:
Labour is not fixed in location, but is mobile.
k. Economic Man:
Weber assumed that entrepreneurs are rational economic man whose basic aim is
to maximize profits through the minimization of the total costs of production.
Other workers in this field have demonstrated that this is often not the case.
ii. Merits:
Despite these criticisms, Weber's contribution to the theory of industrial location
has been enormous.
a. Weber is often said to be the founder of modern industrial location theory and has
had a tremendous influence on other workers in this field.
b. The Weber model has provided useful insights into the manner in which location
is determined and has drawn attention to the importance of transport costs as a
factor in location.
c. He makes explicit the distinction between ubiquitous and localized raw materials
and also distinguishes usefully between the various orientations of different
industries.
d. He has provided a useful conceptual instrument for understanding the broad
locational patterns of industries. With modification, the 'least-cost' assumption of
the Weber model is still appropriate, but at a different level of geographic scale
from that usually envisaged. At the global scale, large Multi-national Corporation
seek cheap locations, for example in Taiwan or Hong Kong, could be readily
interpreted through Weber's idea of the critical isodapane.
B. Factors Influencing the Location of Industries:
1. Introduction:
Many factors come into play in determining the best location for an industry.
Industries are developed in response to human needs, converting certain raw materials
into manufactured goods of greater utility.
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When an industrialist sets out to find a suitable location for his factory, he has to
assess the various factors which favour a site and set them against the disadvantages. No
single factor alone decides the location and growth of an industry. It is never an easy task
to find an ideal site, but it is possible to find locations where advantages outweigh
disadvantages. the main criterion is cost and the best site gives the greatest cost advantage
or the least cost disadvantages.
2. Raw materials:
Raw materials are fundamental to the initiation and sustenance of any industry.
Traditionally, the location of the materials required by the processing plants has been one
of the most important influences upon factory location. Many industrialists must look to
the farms, mines, forests and seas for the supply of many raw materials. These raw
materials occur naturally and in a form which requires some modification before man can
make full use of them. On the other hand, the products of some industries may constitute
raw materials for others. For example, textiles are the raw materials for garment
manufacture and pre-manufacture components are the raw materials of assembly
industries, like automobiles or electrical equipment. If the appropriate raw materials can
be secured close at hand, it will definitely be an advantage as much transport cost can be
saved.
i. Characteristics of Raw materials:
a. Amount of weight loss during processing:
Raw materials that decrease in either weight or volume after being processed
result in industrial locations which are raw material-oriented. It is clearly most
uneconomic to transport large quantities of raw material which will become waste
as a result of the manufacturing process.
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The greater the loss of bulk, the greater the tendency for the factory to be located
at the raw material source. For example, for the forest industry, logs are bulky and
awkward to transport and undergo much loss of weight when processed. Some
timber, for example, makes up less than 40% of the wood in a log, the rest being
waste materials. Thus, most pulp mills and saw mills are located in the forest
regions. For mineral industries, minerals are also heavy and bulky commodities,
especially when the metal content of the ore is low. To transport the ore would
entail enormous transport costs so it is often concentrated and sometimes smelted
in the area of production, and then exported in the forms of concentrates, ingots or
refined metals, such as gold smelting - one tonne of raw material produces a few
grams of metal.
b. Degree of Perishability of the raw materials:
Raw material which possess a high degree of fragility or perishability exert a
strong influence of the location of manufacturing plants, for example, grapes for
wine-making, milk for butter and cheese manufacture, fruit and vegetables for
canning, freezing or dehydrating. These materials deteriorate very rapidly. As a
result, the processing plants are found nearby within the area of agricultural
production.
c. Value of the raw material per unit of weight:
Raw materials of low value cannot stand heavy transportation charges whereas
products of low weight and high value are much better able to do so. Examples of
low value raw material are brick clay, metal ores.
d. Availability of substitute materials:
For example, in steel making, either pig iron or scrap iron can form the main
charge into the open-hearth furnace.
e. Number of materials involved and their relative importance:
For example, iron and steel industry uses several important materials including
coke, iron ore and limestone.
f. Means of transport and structure of freight rate:
In the past, many industries were raw material-oriented, even those with light
weight raw materials such as textiles because roads and railways were less
well-developed and means of transport were slow and more primitive. Thus the
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'friction of distance' was considerable. A transportation distance of 20 to 30 km
was often uneconomic.
g. Source of supply:
Industries which rely for their raw materials on other industries are often located
near companies which make their raw materials. For example, heavy engineering
works are close to their steel supplies; petro-chemical industries are close to the
refineries which provide their raw materials.
ii. Decreasing importance of raw materials:
The strength of the attraction of raw materials for some industries appears to be
decreasing. This can be explained by a number of factors.
a. Improvement in Transport Technology:
The transportation revolution of the 20th century, in particular the advent of bulk
carriers, improvement in mechanical handling and the development of extensive
transport systems, has lessened the cost of moving bulky materials and enabled
the efficient movement of materials, and so the pull of raw materials has been
reduced in many industries.
Some industries have already been relatively independent of raw materials
supplies. For instance, the cotton textile industry uses light-weight, non-perishable
goods which can be easily transported.
b. Advances in industrial techniques:
Improved manufacturing processes have decreased the pull of raw materials.
Simple on-site processing has led to weight-reduction or enrichment of the raw
materials (i.e. beneficiation of the ore). Improved technology has cut down
wastage in processing and so reduced the amount of raw materials which
industries need to use.
c. Others:
It includes use of substitute raw materials, practice of recycling ore, and greater
attractiveness of the market.
The trend during the last 50 years has been a locational shift away from sources of
raw materials towards markets as manufacturing has shifted its emphasis from
AL Geography Notes (Industrial Landscape)
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processing to fabricating. The latter has its main costs in labour and marketing. Raw
materials have declined somewhat in importance as a locational factor of industry.
In fact, many modern industries are so varied and require such a wide range of
raw materials that it is simply not possible to have all these close at hand. The
location is therefore dependent on transport which can assemble all the required goods
in one place. The cost of transporting the most bulky or the heaviest of the raw
materials is usually decisive.
3. Energy:
i. Types of Energy Supply:
a. Water:
The Industrial Revolution of the 18th and 19th century, Europe saw the
transformation of manufacturing from domestic or cottage system, where goods
were made in the home, to the factory system, where powered machines grouped
under one roof, enabled a massive expansion of output. This revolution was based
upon the application of mechanical energy to the manufacturing process. Initially,
this energy was supplied by fast-flowing streams whose energy was harnessed by
water wheels. This form of energy was immobile and industries were strongly
power-oriented.
b. Coal:
With the introduction of stream power and the development of large-scale
industries, large quantities of coal were required for almost every industrial
activity. In the early days, the fuel efficiency of coal was poor. For instance, as
much as 12 tonnes of coal were required to smelt 1 tonne of iron. Under such
circumstances, industry became increasingly concentrated in the coalfield areas.
The bulkiness of coal required by those early inefficient steam engines plus the
unsatisfactory nature of the nature of the existing communications system
handicapped any attempts by entrepreneurs to break away from a coalfield
location. These events transformed the life and landscape of north-west Europe
and north-east USA and produced the pattern of urban-industrial agglomerations
which persists to the present day. However, the pull of the coalfields has gradually
diminished during the past century for a number of reasons:
- The developments in industrial techniques have reduced the amount of coal
consumed by industries. For instance, technological advances have substantially
reduced the proportion of coal needed in making steel; the iron industry which
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used 8 tonnes of coal per tonne of iron in 1760, now uses less than 1 tonne of
coal per tonne of iron.
