Factors of industrial location
Types of industries
 Primary
industry
 Secondary industry
 Tertiary industry
 Quaternary industry
 In
this section, we are only confined with
the “manufacturing industry”.
 Primary
industry usually known as
handicrafts.
 It
is estimated that in Asia, Africa, and
the Middle East, some 80 - 85 % of the
industrial workers are employed in
handicraft industry.
Manufacturing industry can be
seen as ”system”.
 Various
inputs (factors of production) such
as raw material, labour, and power are
brought together in the production process
from which produce an output -- the product.
 Frequently,
the output of one
manufacturing industry becomes input
of the raw materials of another.
 e.g.
steel is used to make car bodies
and therefore one of the inputs needed
by automobile industry.
 It
can be divided into heavy industry
and light heavy
Manufacturing industries can be also divided into:

a. Processing industries :
-
A material may undergo a change in physical
state, chemical composition, volume or mass,
in creating a product more useful to man.
-
e.g. Steel making is one of the example. It
change state during process.
For reference, can see this site :
 http://www.nucor.com
 http://www.posco.co.kr
Two kinds of processing industry :
1. Initial Processing industries :
-
A single raw material is converted into
a more concentrated or useful form.
For example: (1)sugar milling (2)dairy processing
(3)fruit and vegetable canning (4)meat packing
(5)grain milling (6)brewing and wine making etc.

In some cases, the output of the processing
factory becomes available for immediate
consumption, e.g. butter, cheese, wine, beer
and canned fruit.
 In
other cases, some treatment of mineral
ores, the output must pass through other
manufacturing for processing before a final
product results.
2. Complex processing industries :

Some types of processing involves more than a
single raw material inputs.

Raw materials are frequently obtained from several
different sources, and often subjected to a series of
lengthy and complex processes that involve a high
degree of organisation and advanced technology.

In some cases, the complex processing industries
may result in a product available for immediate
consumption, or the required further processing or
fabricating,
e.g. steel making, aluminium production, petroleum
refining, sugar refining.

b. Fabricating industries :
 Fabricating
involves a change in the
physical form but not the state of the
raw materials used.
 Fabricating
is basically the assembly of
finished or semi-finished product from
other primary or secondary
manufacturing industries
 e.g.
steel making industry, to produce a
finished products.
 Examples
: the manufacture of
automobiles, aeroplanes, ships, all
other types of machinery, furniture, and
clothing are examples of fabricating
industries.
INDUSTRIAL LANDSCAPE:
Some Basic Problems of Industrial Location
1.
Distribution Pattern
Not evenly distributed around the earth, with
some manufacturing industries typically
concentrated in certain localities.
The reasons for the Contemporary Pattern of Location And
the Cause for Dynamic Change of Location:
1. differences in scale or level of study:

micro level or firm level – individual firm

meso level – an industrial district

macro level – an industrial area or a whole
industry
2. differences in the types of industry
 e.g.
light industry such as textiles make
strong demands for labour.
 Heavy
industry such as oil refining and
petroleum results little labour but much
capital.
3. differences in special needs:
-
need to be close to other industries
-
need to lower transportation costs by
cheap sea transport
-
others
4. differences in the motives of the individual
entrepreneur in choosing a location:
 some
are likely to be motivated by a desire
to maximise profits and will take risks in
doing so.
Other may want simply “satisfactory” profit
and safe existence.
Despite these diversifying factors of location, there
are common requirements to all industrialists:
 1.
the purchase of raw material or semiprocessed materials
 2.
the processing or assembling of these
raw materials or semi-processed materials
whereby value is added to them.
 3.
the sale of the finished products.
 4.
the payment of transportation costs
involved in the assembly of the raw
materials or semi-processed materials and
the distribution of the finished products.
 5.
labour supply
 6.
energy resources
 7.
capital
II. The Factors affect Industrial Location:
1. Role of Raw Material
 The
degree of attraction exercised by
raw materials varies according to nature
of the materials themselves.
Raw materials can take many forms:

