Chapter 11 Outline: Industry
I.
World Industrial Regions: Nearly all industrial centers have three things in
common. Proximity to water (cheap transportation), abundant and cheap
energy (usually coal) and abundant resources (usually iron ore)
A. Europe
1.Northwestern Europe
a. United Kingdom: Glasgow, Scotland to Birmingham England. Hearth
of the Industrial Revolution. From there Industrialization spread East to
Netherlands, Belgium, Germany and France and West to Eastern North
America. Prior to the Industrial Revolution, goods were produced in by
hand in small shops or homes known as “cottage industry.”
b. Rhine-Ruhr Valley – (Germany, Belgium, Netherlands)
Rhine and Ruhr rivers run through this area.
c. Mid-Rhine: (France and Germany) Resources from the Alps
combined with transportation to the ocean via the Rhine River.
d. Northern Italy: resources from the Alps
2. Eastern Europe
a. Industry centered around major cities (Moscow, St. Petersberg
b. Urals and Kuznetsk are newer industrial regions away from major
markets that were created to spread industry to the eastern parts of
Russia.
c. the admission of many formerly communist countries to the European
Union (Poland, Czech Rep. Slovakia etc.) has led many corporations in
Western Europe to locate factories in this region. They can pay less but
the workers are usually well educated and Eastern Europe is close to
Western European markets.
B. Eastern North America
1. Western Great Lakes: Milwaukee, Chicago, Detroit
2. Mohawk Valley: Buffalo, NY; St. Lawrence River and
Ontario,Canada
3. Pittsburgh-Lake Erie (Region between Pittsburgh and Cleveland
4. Mid-Atlantic: (NYC, Philadelphia, Baltimore) In contrast to
Western Great Lakes, Mohawk Valley and Pittsburgh-Lake Erie
which take advantage of mineral resources and waterways,
industries in the Mid-Atlantic region are located to take
advantage of large markets in that area.
C. East Asia
1. Japan
The first industrialized nation in Asia. They overcame the problem
of distance from their markets and few natural resources with their
large labor force that would work for less than other industrialized
nations. As the four Asian dragons (Taiwan, South Korea,
Singapore and Hong Kong) began to compete with Japan for
manufacturing jobs, they trained their workforce to produce more
complex products like electronics and cars.
2. China
Now the world’s second largest manufacturer. Although China
claims to be Communist (which is a self-sufficiency approach to
development), it justifies international trade through designating
regions such as Shanghai, Tianjin and Shenyang as “special
economic zones.”
D. Latin America
1. Mexico
Increasingly important source for U.S. manufacturing. The North
America Free Trade Agreement eliminated tariffs between Mexico,
U.S. and Canada thus creating another “special economic zone”
along the border between Mexico and the U.S. Factories that
produce goods for American consumers are called “maquiladora.”
2. Brazil
Also increasing industrial production for markets in South, Central
and North America. Labor is more expensive in Brazil ($400/month)
than in Asia ($100/mo) but transportation costs are lower from
Brazil to the U.S. than from Asia to the U.S.
a. the practice of putting a dollar amount on the worth of a
worker is called “commodification.” It is condemned by
human rights activists because they believe that no amount
of money can truly represent the worth of a human being.
II.
Location Factors: Situation
proximity to inputs vs. markets
Considers which costs more-transporting raw materials to factory or
finished products to consumers
A. Proximity to Inputs (raw materials/natural resources)
1. copper industry- the amount is greater upon arrival to the factory
than when it leaves.
a. only 25% of the material brought in from mines actually
becomes copper wire, sheets etc.
2. steel industry- mine iron- which is refined by smelting (adding
carbon, heat and water)
3. U.S. Steel Industry- Industrial Era (mid 1800’s to mid 1900’s)
a. located near water (the cheapest type of transportation)
Great Lakes, Mississippi River, Ohio River, St. Lawrence
River, Erie Canal
b. located near large deposits of coal and iron ore.
c. Cities such as Milwaukee, Chicago, Detroit, Cleveland,
Buffalo and Pittsburgh grew as a result of steel industry and
other industries that grew out of steel production
(agglomeration)
4. Changing U.S. Steel Industry
a. changing economy-(globalization, outsourcing, new
international division of labor) have impacted the U.S. steel
industry
b. surviving factories are actually closer to markets than
inputs.
c. Steel production has adapted reduce costs. They are more
specialized. Now 25% of steel production is done in minimills that produce only one type of steel product (beams,
sheet metal etc.) verses integrated mills that are involved in
all aspects of steel production.