- The increasing use of electricity has freed industry of the domination of fuel
supply location since electrical energy can be easily transported over great
distance from the generating stations to assure widely dispersed industries of a
stable power supply, thus facilitating the growth of manufacturing away from
the older coalfield regions.
- Development in transmission technology and the ability to use a whole range of
primary energy sources, including coal, water, oil, natural gas, atomic fuel, tidal
power and even the sun and the wind, have provided industrialists with a
considerable degree of freedom of choice in locational decision-making.
- The improvement in transport technology has facilitated movement of bulky
fuels.
c. Electricity:
Electricity can be distributed to places hundreds of km from its source. The
importance of electricity as a dominant locational factor is restricted to those
industries which require massive input of low-cost power, generally of
hydro-electricity. Electrolytic smelting, particularly of aluminum, is the most
common industry of this type. Thus, major smelter tends to be located near
hydro-electricity stations.
d. Petroleum and Natural Gas:
Petroleum and natural gas are even less decisive as factors of industrial
location. Oil and gas can be conveniently transported by pipelines and tankers to
any industrial site so that there are few major industrial districts on oilfields,
except where other factors are of importance. Thus, despite the rapid rise in the
use of petroleum and petroleum products as fuel, their impact on industrial
location has been small.
ii. New Trends of Industrial Location:
In most countries, a drift away from coalfields is well-established to that the
coalfield areas suffer a relative decline. In more recent years, new forms of power
such as natural gas, petroleum and electricity (most of which is derived from coal or
petroleum originally) have played an increasing role in the location and development
AL Geography Notes (Industrial Landscape)
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of modern industries. The real influence of these new forms of energy has been the
freeing of industries from a coalfield location. The new fuels have led to a greater
dispersion of possible industrial sites and have allowed other locational factors to
have greater significance.
In spite of the greater locational freedom resulting from the discovery of new
forms of power, there does not appear to have been a widespread dispersion of
industry, especially in the long-established industrial nations. Most industries remain
in the old coalfield locations. In fact, the present world pattern of industrial regions,
especially those with many heavy industries, is very closely related to the coalfields.
the failure of industries to move immediately from one area to another when
locational advantages and disadvantages change is called industrial inertia. it is due to
the fact that old industrial centres often possess certain advantages.
a. Concentration of Capital:
Investment ion factories, equipment and other facilities were concentrated in
coalfield areas and could not be immediately written off. This concentration of
investment discouraged industrial firms from moving to new locations. The cost
of building and equipping a factory is extremely high. Industrial establishments do
not readily undertake a complete move with the new building and tooling-up costs
that this entails. This means that existing sites continue to be occupied long after
their original advantages have gone and a move is only made when the
disadvantages thoroughly outweigh the advantages.
b. Transport Network (Infrastructure):
During a period of over a hundred years of industrial development, the transport
networks of the coalfields had been built up to serve industrial concerns. These
transport systems remained an advantage. To move to new sites might have
entailed setting up in less accessible regions.
c. Markets (Industrial Linkages):
Many companies in coalfield areas had their major customers close at hand. Thus,
component manufactures relied on the market provided by makers of the finished
products. For example, in automobile manufacture, and producers of basic
commodities such as steel relied on local engineering companies to consume their
output. By removing to a new site, some such companies would have been
moving from their markets.
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d. Labour:
The densely populated industrial districts of the coalfields supplied a constant and
skilled labour force. The tradition of industrial employment was strong and
workers were easily trained. If companies had moved to alternative sites, they
might have experienced labour shortages or have had greater difficulty in
obtaining skilled workers.
e. Reputation:
The reputation of some firms is strongly associated with their particular locations.
Departure from these locations might undermine the public image of such firms
and reduce the demand for their products.
4. Labour:
Labour varies spatially in quality and quantity. It also varies in cost, in its ability and in
its reputation for militancy.
Characteristic of labour which form the locational influence:
1. The cost of Labour (Wage Levels):
Labour intensive industries which use a large number of workers for each unit of
production are strongly tied to sources of labour because labour costs form a very
high proportion of total costs. For these industries, labour costs may exert a strong
locational influence if labour costs vary considerably from place to place. The
availability of a cheap, suitable labour supply is a strong attraction to these industries.
Number employed
Labour Intensity Ratio = -----------------------------------------------Value of Shipments from the Factory
Capital intensive industries which substitute machines for labour and thus employ
few workers are less tied to sources of labour, but they must be able to obtain the men
they require.
The advantage of a labour force with comparatively low wages is clearly
demonstrated by the success of Hong Kong (50’s-70’s), Singapore (60’s-70’s), South
Korea (80’s) and Taiwan (80’s) in the industrial field.
2. The skills of labour:
Different industries require different types of labour.
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a. Highly-skilled Labour:
The increasingly complex plant and equipment in today's factories require large
number of highly trained operators. Industries like watch-making, diamond
cutting, electronics, electrical engineering and aircraft manufacturing demand
highly-skilled craftsmen. Apart from these specialized industries, almost all
industries need a certain proportion of skilled designers, engineers as well as
research workers. Such highly-skilled workers are relatively scarce and rather
localized in their occurrence, eg. in advanced countries where facilities for their
professional training are available or in some places where there is a tradition of
industrial skills.
A ready supply of skilled machinists will save a firm the costs of their training and
ensure the most efficient use of its equipment.
b. Semi-skilled Labour:
In most industries, semi-skilled workers provide a fair proportion of the labour
force and an area with no semi-skilled workers is not likely to prove an ideal
location for industry.
There are many industries which require semi-skilled people, such as electrical,
metallurgical, shipbuilding, automobile, chemicals, certain branches of the textile
industries.
c. Unskilled Labour:
The bulk of the labour force in most industries is made up of the unskilled
labourers who do mechanical operations, eg. putting in screws, packaging thing,
adjusting fixtures.
Women are often preferred because they are more patient; and they can be paid
less usually despite of legislation in many countries. A large untrained labour
force can be found in most densely-populated countries, especially in and around
the larger towns. Women workers are found in the large urban centres where their
husbands may do other work.
Where there is a shortage of unskilled labour as there often is in the developed
countries where everyone has a chance to get a good education and fewer people
are willing to do boring, lowly paid work, the problem is sometimes overcome by
automation, i.e. by using many labour-saving devices.
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3. Labour Mobility:
Highly-skilled workers are much more mobile than the ordinary factory hands and
are prepared to move to a new area in order to get a good job or better conditions of
employment.
Semi-skilled workers are fairly mobile, especially in countries where the number
of employment opportunities for such workers is limited. For example, many Turks,
Yugoslavs, Italians and Greeks have moved to Germany to seek better pay and
conditions.
Unskilled workers are the least mobile because they can usually obtain a suitable
job in their own area and also because they have no special skill to offer.
4. Reputation of the local work force:
If a particular place has a bad reputation in the field of labour relations, firms may
be repelled for this reason. The good examples are South Korea (90’s) and UK (80’s).
Trade unions have an important influence on the locational choice of industries. if
a labour force is highly urbanized and the unions are militant, demanding constant pay
rises and increases in fringe benefits, or frequently striking, an industry may be
deterred from locating in the area.
A stable work force means that the time lost through absenteeism and labour
turnover will be minimized, and hence labour costs will be reduced.
Labour is declining in importance as an industrial locational factors. As machines and
robots do more and more work within factories, there is less need for large, unskilled
workforce. This has led to a relative decline in the locational influence of labour upon
manufacturing as a whole. One the other hand, the availability of a suitable labour supply
is still a strong attraction to industry for modern plants require hundreds or even
thousands of workers with particular skills.