1. products from a primary industry, e.g.
agriculture, mining, forestry or fishing.
 2.
semi-processed (semi-finished)
products from an initial processing or
complex processing industry, e.g. raw
sugar, steel plates.
 3.
semi-processed products from a
fabrication industry, e.g. electricity
circuits, car engines.
In term of spatial distribution, raw materials can be classified
into 2 broad types:
Ubiquitous raw material – which are
found practically everywhere, e.g. water,
sand, atmospheric gases
 1.
Sporadic or localized raw materials –
which are found only at specific sites and
are of many types, e.g. coal, petroleum,
iron ore, bauxite, rubber.
 2.
 Ubiquitous
raw material cannot exert strong
locational tie or influence on industrial
location as can localised / sporadic raw
materials.
 Historically,
many manufacturing industries
had a tendency of locating very close to
their raw materials – raw-material oriented.
A. If the lose a great deal of weight or bulk
during the production process, the factories
will be attracted to sources of raw materials
because transport cost can be saved.
e.g. sugar is only 1/8 of the weight of sugar
cane

Goldsmith: one tonne pf raw material produce
a few grams of metal.

Alumina refining – which uses about 4 tonnes
of bauxite to produce 2 tonnes of alumina.
b. If the materials are perishable
 e.g.
fruits canning, vegetable and food
preservation, palm oil refining, meat-packing,
they have to locate themselves near their
sources of raw.
 Initial
processing has to be carried out on
the site before the raw materials can be sent
and arrive in fresh forms at the market.
c. High value of raw materials per ton
 If
material of high value per ton (e.g.
wool), then it can bear a heavier cost of
transport and plants will be found further
away from away from sources of
materials.
 Materials
of low value per unit of weight,
e.g. copper ore will attract industries
near them.
d. Possibility of using substitute materials:
 Where
materials are substitutable, the
pull of any one of them is reduced, e.g.
either pig-iron or scrap can be fed into
the converter so steel production may
not be set up nearer to the iron smeltery.
e. Number of materials involved:
 Attraction
of one material in ONE
direction may be counteracted by pull of
another in a different direction, e.g. iron
and steel industry employs several
types of raw materials and location
based on access to both coal and iron
ore can be found.
f. Influence of freight rate:
 If
the materials are costly or difficult to
handle, then raw material supply plays a
very important role in location decision.
g. hazardous or dangerous materials
which require to travel long distance
 These
may include the generation of
nuclear electricity and making of nuclear
armaments.
A marked decline in the locational pull or
attraction of raw materials on industrial
location because of:
1. improvements in transport
technology – which allow raw materials
to be transported over longer distances
at lower costs (cheapening of
transportation).
2. advances in production techniques –
which allow the same amount of
products to be produced forma reduced
amount of raw materials.
3. greater attractiveness of the market
location.
4. advantages of agglomeration of
manufacturing industries.
Examples:
 A.
Sugar milling (case study)
Physical requirements :
 1.
alluvial flat land with deep and welldrained soils of volcanic origin.
 2.
completely (frost-free) - mean monthly
temperatures (should not fall below 18 ℃
for optimum growth.
 3.
annual rainfall: 2000mm per annum but it
is also necessary to have a slightly dry
period (75mm)
Processing cane into raw sugar :
1.
crushing the cane to extract juice. (The
remaining cane fibber is a dry material
called 'bagasse'. This is used as fuel.
2.
cleaning dirt out of juice in settling tanks.
3.
boiling juice twice to form syrup-coated
sugar crystals. (糖漿)
4.
spinning off syrup from crystals.
5. A thick syrup, called molasses (糖蜜)is also
spun off in this final centrifuging and this is
then sent to distilleries to be made into
industrial alcohol, rum (酒)
6. It is also sold to farmers for stock feed and
fertilizer.
Raw material (case study) :
1. Perishability of harvested cane
transshipment must be avoided.
2. Cane, is an extremely bulky, and
cumbersome crop of low specific value, i.e.
'value per unit weight is low.
 For
example, an average yield of cane is 84
tonnes per hectare, compared to less than
2.5 tonnes per hectare of wheat and other
cereals.
 As
a result, cane is difficult and costly to be
transported.
 Therefore,
the transport system focusing on
each mill has to be both fast and capable of
handling very large quantities.
 Also,
it is more economical to keep the haul
as short as possible. Thus, mills have to
located in the midst of their assigned cane
areas.
3. Weight lose material:
 Each
7 tonnes of cane brought in from
the fields yields only 1 tonne
approximately of raw sugar in the milling
process.
 Thus,
the overriding consideration in
siting sugar mills is to locate them as
close as possible to the fields with
efficient bulk transport system
B. Copper processing (Case Study)
Highly concentrated into a few
major mining centres :
 a. interior south-western U.S
 b.
the Ural (烏拉爾)and Caucasus regions of
USSR(高加索山脈)
 c.
Zambia and Zaire in south-central
Africa(桑比亞、扎伊爾)
 d.
east-interior Canada
 e.
central and northern Chile
 f.
Peru, the Philippines
 Most
of these regions are in relatively
isolated, sparsely settled and
underdeveloped parts of the earth distant
from the major consuming regions.
Distribution of consuming regions
In the advanced nations (industrial regions)
North-eastern part of the USA and Canada,
the-west coast of the USA, western Europe,
European USSR and southern Japan.
2. Locational Factors:
 High
weight loss ratio - Large amounts
of worthless waste material except for
the small quantities of recoverable gold,
silver, lead, zinc etc are mined with
copper ores.
 In
other words, for every 100 tonnes of
copper ore mined, only 1 or 2 tonnes Of
pure copper are yielded.
 Thus,
the weight loss ratio is very high (9798%) .
 Therefore,
it is desirable to upgrade the ores
at the mine in order to reduce the transport
costs associated with moving huge
quantities of bulky materials of low specific
value.
 Therefore,
strong materials orientation
3. Copper manufacturing : (case study)
1. Concentrating the ore
The purpose of this stage is to upgrade the
crude ore by removing most of the waste
material. The concentration mills convert
each 100 tonnes of ore into about 2 or 3
tonnes of copper concentrate.
 In order to save transport cost, nearly all
concentrating mills are found within a few
kilometres of the mines that supply them.
 thus, copper concentration is an excellent
example of a materials oriented initial
processing industry.

