Chapter 11: Industry
Two important considerations…
• Where are the markets for the products located?
• Where are the necessary resources located?
• Increasingly industry has diffused from MDC’s
to LDC’s, especially through the operation of
transnational corporations.
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Key Issue 1: Where is Industry Distributed?
• Industrial revolution originated in Britain during the late 18th century
due to a combination of factors:
– Entrepreneurs
– Capital
– Raw Materials
– Available Labor
• Also included social and political changes of that time
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Spatial Organization of the World Economy
• Three-quarters of the world’s industrial production is concentrated in four regions:
– Northwestern Europe
– Eastern Europe
– Eastern North American
– East Asia
• Western Europe has major industrial regions in Britain, the Rhine-Ruhr Valley,
the mid-Rhine and Northern Italy.
• The oldest industrial areas in eastern Europe are the central industrial district
which is centered on Moscow, and the St. Petersburg Industrial district.
– Also the Volga and Ural industrial districts
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Why do industries have different
distributions?
• Situation factors involve decisions about industrial location that attempt to
minimize transportation costs by considering raw material source/s as well as
the market/s.
– If the cost of transporting the inputs in greater than the cost of transporting
the finished product, the best plant location is nearer to the inputs.
– Otherwise, the best location for the factory will be closer to the consumers.
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The Copper Industry in North American
A good example of locating near the raw
material source.
Copper concentration is a bulk-reducing
industry.
BULK REDUCING: The final product
weighs less than the input
Two-thirds of US copper is mined in
Arizona, so most of the concentration mills
and smelters are also located in Arizona.
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Other Bulk Reducing Industries?
• Steel
– Made by the Bessemer process
• Combines iron ore and carbon at high
temperatures to produce steel
– Beginning in the 20th century, most of the large US
steel mills were located near the East and West
coasts because iron ore was coming from the other
countries.
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More facts about the US steel industry…
Today the US steel industry is located near major
markets in minimills.
It has become a FOOTLOOSE INDUSTRY
One that can locate virtually anywhere because the
main input is scrap metal and is available almost
everywhere
Today the US steel industry takes advantage of the
AGGOLMERATION ECONOMIES, or sharing of services
with other companies that are available at major
markets.
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Agglomeration is an extended city or town area
comprising the built-up area of a central place
(usually a municipality) and any suburbs linked by
continuous urban area.
An excellent example of an Agglomeration is the San
Diego-Tijuana metropolitan area. The cities together
create a bi-national agglomeration between Mexico
and the United States.
Another example is Silicon Valley in California. Many
tech companies locate there because there is a lot
talent there.
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Deglomeration occurs when
companies and services leave
because of the diseconomies of
industries’ excessive concentration.
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Alfred Weber’s Theory of Industrial Location
Also known as LEAST-COST
THEORY
Al’s theory is that the firms will
locate where they can minimize
transportation and labor costs as well
as take advantage of agglomeration
economies.
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Weber's Location Triangle
Transportation is the most important element of the model since
other factors are considered to only have an adjustment effect. To
solve this problem, Weber uses the location triangle within which
the optimal is always located. The above figure illustrates the
issue of minimizing transport costs. Considering a product of w(M)
tons to be offered at market M, w(S1) and w(S2) tons of materials
coming respectively from S1 and S2 are necessary. The problem
resides in finding an optimal factory location P located at the
respective distances of d(M), d(S1) and d(S2).
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Bulk-Gaining Industries
Determined largely by the markets because
they gain volume or weight during production
Most drink bottling industries are
examples of bulk-gaining industries
Empty cans or bottles are brought to
the bottler, filled and shipped to
consumers
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Break-of-Bulk Point
Commonly, a transfer point on a
transport route where the mode of
transport (or type of carrier) changes and
where large-volume shipments are
reduced in size. For example, goods may
be unloaded from a ship and transferred to
trucks at an ocean port.
The major modes of transportation
are:
Ship
Rail
Truck
Air
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Site Factors
Location factors related to the costs of factors of
production inside the plant, such as land, labor, and
capital.
Labor-Intensive Industries
Those which the highest percentage of expenses are
the cost of employees
Textile and apparel production
Land, which includes natural resources, is a
major site factor
Aluminum producers locate near dams to
take advantage of hydroelectric power
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Situation Factors
• Transporting materials
to and from a factory
• Takes into consideration
inputs: anything used to
make products
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Where is Industry Expanding?
Within regions in MDC’s industry has relocated to
urban peripheries and rural areas from central city
locations.
At the interregional level, manufacturing has
moved towards the south and west in the US.
As industry has declined in MDC’s it has
increased in LDC’s.
In 1980—80% of the world’s steel was
produced in MDC’s.
Between 1980-2005, MDC’s share of steel
production declined to 45%, and that of LDC’s
increased to 55%
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China
oChina is the leading new industrial center
in the world because of its low labor costs
and vast consumer market.
oMexico and Brazil are the leading
industrial centers in Latin America, with
manufacturing clustered near large cities
such as Mexico City and Sao Paulo.
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Maquiladoras
Since the 1980’s, manufacturing in
Mexico has moved north to take
advantage of the US market.
Maquiladoras, which assemble US
parts and ship the finished product
back to the US, have benefited from
the North American Free Trade
Agreement: NAFTA
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Break down of manufacturing inside a
Maquiladora
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WHAT IS NAFTA?
The North American Free Trade Agreement
NAFTA eliminated the majority of tariffs on
products traded among the US, Canada and
Mexico, and gradually phased out other tariffs
over a 15-year period.
Restrictions were to be removed from many
categories, including motor vehicles,
computers, textiles and agriculture.
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The cost of labor is changing the spatial organization of
industry around the world.
•In the 20th century, textile production went from the
Northeast to the Southwest to take advantage of
cheaper wages
•More recently, the apparel industry is located in Latin
America, China and other Asian countries.
•Now the US imports more than 75% of its clothing
needs.
•This is one part of the NEW INTERNATIONAL DIVISION
OF LABOR:
•Industrial jobs are transferring to LDC’s largely as a
result of transnational corporations search for low-cost
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labor.
Outsourcing
• Outsourcing involves the transfer of the management
and/or day-to-day execution of an entire business
function to an external service provider
• Under the agreement the supplier acquires the means
of production in the form of a transfer of people, assets
and other resources from the client. The client agrees to
procure the services from the supplier for the term of the
contract.
• Business segments typically outsourced include
information technology, human resources, facilities, real
estate management and accounting.
• Many companies also outsource customer support and
call center functions like telemarketing, market research,
manufacturing and engineering.
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Some industry does remain in MDC’s
• Due to skilled labor and rapid delivery to market
• FORDIST APPROACH: Named for Henry Ford
– Traditionally assigned each worker a specific task in a mass
production industry.
– POST-FORDIST production has recently become the norm in MDC’s.
• It is flexible production with skilled workers characterized by
teams working together, problem solving through consensus, and
factory workers being treated alike regardless of their level.
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Just in Time Delivery
• When the shipment of parts and materials to a factory arrive
immediately before they are needed.
– This avoids the stocking of unnecessary and expensive
inventory.
– Cottage Manufacturing
• Based in homes rather than in a factory
– Commonly found before the Industrial Revolution
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Asia’s Rise, how and when
• What happened in 1858 in the west? Why was this such a
notable year?
• What happened in that year in India?
• What about in China?
• Describe the changes in India and China that happened
after 1947.
• What is necessary in India and China for them to make the
final step to catch up with Japan and the western
countries?
• What does he say needs to be avoided in order for these
countries to catch up?
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The END
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