5. Transport:
Modern industries require constant supplies of raw materials, often in great bulk from
various sources, and finished goods have to be despatched to many destinations. thus, the
availability of a good network of transport facilities is another deciding factor in the
location of industries as a certain proportion of total costs is made up of transport costs.
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Effects of transport on factory location:
a. Transport costs over increasing distance:
Short hauls are proportionally
more expensive than long-distance
carriage. The effect is to reduce the
costs of moving goods over long
distances.
b. Transport costs are not the same for
all goods:
Fragile goods, perishable
foodstuffs and luxury goods of high
value are costly to transport because
of the higher insurance coverage, the
need for specialized trucks or wagons, eg. refrigerator trucks, and the possibility of
breakage, spoilage or deterioration in transit. A market location is thus a strong
attraction to these industries.
The cost of transporting raw materials is usually more important than the
distribution costs of the final product because the finished product is more valuable
and can stand higher transport costs. For instance, where large quantities of steel are
required for heavy engineering, the industry will be located near products, eg.
machinery, will still be heavy, but its greater value will mean that transport costs
represent only a small proportion of its total costs.
An industry which requires only a small quantity of easily and cheaply transported
goods, eg. assembly of electrical apparatus, is free to locate near labour supplies or
major markets because transport costs for raw materials are relatively low.
c. Structure of Freight Rates:
Simple freight rates which increase
proportionally with distance are rare.
The normal arrangement is for the
freight rates to be arranged in blocks.
This produces tapering/ stepped freight
rates.
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The effect of such tapering freight rates is to reduce the impact of distance,
especially where large distances are involved. The costs of transporting materials over
very long distances will not necessarily very much above those paid by his competitor
who is nearer the source of supply.
d. Efficiency of the means of transport:
Where communications are well-developed, transport costs will be relatively low
and form only a very small fraction of the total production costs.
In the underdeveloped parts of the world where means of communication are less
well-developed, freight charges, especially for bulky raw materials, can take up a
good proportion of the cost of the final manufactured item. Under such circumstances,
transport becomes a deciding factor in the success or failure of an enterprise.
e. Improvements in the transport network:
Improvements in the transport network may bring down the freight charges and
make a place more conducive for industrial development. For example, the opening of
the Erie Canal in 1825 reduced the freight charge between Buffalo and New York
from US$100 a tonne to only US$5 a tonne and the freight time was cut from 20 days
to less than days.
f. Modes of transport used:
Certain methods of transport are better suited to carrying certain goods. The
following figure illustrates the difference among the major means of transport.
i. Water Transport: Water transport is
by way of lakes, rivers,
canals as well as sea. It
is the cheapest form of
transport, especially for
bulky goods, such as
coal, iron ore, timber,
grains, heavy
machinery and
equipment, over long
distances, but expensive on short hauls due to the high terminal costs.
AL Geography Notes (Industrial Landscape)
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Many rivers and ports have contributed significantly to the industrial
and economic development of their respective regions and some of the
ports have become the largest industrial centres of the world. However,
water transport is slow though it is the cheapest.
ii. Rail Transport: It is cheapest for intermediate distances. It is more rapid than
water transport. Rail links are important, especially for bulky items.
iii. Road Transport: It is cheapest for short hauls, and they’re after rises steeply. The
speed and efficiency of road transport, especially the advantage of
door-to-door transport, are making it more and more important. this
has allowed the decentralization of many industries.
g. Use of containers in transport:
The rapidly increasing use of containers which can be carried equally well by
ships, lorries or railways makes transport from trans-shipment point (where there is a
change from one type of transport to another, eg. ports) to inland centres more
convenient, quicker and cheaper. This may have the effect of halting the decline of
inland centres or may make them more competitive.
6. Market:
Markets are where the finished products will finally go. Large urban areas having
large concentrations of people with high living standards and high purchasing power
constitute markets for the consumption of manufactured goods. However, markets are not
merely a question of numbers, but also of the earning capacity of the people and of their
willingness to spend. For instance, in many parts of Monsoon Asia, the population does
not have a high purchasing power and only industries which produce cheap or
highly-essential goods can find an adequate market in such areas. Economic production is
based on demand and the ability to pay for the goods.
The influence of markets on deciding where to locate an industry has become
increasing important for a number of reasons:
a. By locating in large urban areas which often coincide with large industrial
conurbation, transfer charges for both consumer and producer goods can be reduced
because consumers of these manufactured goods are found nearly.
b. The large city possesses the type of infrastructure required by manufacturing, eg.
roads, railways, organizations for handling goods on a large scale.
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c. The large city provides a sizable and varied labour force. There is a ready supply of
labour.
d. The increased use of electricity as a power source has freed industries from points of
energy production and promoted an attachment to the market.
e. The higher level of mechanization of industrial processes, combined with the
increased mobility of labour has broken the grip previously exercised by localized
pools of skilled labour.
f. Improved transportation of raw materials in various forms of bulk carriers, along with
the greater utilization of substitutes have resulted in:
- more expensive transport freight rates in transporting a packaged and finished
product than a comparable weight or volume of raw materials, and
-
a decline of the raw material source as the optimum point of industrial production.
g. A number of technological developments have enabled less material to be processed
to make a unit weight of product. The costs involved in transporting raw materials
account for a smaller proportion of total costs.
These factors are working together to increase the attraction of a market location.
Some industries are more likely to be located near markets than others. there are a
number of considerations which will influence whether an industry is likely to favour a
market location. They are as follows:
a. Perishable goods: Some foodstuffs industries must be market-oriented. These are the
ones which produce cooked food, eg. bread, cakes, cooked meat; or deal with
other goods which are not normally canned or frozen, eg. egg grading, dairy
products. Such food processing will have to be done near the market to ensure
ready disposal of the fresh products.
b. Fragile products: Goods that are easily broken in transit will be at a great
disadvantage if they are manufactured well away form the consumers.
Proximity to markets is the surest way of reducing loss through damage.
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Goods like bottled drinks, glassware, porcelain, are thus made relatively near
their markets unless they are of high quality and can stand high transport costs.
c. Goods that are bulky and have low value: Bulky goods, because they occupy more
freight space, entail high transport costs, and if they are also cheap, high
transport costs will cut profits. Industries such as brick-making, tile-making,
and the manufacture of cheap furniture will be able to make better profits if
they are sited near the market.
d. Labour-intensive industries: All areas of dense population which constitute markets
are also potential sources of labour. Labour-intensive industries, especially
such light industries as electrical goods, wearing apparel, toy-making and
cosmetics, will be in a better position to recruit cheap and abundant labour if
they are sited near urban centres.
e. Industries that involve much personal contact with consumers: W here personal
contact between the maker and buyer is very essential, the industries have to
be close to the market to be able to build up contacts and promote the goods.
Industries which produce goods to individual customers' requirements fall into
this category. they include packaging industries which produce special boxes
and printed material for specific goods; tailor-made clothing and many other
fashion industries such as jewellery, shoes, bags and hats, which have to keep
in touch with the requirements of large shops; high quality paper making,
printing and publishing.
f. Industries with small raw materials: Almost any industry which requires only small
quantities of raw materials, which can be easily and cheaply transported, and
is therefore not tied to special areas, may be drawn to market locations, eg.
light engineering, electrical goods, plastics.
g. Specialized goods: Some industries are market-oriented, not in the sense of being near
large concentrations of consumers, but by being near other industries which
require their goods. For example, automobile component manufacturers
located their factories in the Mid-West of USA near the main
automobile-making centres; manufacturers of textile machinery are found in
traditional textile areas; marine engineering is found in seaboard locations;
agricultural machinery is often made in market towns in predominantly rural
districts.