2. Smelting the concentrate (regarded as part of the initial processing)
- The concentrate from the mills has only about 30
to 40% copper content.
- therefore, the purpose of smelting is to remove
the remaining worthless impurities.
- From 2 or 3 tonnes of concentrate, the smelters
produce about 1 tonne of blister copper, which is
over 99% pure. Thus this stage has weight loss
ratio of approximately 60%.
 Because
of this fairly high ratio, smelters
tend to locate close to the concentrators, or
at some point convenient to several mills.
3. refining the blister copper
The blister copper is 99% pure, but is still
unsuitable for the manufacture of electrical
wiring and other items.
 Hence, it must be refined by electrolysis to
remove the impurities - gold, silver, zinc, lead
etc. This very low weight loss ratio and the
valuable nature of the by-products, mean that
electrolytic refining is not tied to the mining
regions.
 In fact, the high specific value of the blister
copper means that it is economical to
transport it to markets, where power and
labor factors are usually more favorable.

Role of Market
 1. An
outstanding locational influence on
modern manufacturing as a whole.
A market location is attractive to many kinds
of industries, particular consumer goods
industries, and likewise many capital goods
industries.

a. Consumer goods – Industries which are
producing goods for consuming markets in large
urban areas.

Textiles and many kinds of processed food are
good examples, with their raw materials sources
widely spaced from their market-based factory
plants.

It is clear that consumer goods industries have to
be sited in densely populated regions such as
cities and conurbations.
 b.
capital goods industries - which sell their
products to be further processed or
fabricated by other plants, are less
dependent upon distribution of population.
 However,
since their products are very often
sold to the consumer goods industries, many
capital goods industries are likewise
attracted to urban-based and market-based
locations.
 Good
example include the production of car
tyres and the assembly of motor vehicles,etc.
Industries have become market-oriented for the following
reasons :
a. The market will exert a strong pull on industry if:
(i) Bulkiness of the products:
 If there is an increase in weight
(weight-gaining products), in order to
save on transport cost . e.g.
breweries, soft drink manufacturing
(coca-cola), bottling plant are all
market oriented.