B. Proximity to Markets (Market Orientation)
1. Bulk gaining industries- products are composed of many small
parts that make them bigger/heavier when they leave the factory
than when they came in.
a. soft drinks- mostly made of water (which is heavy and
abundant) so plants are located near major population
centers so that the only thing shipped to the plant is the
syrup.
b. Fabricated Metals and Machinery- bring in a variety of
parts that are made in other factories and assembled.
c. automobiles: production began in Detroit, but while
company headquarters are still there, production facilities
were moved near the largest markets on the east and west
coast.
d. 1950 U.S. manufacturers produced 100 different models of
cars. In 2000, there were 700 models produced in the U.S.
Most models are made in factories that exist just for one
model of car.
e. To cut costs and become more efficient, factories located
away from the east and west coasts and are located in the
center of the U.S. between Michigan and Mississippi. This
region is known as “auto alley.”
2. perishable products-products that are only good for a limited
time.
a. Food or drink that will spoil is located near the market
where it will be sold.
b. Canned, frozen or preserved foods can be located further
from markets
c. Newspapers and magazines: used to be only local due to
transportation and information constraints. Advances in
technology allow major newspapers to be written in one
place (New York Times, Wallstreet Journal, USA Today)
but printed and distributed near major markets.
3. Weber’s Lest Cost Theory
The larger and heavier the product is, the more likely it is to be
manufactured near the market where it is sold.
4. Footloose Industries (computer software and electronics)
Industries that are not tied to a certain location
a. size is small enough to minimize transportation costs
b. resources are abundant and found in many locations
c. is not labor intensive (labor is not the biggest cost in
production).
C. Modes of Transportation: Ship, Rail, Truck or Air? The further from the
market the cheaper the cost per mile. All goods have loading and
unloading costs.
1. Ship-is the slowest but least expensive form of transportation
2. Rail-used for products shipped long distances inland.
3. truck-used for products transported relatively short distance or to
places that aren’t served by rail.
4. air- most expensive but also the fastest. Some companies use air
because of the time-sensitive nature of their product.
5. Break-of-Bulk Points- places where products are exchanged from
one mode of transportation to another.
a. “just-in-time” delivery: advances in transportation and
communication allows parts and products to be shipped so
that they arrive “just in time” to be used. This cuts the cost
of renting space for storage.
III.
Location Factors: Site
Costs involved in making a product that doesn’t involve transportation.
A. Labor
1. labor intensive industry-the majority of the cost of production is
in the labor needed to produce it.
a. labor intensive does not equal high wages;
labor intensive=low wages
b. labor intensive industries are usually outsourced to LDC’s
where labor is five or six times cheaper
c. textiles: account for 6 percent of all industry, whereas
labor from textiles accounts for 14 percent of all wages
2. “Right to Work Laws” many states in the South and West have
“open shop” laws that allow people to work without joining a
union. Many states in the northeast have lost factory jobs because
they have “closed shop” laws that require workers to join a union
in order to work in certain industries.
B. Land-there are many factors that influence the decision of which parcel of
land upon which to build a factory.
1. climate
2. proximity to sources of energy
a. aluminum plants use a lot of energy, so they locate near
sources of cheap energy like hydroelectric power or wind
power.
3. proximity to cheaper land and labor- while some U.S.
manufacturing has moved to other countries, some factories have
moved South and West to take advantage of cheaper labor.
C. Capital
1. availability of money to invest in the growth of the company
a. auto industry could have started in many cities of the
Midwest. The willingness of banks to lend money in the
Detroit area is a major reason why the headquarters ended
up there.
b. Silicon Valley, Ca: growth of the computer industry started
because of the availability of capital to start computerrelated companies.
IV.
Where is Industry Expanding? (Key Issue 3)
A. Intra-regional shifts in manufacturing (shift from urban to rural/semi-rural)
1. Early factories located near cities for proximity to labor and
markets. Built multi-story buildings to save on land costs.
2. modern factories are locating in suburbs or rural locations due to
cheaper land and advances in transportation and communication.
It is more efficient to have factories on one level.
3. Shipping costs are also lower in semi-rural locations because raw
materials don’t have to be transported as far.
B. Inter-regional shifts in manufacturing
1. factories relocated from the northeast to the southeast and west.
a. cheaper land
b. cheaper labor (right to work laws)
c. warmer climate
2. shifts in Western Europe from northeast to southeast
a. U.K. and Germany (Rhine)have water transportation, iron ore
and coal just like the Midwestern U.S.
b. European governments have encouraged/required relocation of
factories to less developed parts of Europe.
c. As countries turned from Communism to Capitalism, factories
began to move to the east because of the highly educated workers
who would work for less money.