AL Geography Notes (Industrial Landscape)
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In the cases above, transport costs are greatly reduced if plants are established in the
market areas because expensive handling of finished articles is minimized. Great
advantages and transport savings will be achieved by sitting close to the main market.
7. Technology:
a. Importance of Technology:
Technology is fundamental to the production process. A new method, technique
or machine can alter the production possibilities open to a manufacturer. Changes
may result from a new source of power or raw material being brought into use or from
changes in the actual processing. These changes will affect the choice of factor mix.
As a result, technology may substantially alter the cost effectiveness of given
locational choice.
New technical knowledge does not originate in all regions at the same rate. As a
factor, technology is not perfectly mobile. Its availability at different locations
depends on the existing lines of movement and interaction. There are places where it
is more available than others. technical knowledge may be considered a spatially
localized factor input for most economic activities. Its localization tends to be
oriented towards the larger and more successfully existing concentrations of
production and the foci of the network of communications. In view of this, its
capacity to draw development to its location is especially powerful when other factor
inputs such as labour and capital tend to be relatively mobile.
For those technology-based industries like electronics, the relative importance of
'new ideas' as an input is likely to be so great as to encourage a location close to the
main foci of technical knowledge in this field even if the cost of other factor inputs at
that point is high.
Virtually all technological progress comes from research. Industrial research aims
at more efficient production. The electronic industry and a wide range of chemical
industries are in fact new industries created by the success of industrial research teams.
Most modern industries and some large firms maintain their own research
laboratories.
Research and innovation are vital to the sustained growth of a mature industrial
region. For instance, New England had faced serious decline in its old staple
industries especially the textile industry because of competition from more recent
AL Geography Notes (Industrial Landscape)
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industrialized areas. It begins to turn to advanced engineering industry in which New
England keeps ahead by labour skill and continued technological advances.
Concentration of research activities near research institutes will help to attract
modern research-based industries, eg. the great concentration of electronic product
and missile industries in the USA are close to the major centres of research.
b. An example - The iron and steel industry:
The iron and steel industry is an excellent example of an industry where changing
technology has had a strong effect on location. Iron has been made for many centuries,
and during the long history of the industry, two main trends have been apparent:
a. The techniques of smelting, refining, forging and working the iron have been
greatly improved and increased in efficiency.
b. In response to changing techniques, different locational factors have become
important at different times.
Changing in the technology used by an industry may result from a new external
source of power or raw material being brought into use or from changes in the actual
processing.
a. Changes in Fuel Sources:
i. Dispersed Small-scale production:
Up to the early 18th century, charcoal was used as a fuel in the blast furnaces
to make iron. Scattered ironworks were situated wherever supplies of charcoal
and iron ore were available close to each other. Because of the difficulties of
the iron-making process and because the iron could not easily be transported
to distant markets by the primitive roads of the time, the scale of operation
was small. Only enough iron was made to supply local demand. Since forests
were widespread and sufficient deposits of iron ore for such small ironworks
were available in a large number of places, this led to dispersed small-scale
production. iron was made in widely dispersed small units.
ii. Movement to the coalfields:
In 1790, cokes were successfully used in iron smelting and the attraction of the
coalfields increased. By the late 18th and 19th centuries, the coalfields were
already the major iron-making location which operated strongly in the late
18th and 19th centuries:
AL Geography Notes (Industrial Landscape)
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- Coalfield regions often had a tradition of iron working. As a result, such
coalfields had many advantages in respect of labour and technology.
- In many regions where the earliest developments took place, iron ores were
found interbedded with the coal seams as black-hand ores, and could be
easily extracted at the same time as the coal from the same mine. Thus, the
ideal location for smelting activities was obviously at or near the pit-head.
- With the existing techniques, eight times as much coal as iron ore was
needed to produce a given quantity of iron. Therefore, it was much cheaper
to transport ore to coalfields than to take coal to orefields.
iii. Tide-water location:
As sources of raw materials have been exhausted in those areas where coal
and iron ore were once hound in close proximity, it has become necessary for
at least one of the main raw materials to be transported to the producing area.
The development of modern transport makes it no more difficult. Because of
need to import one or both raw materials, a tide-water location which permits
the use of bulk carries is thus a strong attraction.
b. Changes in Technique:
The techniques of making iron and steel have continued to change right up to
the present day. These changes centre upon two aspects of production: the
improvement of fuel use, and the making of steel, as opposed to pig iron.
i. Increased Efficiency in the Use of Fuel:
- With the introduction of 'hot blast' in 1829, i.e. by blowing hot air through the
furnace, it was possible to cut coal consumption by as much as a half.
- The merging of iron smelting and steel making, formerly two distinct
industries, into a single process in the integrated and continuous mills led to
further reductions in fuel input, since reheating was no longer required.
- In the last decade and a half, further remarkable fuel economies have been
achieved by the introduction into steel making of the oxygen-using process, i.e.
by blowing high-pressure oxygen onto the surface of the converter charge and
fuel requirements have once again been cut by a third to a half.
AL Geography Notes (Industrial Landscape)
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- With all these developments continuing, the heat input necessary to produce
one tonne of iron had fallen as follows:
Heat Input (tonnes of coal)
1850s
8.0
early 1900s
3.5
currently
0.8
- The economies achieved in the use of fuel have reduced the pull to the
coalfields.
ii. Growth of the steel industry:
- Pig iron has a high carbon content and to turn pig iron into steel which is a
much more useful metal, it is necessary to reduce the carbon content.
- Before the middle of the 19th century, the making of steel was a slow,
small-scale and therefore very costly business. Steel was produced in small
quantities by hammering or by 'puddling'.
- The first breakthrough came with the Bessemer Converter of 1856. By
blowing a blast of air through the molten pig iron, the carbon content of the
pig iron is reduced from about 4% to less than 0.3% and mild steel (type of
steel most widely used) is produced. The Bessemer process yielded cheap steel,
but only from non-phosphoric iron ores.
- In the USA in the 1850's, the newly-tapped Lake Superior ores were
non-phosphoric iron ores, and the industry based on these iron ore
mushroomed with the demand for its new product. In Great Britain, the only
important non-phosphoric iron ores were in Cumberland. Although their
presence was enough to draw a few units of the industry to north-western
England, the majority of steel-makers had to use imported ores, such as those
from Spain.
- The Open Hearth Furnace appeared in 1869. Hot gas and air were forced
across the surface of the molten iron and the impurities were oxidized and
removed. Scrap steel and other alloying materials can be added to produce
steel of desired qualities. The process made a better quality of steel, but still
from non-phosphoric iron ores only.
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- The Electric Furnace was introduced in 1899. It can function entirely on scrap.
It is used mainly for the production of high grade alloy steels.
- The most recent development in the making of steel was the introduction of
the Basic Oxygen Process which is the method now used to produce over half
the world's steel. Pure oxygen is blown into the charge of molten iron to burn
out the carbon. This method permits the use of scrap steel in the charge. It
gives a better quality steel.
- The extensive use of scrap to replace pig iron in making steel has enable a
steel mill to locate in an area remote from either iron ore or blast furnace, eg.
in the vicinity of a large city which is the main source of scrap steel. There is a
market orientation in the location of the industry.
- Electricity has joined charcoal, coke and gas as fuel sources for the steel
industry (electric furnaces). This has further freed the industry from the tie of
the coalfield location.