ii. Perishability of the products, e.g. bakery

iii. Fragility of the product e.g. glassware, camera

iv. If the industries require close personal contact
between producer and consumer. E.g. newspaper

v. If the product is relatively cheap (low value, but
bulky) and transport cost will increase the cost
substantially e.g.cement-making

vi. If a market is a concentrated and specialized one.
e.g. farm machinery industry in US is located near
to mid-west while the cotton picking machine is
produced in the south.
MARKET, therefore, IS GETTING MORE AND
MORE IMPORTANT IN INFLUENCING THE
LOCATION DECISION OF ENTREPRENEURS.
 Market
is population centre
 Concentration of industry will create market
 The distribution cost is higher than
procurement cost
EXAMPLES: The Changing Pattern of Oil Refinery from raw
material to market location (case study)

1.The high proportion of wastes meant that it was
uneconomical to transport crude oil very far before
refining. It is natural that refineries established in
the early days were at the source areas.

2. Near the turn of the century came the first big
demand for petrol owing to the development of the
motor vehicle, and this meant that a substantial
proportion of former “waste” became an important
market product.

3. The proportion of waste was further diminished
by the development of the cracking process.
Cracking is, however, an expensive process but
only a limited amount of waste is produced.

4. The overall result of these changes in demand
is that today up to 95% of crude oil can be made to
yield marketable products.

One of the main reasons, therefore, for the
location of refineries at source, a high proportion of
waste has disappeared, and it is no accident that
in recent years we have seen a marked shift to
market location.
5.Market refineries are more flexible in the
sense that they can accept the crude oil
from competing regions, while source
refinery is virtually tied to using oil from a
single source.
 In
the Suez Crisis, for example, when the
supplies of oil from the Middle East to
Western Europe were interrupted, British
refineries were able to switch to Venezuelan
oil.
 6.
Skill man are more easily to found in
developed countries (market) than at the
underdevelop countries (raw material)
 In
developed territories where the danger of
"civil strike and political instability is at
minimum.
 It
is therefore surprising that political and
strategic refineries have encourage the
development of market-oriented refineries in
the post-war years.
This is a notable trend for modern industry
to seek a market location, and this is true of
the oil-refining industry. The strength of the
attractive power of the market should be in
no doubt to anyone.
3. Role of Transportation

Terminal costs: are incurred because of the costs
due to loading, unloading and temporary storage,
and the cost of preparing shipping documents

Haulage costs: are related to the distance of the
journey covered, and include fuel costs, labor
costs, maintenance costs and depreciation on the
means of transport vehicle concerned.
 Most
modern industries find it necessary to
bring in raw materials from a large number
of sources, and to distribute their finished
products to a large number of markets.
 Usually
manufacturing industries prefer
locations with good transport infrastructure
(e.g. road, railways, harbors and airports)
 1.
coastal ports e.g. Sydney, London,
Rotterdam.
 2. railway centers e.g. Chicago (with 27
rail lines converging upon it), Paris.
 Ports,
canals, roads, railway, and airports
have all, at different times and to different
degrees, been important influences on
industrial location. Thus, industrial location
and technological change in transport are
linked together.
Advantages:

(i) Water transport offers the lowest cost per
tonne per km for long hauls.

(ii) It is the cheaper means. It usually have very
large cargo capacities and the natural water
route,(rivers, seaway and oceans )needs little
maintenance.
Disadvantages :
 (i)
Sea transport much slower than other
means of transport.
 (ii) It may be disturbed easily by storm and
other adverse weather conditions.
 (iii) Deep-water harbors well sheltered from
strong wind must be available, or else heavy
investment may be necessary artificial
harbor improvements.
 (iv) Heavy capital investment are required
for the construction of container terminals.
R
I
M
1. At either R or M, only 1 set of terminal
costs is incurred.
2. At any intermediate site I between R and
M, 2 sets of terminal costs are incurred,
one for the procurement of raw materials
and one for the distribution of finished products.
3. Since a lot of terminal costs could be saved, it
would be cheaper to locate the manufacturing
plant at either R or M than at any intermediate
point I.
Case 2 :
 Location
at the break-of-bulk point
(transhipment location)
- for manufacturing plants the consignment
of which requires transhipment, i.e.
transfer from one carrier to another, e.g.
from railway to sea transport).

The place where transfer from one carrier to
another occurs is referred to as a break-of-bulk
point or transshipment point.

Here, the terminal costs are unavoidable, and
hence the step-up in the procurement cost curve
moving towards the market, and the step-up in
the distribution cost curve moving towards the
material source.

A market orientation or materials orientation will
incur these additional terminal costs, which push
up the total transport costs at either location.

However, if the manufacturing takes place at the
transshipment point, some of the reloading
terminal costs may be avoided, especially if the
manufacturing process results in some weight
reduction and/or bulk reduction.

Break-of-bulk locations are frequently least cost
location for manufacturing plants which process
bulky raw materials arriving by sea, e.g. sugar
refining, oil refining, steel milling.
Case 3 :
 1.
the finishing products are bulkier or more
fragile than the new material.
 2. the finished products may require special
handling facilities, e.g. refrigeration.
 3. raw materials can be carried in bulk
carriers and trains whereas the finished
products cannot.
e.g. furniture-making/ manufacture of washing machines,
processing of agricultural products into chilled/frozen foods.
 As
a result of lower assembly costs
relative to distribution costs, such
industries tend to be located at or near
their market.
4. The role of Labour
Labour is needed to operate any industrial
plant but the type and amount vary from
industry to industry.
In some industries, labour input is a large
cost item while other may be of minor
importance.
 Labour
is relatively immobile factor, difficult
to move to new areas or to new jobs.
Largely for this reason, labour-intensive
industries may be attracted to areas that
have a surplus of labour.
 For
these industries labour costs, form a
very high proportion of total costs and, if
costs vary from place to place, may exert a
strong locational influence.
a. i. quantity of labour
Labour intensive ratio =
number employed /value of shipment from
factory

b. Labour varies spatially in quality and quantity.

Labour costs are determined by 3
main consideration:
(i)
payments to workers:
educational level of workers and costs
of training workers
Stability of labour force
(ii)
(iii)
5. The role of capital
a. Fixed capital – land, construction of factory
building, machinery for processing and social
capital (social services) of the area, including
public housing, school, hospital. It also include
physical infrastructure (e.g. road, railways).
b. Working capital - It is needed to finance the costly
factory system, to pay wages, purchase stock of
material, component parts, finished product not
yet sold and money (money capital)
The location effect of capital:
-
Fixed capital is much more immobile,
difficult and costly to move. This is the
reason for geographical inertia.
 Money
capital can be obtained from
investment of manufacturers, sale of
shares to private investors, loan from
banks, insurance companies and
government. More mobile.
6. The Role of Power Resources
 a.
Cost of energy varies over space:
A known resources may not be used
because of its inaccessibility, e.g. oil in
Siberia.
 b.
There is also time variation in demand
and supply.
 Technological
advances may make formerly
useless to be valuable and desired.
 The
fuel and power resources obtained
from modern industries are coal, natural
gas, petroleum, water power and nuclear
energy.
 The
fuel can be directly or indirectly, that is,
the fuel is converted to energy in another
form usually easier for transport e.g. coal to
produce electricity.
7. The Role of Government /
Government Influence
 Government
influence is increasing felt
in the development of industries in
many developed and developing
countries, whether they have a free
enterprise economy (i.e. laissez-faire),
mixed or planned economy.

In particular, government influence on
manufacturing location is most marked in the
planned economies in socialist countries.
Government exhibits its influence through
- infrastructure
 - government spending
 - legal framework
 - education and training facilities

In free economic local
government:
 a.
On a local scale, conflict of interest (the
problem of noise, dirt, smoke, offensive
smell, danger and traffic congestion)
between industrial landuse and other e.g.
residential, educational, recreational has
led the city government to introduce zoning
laws.
 b.
Government may set up regulations
controlling the maximum hours of work, the
minimum age of work, minimum wages etc.
to protect the labors from the capitalists'
exploitation.
 c.
To encourage dispersion by offering
cheap land, industrial estates, better
transport system and all infrastructure.
Ways of government intervention
or influence
 Traiffs
 Quotas
 Subsides
& bounties
 Government ownership
 Lease restriction
 Loans
 Strategic consideration
 Tax concessions
Some possible measures of
government intervention include:
 1.
Provision of infrastructure in areas
established for industrial development
 2.Provision
of land (often cheaper and more
extensive land) for industrial use. e.g. Tai Po
and Fo Tan Industrial Estates in the N.T,
Hong Kong