- After 1860, steel gradually increased in importance relative to iron. The scale
of production increased and the industry became integrated with all aspects of
production being carried out by one firm in one plant. With time, production is
concentrated in plants of increasing capacity called integrated iron and steel
works. The optimum location of a modern, large, integrated iron and steel
works now is one which:
1. is close to the main market for the finished products because of the high
cost of transporting finished products compared with that of the raw
materials;
2. provides access to distant raw materials by large ocean-going vessels; and
3. has a large area of level land to permit an arrangement of the plant which
minimizes the distances which raw materials and partially manufactured
products have to be moved on the plant.
As a conclusion, the iron and steel industry has been influenced by a whole
series of factors - fuel, ore supplies and market, and today, units of the industry
can be found in places which represent all these influences.
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c. A summary:
The influence of technological development on the development of industries
can be summarized as follows:
a. In some cases, technological advances have brought about increased
concentration of industrial activities. For instance, the development of
power-driven machinery in textile industry had encouraged the geographical
concentration of factories, instead of the more dispersed patterns of domestic
systems.
b. In some cases, technological advances allow a wider choice of possible
locations. With the invention of the electric furnace, steel plants are no longer
confined to the coalfields, but more widely dispersed since electricity can be
generated by many types of energy resources and can be transmitted over great
distances easily without much cost.
c. The development of substitute materials may affect industrial location. Scrap
steel and iron can now be fed into the Open Hearth Furnace and turned into
steel. In the past, only molten pig iron can be used. This development has
freed the steel plants from the iron smelters. Now, steel plants can be located
nearer to the market which is also the source of the scrap metals.
d. Advances in the utilization and transportation of raw materials and power
resources can reduce the production costs.
e. Improvements in transport technology have made more industries footloose.
f. Machines gradually replace labour and factories become less bound by the
factor of labour availability.
8. Behavioural factor: The Role of the Entrepreneur:
a. Selecting a site:
In seeking to explain the location of industry, geographers have tended to look at
economic factors, in particular raw materials, power, labour, markets, and
agglomeration, weighing up the effects of each in a given case.
Most of the theories of industrial location that we have studied deal with these
economic factors. They assume that the entrepreneur is all-knowing and behaves in a
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rational and objective way. But this is not usually how decisions about where to locate
industries are made.
Economic factors are important but so too are the whims and fancies of the
entrepreneur. This applies where the entrepreneur is an individual and where the
entrepreneur is the board of a company. If an entrepreneur knew the expenditure and
revenue for all sites in an area, he could select the site which would bring the biggest
profits. But this is not usually possible.
Seldom does an entrepreneur have at his disposal enough information to find the
most profitable sites. Indeed, he may not wish to make as much money as possible.
He is not a so-called economic man who acts in a rational and objective way. More
likely than not, armed with incomplete information, he will either try to come to a
rational decision about where to set up his business or he will simply establish a broad
area in which it seems feasible to run his business and then select a site according to
seemingly irrational criteria such as scenery or nearness to a golf course.
Under these circumstances, the site selected is unlikely to coincide with the site of
maximum profit. Nonetheless, the entrepreneur will be happy with his potential
returns as he sees them. He is a so-called satisficer.
The figure above shows three different background against which decisions about
where to locate an industry are made:
- The expenditure and revenue for all possible sites are known so the potential profits
at all sites can be mapped. The site selected is the one which offers the largest
potential profit. It has been chosen by an entrepreneur acting in a rational and
objective way with all the necessary information at his disposal. This kind of
entrepreneur is called an economic man or optimizer.
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- The information about potential profits is patchy. The entrepreneur, in choosing a
site, was happy with a potential profit of $5000 and, armed with his incomplete
information, has selected a site with that potential profit. He probably realizes that
bigger profits could be obtained elsewhere but he is satisfied with the site he
chooses. He is called a satisficer.
- The entrepreneur has simply established an area in which it seems feasible to locate
his industry. Within this area he assumed all sites were equally attractive in terms of
profit and his selection of a site has been swayed by personal factors - nearness to a
golf course for instance. He too is a satisficer.
b. Spatial perception and decision making: Mental Map
1. Behavioural and Objective Environments:
- Human behaviour cannot be ignored in industrial location studies. Among the
personal factors which may influence industrialists' locational choices is their
perception of a place - what they think it is like rather than what it actually is like.
We may compare the world inside our heads with the real world: the former being
termed the behavioural environment and the latter the objective environment.
- The way we perceive the world is important because it affects the way we behave.
The way we behave influences the objective environment (the real world).
Therefore, the link between perception, behaviour and reality is quite strong. this
is illustrated in the following figure. Information is obtained from reality which
forms an image of that reality in our minds. We use the term 'mental map' to refer
to our mental images of places. Mental maps make up the world inside our heads
and are likely to influence our locational decisions.
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2. Influences on our Mental maps:
- Our images of places are influenced by the amount of information we obtain about
a place. The amount of information available depends on the following factors:
i. the distance we live away from it.
ii. the frequency of our visits to it.
iii. the degree of exposure it gets in the media.
iv. its size.
v. our prejudice or emotion.
vi. our motivation to known more about the place; and
vii. social, economic and political constraints.
- Apart from the amount of information we obtain about a place, our perception of
places are influenced by other factors, including age, education, socio-economic
status, cultural background, aspiration, place of residence and ways in which we
have acquired our information about that particular place.
- The various images people have of different places lead them to prefer some
places to other (space preferences). Subjective factors are always present in the
locational decision-making process. Personal factors have greatest influence on
the siting of industries which are 'footloose' or likely to be equally successful in a
wide variety of locations. Such factors are also most likely to influence the
location of small firms which are under the control of a single individual.
c. The Behavioural School:
Attempts have been made to clarify the role of the entrepreneur as a satisficer in
industrial location by members of the so-called behavioural school. Allen Pred
examined the factors which influence how an entrepreneur behaves in selecting a site.
He recognized two key factors:
- the amount of information an entrepreneur has to hand (the perceived
environment), and
- the ability of an entrepreneur has to use this information.
He devised a 'behavioural matrix' (the figure below). The two axes of this matrix
measure perceived information and the ability to use information. Different parts of
the matrix represent different behavioural patterns in entrepreneurs. these differences
will influence the site selected to set up a firm. An 'able' entrepreneur with access to a
lot of information is likely to locate his firm near the optimum economic location
whereas a 'less able' entrepreneur with access to limited information stands a good
chance of locating his firm near the margin of profitable production.
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An improvement in entrepreneur skill may not only provide the potential to move
the decision-maker closer to the optimum location; it may also produce the potential
for the spatial margins to profitability to be expanded. this is because entrepreneurial
skill could have the effect of lowering costs, thus pushing spatial margins to
profitability further away from the optimum location.
The forces which influence industrial location decisions are extremely complex.
The existence of strong economic forces, the variety of decision-makers, the different
motives of the entrepreneurs, the significance of behavioural factors and the influence
of past forces and decisions, all combine to complicate our attempts to understand the
industrial scene.
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9. Institutional factor: Government Influence
a. Introduction:
Government policy exercises a major influence upon the development of
manufacturing. The type and degree of this influence varies immensely with different
economies. On one hand is the planned economies of the communist states of Eastern
Europe, the Soviet Union and China, on the other, the so-called free economies of
many western European nations, Australia, USA, Hong Kong and others.