3. Establishment of manufacturing industries in
depressed regions and new industrial areas
(a) In countries of planned economies, e.g. China,
the Chinese government has established a
large petroleum refinery and petrochemical
works at Urumqi in Xinjiang in order to achieve
regional economic balance and industrial
dispersion.
(b) In countries of mixed economies, e.g. Britain
and France, the governments can establish
nationalized plants in depressed regions and
rural areas.

e.g. The British government has
established new factories such as Ford
at Halewood (near Liverpool), British Leyland
at Bathgate (near Edinburgh), etc.

4. Introduction of favourable terms of trade to
industries in order to attract foreign investment
and the establishment of technology-intensive
industries
e.g. By granting tax concessions (low rates on
profit taxes)
 5.
Protection of the country's own-industries
and/or new industries
e.g. By imposing tariffs on imported finished
products or raw materials; and imposing
quotas on imports
 6.At
city or regional levels, governments
may adopt zoning policies which specify the
site of industries in various industrial
districts
 (e.g.
Tai Po Industrial Estate for industries
not possibly accommodated in the inner
city's multi-storey buildings) and/or
industrial regions. e.g. Metropolitan Sydney,
Australia

7. Setting up of training institutions for industries
in specified industrial estates or regions

8. Introduction of anti-pollution laws and traffic
control regulations to reduce pollution and other
environmental problems in existing problem areas.
9 Town planning measures and strong central
planning
These may :
(a) limit the establishment of repulsive industries
(e.g. leather tanning)and environmentally
dangerous industries (e.g. chemical works) to
some specified regions
(b) encourage the development of “cleaner”
industries and force the manufacturers to adopt
sewage treatment of their waste products
before discharge/disposal

Case Study (1) :CHINA'S IRON AND
STEEL INDUSTRY AFTER 1949
Case Study(2): Government influence on
industrial location in Australia
Please refer to the online notes
8.The Role of Technology Change
 Technology
as a factor of manufacturing
location is needed in the production,
transport and marketing of the finished
products.
 In
particular, technological advances in
various aspects affect considerably the
location of manufacturing industry.

Firms tend to be located at the site where
the total costs are minimized. Changes in
technology at any state of production will
alter the least cost point and induce a
locational shift.
9. Climate and Water Supply
a. Climate:
 certain
agriculture raw materials are
limited by the climate, e.g. equatorial
climate rubber for processing.
 availability of water may influence the
location of textile industry.
 cost of heating, cooling, humidifying and
dehumidifying.
 types of demand may depend on the
climate e.g. heater in cold environment.
b. Water supply:
 water
can serve as raw materials e.g.
soft drink, wine
 washing and cooling e.g. textile, paper
making
10. Land Space
a. The increasing scale of manufacturing factory
demands for a more spacious site. A lot of
industries take a sub-urbanized location, e.g.
motor vehicle assembly, oil refinery
While smaller labour-intensive industry are in
residential buildings or flatted-factory building.
b. Physical demand of the industry
e.g. ship building demands a water frontage.
 c.
Cost of the land
Land prices vary from region to region.
Rental will normally decrease from the city
center. But, it is determined by the market
Mechanism.
11. Personal Factors: Behavioral and Random
factors for decision making
 a.
Geographical inertia – many
industries are located at the place
where they were set up even though
the favourable factors have been
faded out.
 b.
In making decision on the location of
plants, most of the industrial entrepreneurs
do not have complete knowledge about the
various factors of production and the
general business conditions.
 Accordingly,
industries can rarely hope to be
sited at places with minimal costs, i.e.
optimal locations. Personal consideration
may influence the final decision on a
location.
 c.
Economic factors are seldom the only
factors considered in the building of a
factory plants; non-economic factors also
enter the consideration in many locational
decisions.
 Many
industrialists would be satisfied with a
high level of profits; profit maximization is a
motive more applicable to large
manufacturing plants than to small and
medium size manufacturing firms.