In the communist states, all manufacturing is under the direct control of the
government which plans all aspects of industrial development: types of industry, size
of plant, location, production levels, prices and so on. However, in recent years, the
governments of the non-communist world have been increasingly involved in the
regulation of their economies. The age of 'laissez-faire' has passed. However, it is
important to bear in mind that even under 'laissez-faire' conditions, government of
played an important, though indirect role, in the development of manufacturing
industry. Their influence was felt through the level of the infrastructure which they
created: an infrastructure which is fundamental to the establishment of any form of
economic enterprise.
b. The cycle of industrial development:
The Davisian life cycle about 'youth, maturity and old age' is employed to trace
the development of a hypothetical region.
i. Infancy:
In this stage, the region is given over mainly to primary industry on a domestic
scale. Hardly any industrial towns existed at this time, urban centres primarily
performing a market function and only secondarily acting as processing centres.
Indeed, much manufacturing actually took place in the countryside.
ii. Youth:
The youth stage starts with the development of manufacturing in a factory system.
Such development can either initiated by an innovation transforming domestic
industry or the discovery of a technique for converting localized raw materials
which have weight-loss ratios for industries with a high material index. This initial
industrialization is followed by a growing infrastructure - houses for workers,
allied industries supplying or being supplied by the pioneer factory, canals, roads,
railways, service trades and so on. The initial factory has produced wealth and
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employment in the region far in excess of the wealth generated by the factory
alone.
iii. Maturity:
The arrival of the mature stage implies that the region has experienced large-scale
development of manufacturing industry and economic development over many
decades, usually for well over a century. It has evolved a deep-rooted and highly
complex system of industries and services, many of which are inter-related in a
variety of important ways, and it depends for its survival on the outside sale of its
manufactured products. In this stage, derelict building in inner cities, slum
conditions and dated infrastructure are all found in mature industrial regions.
iv. Old:
The old age stage starts when areas begin to exhibit the well-known features of the
'problem region'; growth is low, the industrial structure is not diversified,
extractive industries like coal mining are relatively important, unemployment is
relatively high, large numbers of people leave the region for other areas, the
region exhibits decrepit by the seemingly impossibility of bringing back the
prosperity which it once knew. The closure of a local coal mine or factory means
that spending power in the local community is reduced and that service traders
such as shopkeepers also suffer as a result.
v. Rejuvenation:
If the cycle of industrial
erosion really is a cycle,
youth should follow on
from old age. This largely
depends on the effort of the
government (government
intervention).
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c. Rationale of Government Intervention
i. Strategic Factors:
Wars, or the prospects of war, have frequently led to increased involvement of
governments in manufacturing. This intervention may take the form of stimulation
or control of vital 'war industries' such as iron and steel, heavy chemicals,
shipbuilding, munitions and aircraft manufacture.
There may be the need to decentralize industrial development in order to
break down the very vulnerable industrial agglomerations. Decentralization of
industries into what are regarded as 'safe area' has been a common practice.
For instance, the WWII saw the movement of Soviet industries to the east of
the Urals, the United States' air-craft industry into the continental interior, and the
development of steel and shipbuilding industries at Whyalla in South Australia.
The widespread distribution of industry in modern China also reflects strategic
considerations.
ii. Economic Factors:
The complexity of modern economic systems, which is partly the result of the
existence of a large number of individual entrepreneurs, has created the need for
the controlling influence of some form of authority, if the systems are to function
efficiently.
Free market forces cannot be relied upon to operate satisfactorily in industrial
location decisions because decision-makers in the real world do not have perfect
knowledge about the best place to locate. In fact, the optimum locations are often
not sought by industrialists.
If the country is to experience economic growth, it is important that spare
resources are as fully utilized as possible. Without government aid to senile
regions, land, labour and capital would be wasted. Labour could move elsewhere,
but land and capital are fixed spatially and would be wasted if some form of
assistance were not provided.
Concentration of economic activity can produce diseconomies of scale. The
increase in air pollution, congestion, house prices, mental illness are just some of
the increased costs society might have to bear if uncontrolled growth of
metropolises continued. Regional policy of government can be seen, there fore, as
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a two edged sword, controlling growth in certain areas and offering incentives for
industry to go to others.
Some of the economic motives of government involvement can be
summarized as follows:
- the need to promote overall economic growth through the development of
industry;
- the need to promote the growth of a particular industry;
- the need to diversify the economy;
-
the need to ensure regional economic balance; and
the need to ensure efficient utilization of the factors of production.
d. Indirect role Governments in the location of industries:
e. Effects of Government Intervention:
i. Extending Spatial Margins:
One way of thinking of government policy is to incorporate the idea of
government subsidies into the Smithian space-cost curve. Subsidies can be
interpreted as attempts to make profitable those locations which industrialists
might otherwise avoid on the grounds of unprofitability. In the figure below, the
effect of government subsidies has been to reduce total costs in relation to total
revenue in development area AB by pushing down the space-cost curve below the
space-revenue curve. Thus, with the subsidies, AB becomes a profitable location
whereas without them, it was beyond the spatial margins to profitability.
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ii. The Regional Multiplier:
The basic theme of the multiplier concept is that if a given amount of money is
injected into a regions, the income of that region increases, not by the value of the
injection, but by some multiple of it. To illustrate the idea of the multiplier, two
simple assumptions are made:
- The region is a closed system - it has no import or export.
- Every person spends 50% of any addition to his or her income and saves the other
50%. (The proportion of an increment of income that is saved is called the
marginal propensity to save [MPS] - in our example, the MPS is 0.5)
Suppose the government builds a factory in a development area which creates
additional income for the region's workforce of $1000. If each worker's MPS is
0.5, this means that $500 will be spent on, say beer, thus increasing the incomes of
beer producers, who spend 0.5 of their additional income (0.5 of $500 = $250)
on, say, clothes, thus increasing the income of the clothes producers by $250.
They in turn spend 50% of their extra income somewhere else - and so on, and so
on until the multiplier has worked itself out. The value of the multiplier can be
calculated by using the following simple formula:
K = 1 / MPS
where K is the multiplier and MPS is the marginal propensity to save.
In our example: K = 1 / 0.5 = 2.
Thus in our example, an initial increase of income of income of $1000 has, when
multiplied by 2, produced an increase in income in the region of $2000 (i.e. $1000
+ $500 + $250 + $125 + ...+ $m = $2000).
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However, in real life, people living in the region are unlikely to be able to spend
their money solely in that region. They will purchase goods made outside the
regions; they will purchase imports from overseas; they will pay taxes to the
national government. Clearly, the initial investment will do the region less good if
a high proportion of people's spending is on items produced outside the region; it
will create wealth for someone else and not add directly to the region's wealth.
Such expenditures are called leakages. Thus, a more realistic regional multiplier
formula can be written as:
K = 1 / (MPS + P)
where P is the % of additional income spent on leakages.
A low regional multiplier means that attempts to resolve a regional problem are
likely to be a long process. It is rather like trying to fill a bath with the plug out.
iii. Cumulative Causation:
An initial investment by the government will create in the region the impetus for
more investments, more jobs and more infrastructure which would in turn induce
more factories. Figure below shows how the location of a new industry in a given
region leads to, first, an expansion in local employment and population, and in
increase in the local pool of skilled labour which will then to further industry
coming to the region. Once started, this cumulative process is self-sustaining - it
does not need outside help.
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Thus, by establishing a new industry in a given region, the government through
the multiplier process, has produced more employment in the region than that
provided by the initial industry. Service trades, transport employment and linked
industries have all been attracted.
Of Course, the multiplier works backwards as well. If a steelworks were forced to
close down, more people than those formerly employed at the works would
eventually be out of work. Because former steelworkers would suffer as their
trade declined as a result of the reduced spending power. Such a catastrophe could
be averted if alternative employment opportunities were made available in the
local area.
10. Agglomeration and decentralization:
One of the characteristic features of economic activities is their marked tendency to
occur in spatial clusters, i.e. they agglomerate in certain areas. The study of
agglomeration economies emphasizes the connections or linkages between economic
activities within a relatively restricted geographic area. Any firm is one part of a complex
chain of production held together by direct or indirect linkages between a series of firms.
a. Industrial Linkages:
All firms have links with other firms. These links may be very simple, like raw
material links with plant and market links with the finished product, or complex
because in the real world, industrial linkage may or may not be with the final
purchaser of a firm's product. In the motor industry, for example, the output of many
firms passes into the assembly stage of the motor vehicle industry rather than to
buyers of cars.
Industrial linkage may be defined as 'all the operational contacts, including flows of
materials and exchanges of information, between the separate functional elements of
the manufacturing system'. These 'elements' may be thought of as whole industries,
sectors of the economy, or individual plants, depending on the scale at which one is
considering the system.
The study of industrial linkage has been seen as an alternative approach towards the
explanation of industrial location. Though all firms possess linkages, some are more
important in the locational choice for the firm than others. Geographers seek to
discover:
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i. how important linkage is in the locational choice of firms,
ii. how important linkage is in the continuing operation of firms at given locations, &
iii. the extent to which linkage acts as a constraint on movement.
a. Types of Linkage:
i. Material Linkages (Tangible)
- Process Links: Goods are moved between firms at different stages of the
production process. For example, the movement of a windscreen wiper from
the plant manufacturing windscreen wipers to the car assembly plant.
- Sub-contract Links: Work is undertaken by one firm for another. For
example, if the demand for windscreen wipers suddenly increased and the
usual producer's capacity could not meet that demand, the work might be
sub-contracted out to a neighbouring firm.
- Service Links: They involve the supply of machinery, equipment or ancillary
parts and the maintenance of a firms' plant and equipment.
- Marketing Links: They involve the movement of goods to another plant or
establishment for purposes of marketing and distribution.
ii. Information Linkages (Non-tangible)
- They include ties with such establishments as banks, stock-brokers or
insurance agents. They are frequently made between firms engaged in the
various forms of tangible exchanges.
- The medium by which such contacts are made is frequently the telephone
and face-to-face contacts are also common.
b. Forms of Linkage:
i. Vertical Linkage:
- Each factory forms a separate link in a series of processing operations which
lead to the production of a final finished product.
ii. Horizontal Linkage:
- Firms specialize in the production of components which are assembled by
another firm.
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iii. Diagonal Linkage:
- A firm produces an article or a service which is required at various stage
of the vertical or horizontal process.
c. Strength and complexity of linkages:
- A firm is linked to other factories or industries in a variety of ways, but some of
these links may not be significant in its location. These 'weak' links will
therefore have much less significance in affecting industrial location than those
strong links. On the other hand, we need to make the distinction between simple
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patterns of connection where firms have relatively few linkages and complex
patterns where firms have many linkages.
- According to wood, there are eight types of linkages.
1. These are material linkages that are few in number and of little importance in
deciding about location. Such type of linkage can be found in 'footloose' light
industries.
2. In this type, individual weak linkages form a complex organizational
arrangement which is important for successful industrial operation. Industries
having this type of linkage of linkage are large scale assembly industry, eg.
motor vehicle production.
3. Industries belonging to this type have strong but simple material linkages.
These industries are strongly tied to markets or material sources. Examples of
these are heavy industry with high transport costs such as those postulated in
Weberian location theory.
4. Material linkages form a complex pattern in the supply and marketing of a
firm. A few strong links, however, dominates the pattern. Lancashire textile
fit into this category.
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5. It is characterized by few information exchange which are of little importance
in deciding location.
6. This group represents information links exchanges that are individually weak
but which together form a complex system that must be maintained. This is
common in manufacturing industries and may have important implications
for location change. The attraction of large cities to manufacturing can be
explained by this type of linkage although it is difficult to measure them as
they are less tangible.
7. Information exchange which is simple in structure but dominated by strong
individual ties to other plants. The link between a subsidiary or branch plant
to its head office illustrates this point.
8. A complex set of information exchanges which is dominated by a few strong
ties is illustrated in this type. These will include non-manufacturing
commercial and service activities.
d. Variations in the Complexity of Linkages:
i. Linkages as Chains:
- Linkages vary in their complexity from the simple movement of a single
product from one plant to another, to a series of inputs from a large number
of origins converging on one plant. We can conceive of linkages as chains
binding the manufacturing system together. Some of these chains are of
considerable complexity, as the figure shows below.
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- The concepts shown in the figure may be illustrated by actual examples. In
A, for instance, a firm might be sending all its products to one warehouse or
retailer. In B, primary metals might be going to various second stage mills.
The motor vehicle industry represents a classic example of the situation
shown in C (as many as 17,000 different factories supply one US car plant
with parts). D - a simple chain - is illustrated by the sequence: logging,
sawmill, and furniture.
ii. Scale of Linkages:
- Linkages may be studied at different scale levels, ranging from the localized
linkages of the street level to linkages of the national scale.
1. Street Scale: Sub-contract work or particular processes in the manufacture
of a product being undertaken in the workshop next door.
2. Industry Scale: Linkages between the different elements in the iron and
steel industry.
3. National Scale: Natural rubber produced in W. Malaysia being supplied to
the USA for its rubber types industry.
b. Agglomeration:
Industrial linkage is a strong force leading to industrial agglomeration. When used in
Geography, the term 'agglomeration' incorporates two ideas. Firstly, there is an idea
related to space with activities clustering or concentrating in a comparatively small
area (i.e. a spatial pattern). Secondly, there is an idea of the process which encourages
the clustering of activities in particular areas (i.e. a process).
Agglomeration, therefore, refers to both a process of locational decision-making and
the spatial pattern which results from the decision to agglomerate. Agglomeration
occurs because an individual firm is able to reduce its costs by locating near other
firms. In other words, agglomeration enables a firm to achieve external economies of
scale which derive mainly from external efforts rather than the own efforts of the
production unit.
i. Forms of Agglomeration::
- Spatial Clustering:
It refers to the clustering of industrial plants within a relatively small geographic
area. For example, the Newcastle of Australia, the Ruhr Valley of Germany and
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the Pittsburgh-Cleveland area of the USA are points of concentration of
industries based on the steel industry.
- Enlargement of Industrial Plants:
Each plant with a complete organization is indirectly a local concentration
compared with production scattered in small neighbourhood plants.
The economic advantages of large-scale production as compared with
small-scale production are effective factors of agglomeration.
An example is the integrated iron and steel works with all aspects of production
being carried out by one firm in one plant, including iron smelting, steel making,
steel rolling and steel fabricating.
ii. Agglomeration Economies (External Economies of Scale)
Agglomeration enables a production unit to achieve external economies of scale.
We use the term 'external' because they are benefits which derive mainly
economies bring about savings in the production costs.
a. Transport Savings:
Material inputs may be obtained from nearby factories. Thus, inter-factory
transport costs are minimized. As a result of the clustering of economic
activities, transport services will be improved and firms may obtain special
rates because of the large volume of traffic provided.
b. Access to skilled labour:
A pool of skilled labour tends to build up in an area where a particular type of
manufacturing is localized. A firm locating in the area can therefore save the
costs in carrying out costly training programmes. Moreover, with the
employment of skilled labour, equipment and machinery can be more
efficiently used.
c. Presence of Ancillary Services:
In a large and growing industrial centre, there is expansion and development
of many useful services, eg. repair and maintenance facilities, banking,
marketing and accounting services.
d. Infrastructure Savings:
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Public facilities are usually provided by the government. As the size of the
industrial centre increases, the unit cost of providing utility services such as
power, water, transport, sewage disposal will fall.
e. Possibility of Internal Economies:
The grouping together of firms forms a chain of production which enables
each to specialize in only one or two phases of the production process. Instead
of producing all the component parts at a higher cost, the firm can purchase
them from a factory specializing in the production of those parts.
Such specialized firms with their large scale of production can benefit from
internal economies of scale and cut down the production costs. Thus, the buyer
can obtain these parts more cheaply. Individual firms become more and more
efficient in production.
Internal economies of scale are the result of specialization (i.e. division of
labour), buying in bulk, mass production, utilization of large machine units,
more efficient use of machinery, special transport rates because of the large
volume of traffic provided, and more efficient use of labour since workers
have to concentrate on only one aspect of the manufacture of an article.
f. Attract investment:
The increasing number of job opportunities will attract more migrants. The
place becomes a centre of purchasing power and there will be higher demand
for consumer goods. The areas will become a good site for further investment.
g. Research and development:
The large industrial regions usually have their own research organizations
where research is carried out and marketing knowledge is gathered.
iii. The process of Agglomeration:
Consider what happens when a new industry is set up in a core region. To start
with, new jobs are generated, people move in to take them, and the purchasing
power of the population grows. This increases the demand for houses, schools,
consumer goods, and services, so creating even more jobs. The new industry will
also attract other industries which supply it with raw materials or use its products.
In other words, it triggers small-scale agglomeration. This creates extra jobs in
services, public utilities, and construction. Yet more industries are then attracted
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to the area by the larger labour pool, a bigger local market, and better developed
back-up services in the expanded core region. So the establishment of just one
new industry in the core region can, by a complex chain of events, boost the local
economy in unexpected ways. This is known as the regional multiplier effect.
A new steel plant in the New York-Philadelphia region goes far beyond the
direct creation of jobs at the plant itself. New employment is generated in many
types of manufacturing and service industries. This gives increased scope for new
developments in the steel plant and increases the regional population, both of
which pave the way to the expansion of the steel plant. And so the cycle goes on.
iv. Industrial Inertia/ Geographical Inertia:
Changing sources of raw material, fuel, changing technology and new modes
of transport may lead to a change in the distribution pattern of manufacturing
industry. However, once a factory has been built on a particular site, it will tend to
remain there even though the original factors, which influenced the manufacturer's
choice of that location for his factory, no longer apply. This tendency for a factory
to remain in its initial location regardless of the changing nature of locational
factors is known as 'industrial inertia'.
The factor of geographical inertia also contributes to industrial agglomeration
since it hinders the movement of industries in spite of the fact that the initial
advantages which attracted the industries have already disappeared or declined in
importance.
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The reasons for industrial inertia are as follows:
- The costs of moving and building a new manufacturing plant may be very high,
thus making the move uneconomical. This is especially true for those industries
which possess large-scale and costly fixed capital equipments which are
relatively immobile, eg. plant, machinery, buildings. For instance, the costs of
abandoning an established iron and steel factory to build a new one elsewhere
are very high, due to the requirement of a very large-scale plant and the very
specialized nature of the iron and steel industry.
- The presence of a pool of high skilled labour may take the move very costly. It
is extremely costly to move a skilled labour force to a factory or to train the
existing unskilled labour force.
- The presence of associated industries means a great deal of transport savings.
This is especially important for those industries with strong local linkages (i.e.
dependent on local connections), eg. industries taking a sub-contact work.
- A wide range of services, such as roads, water supplies and training facilities
would have developed in the established area. Such services or infrastructure
might not be available in the new area.
- The reputation of some firms is strong associated with their particular locations.
Departure from these locations might undermine the public image of such firms
for their products.
Industrial linkage has been an important factor affecting the locational choice
of firms. We have seen how industrial linkages lead to a clustering of industries
which in turn achieve the economies of agglomeration or external economies of
scale. Industrial linkages also play an important part in the continuing operation of
firms at a given location long after the original attractive locational factors have
disappeared. In other words, industrial linkages act as a 'brake' on movement and
lead to industrial inertia.
c. Decentralization:
i. A simple model of suburbanization of industries:
The locational behaviour of two hypothetical firms in an urban area can be
summarized by a simple model, as shown in the sequence of diagrams.
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Traditionally, but decreasingly so, small firms are born in small premises in
the inner city (the infancy stage). Assuming that they outgrow their original
premises, they may either expand in situ (as in the case of X) of migrate outwards
(see Y i the youthful stage). By early maturity, X is still centrally located but Y
has moved even further outward, perhaps the result of less conservative
management or perhaps because space is simply unavailable in the central city. By
maturity, both firms are in the big league. They now both own large peripheral
sites and also possess administrative offices in the CBD. This model does, in fact,
summarize the main elements of intra-urban industrial movement, i.e. suburban
ward movement and the eventual divorce of the manufacturing from the
administrative functions.
ii. Factors leading to decentralization:
- Expansion of the firm:
About 85% of all relocation can be attributed to expansion of the firm. A large
number of industrialists have been prevented in some ways from expanding in
situ. We may identify several ceilings on local expansion:
* simply not enough room, esp. those located in inner city areas,
* high land prices, and
* government refusal to grant permission.
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- Redevelopment of Inner Cities:
The redevelopment of inner cities has been accompanied by the voluntary and
planned outward movement of industry, for purposes of expansion, for the
accommodation of single-storey premises and to satisfy the demands for greater
car parking space.
- Inner City Problem:
The continuing growth of cities has caused concern because of problems of
pollution and congestion and a general decline in the quality of life brought
about by the concentration of people in the large urban complexes.
- Demand for Office Space in the Central City:
It seems that offices still need central city locations more than industries. In
addition, many central city areas have been subjected to extensive road
improvements which have meant that many small enterprises are often unable to
afford the rents for new premises in the central city and new space has
subsequently been occupied by offices.
- Suburbanization of the Market:
This may make the optimum location of an industry more peripheral and extend
considerably the industry's spatial margins to profitability.
- Nature of Industry:
Some industries are more likely to suburbanize than others. Decentralization
from the centre to the outer conurbation seems esp. strong for manufacturing
industries such as clothing, timber and furniture, paper, printing and publishing.
- Government Encouragement:
Governments may initiate policies of decentralization to slow down or even stop
the growth of existing large centres.
iii. Role of Government in Industrial Decentralization:
One of the means of bringing about decentralization of the people is to
encourage manufacturing firms to locate in areas other than the already large
centres. The intention is to try to counter the comparative locational advantages
which the large cities have by offering inducements such as cheap land, freight
concessions, or assistance in the housing of employees in the areas where growth
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is desired. The savings which can be achieved in the decentralized location are
designed to offset the increased costs which result in the location because it does
not offer the economies which can achieved from agglomeration.
The government has played a very important role in the decentralization of
industries. An active policy of decentralization requires that the government
should intervene to influence the locational decisions of people establishing
industries. Among the measures the governments offer to manufacturers to locate
their factories in country areas are:
-
freight concessions on raw materials and manufactured goods,
land on which to build their factories at reduced prices,
the provision of services such as roads, water, sewerage and power, and
subsides to help defray the wages of employees whilst they are acquiring job
skills.
The footloose industries because they do not form strong linkages with other
industries and therefore do not have strong locational pulls, are most likely to be
attracted away from the metropolitan areas because of the advantages which they
gain from a decentralized location.
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