Industry
Industrial Revolution
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Began in England in late 1700’s
1800’s reached the US and Europe
invention of machines
Iron was a leader and was followed by:
– Coal, engineering(making of machines),
Transportation(shipping, canals, railway), textiles,
chemicals, food processing
From Britain to Europe
• France, Germany and Belgium had followed
Britain into the Industrial Revolution
• Unrest (wars) in Europe during this time
delayed new technology for some countries.
• This forced cooperation of countries who had
been separated after “nationalism”
I.R in the U.S
• Took longer to begin but once it did it
developed very quickly.
Industry Goal: Make $$$
• Maximize Profit while Minimizing Production
Cost.
Why There?
• Situation and Site Factors
• Situation: transportation of materials to and
from factory
• Site: what is going on in that location?—Land,
Labor and $$---depends on location.
Situation
• Goal is to have as little cost to the producer of the
good as possible.
• Place Industry in an area that is inexpensive to
get to the plant but also inexpensive to get to
the customer.
• Best location: If raw materials are expensive to
get to the plant----put plant near raw materials. If
shipment from the plant to the customers is
expensive----put the plant near the customers.
Bulk-Reducing Industry
• These are products (inputs) that are physically
heavy or expensive to move from the earth (or
original location) to the processing plant.
• Products that are Bulk-Reducing have plants
located near the material.
• Examples include:
– Copper and Steel
Bulk-Gaining Industry
• These are products (goods) that after
produced they become heavier, bulkier, or
more expensive to transport.
– Soda (comes in as a number of small, light,
ingredients and goes out as heavy bottled
material)
– Automobiles (tend to be centrally located or near
large market areas) Put plants near populations
that will buy cars.
Single-Market
• Force the people to come to you.
• Manufactures make a single product and are
located in one place.
• Clothing-high end are clustered in N.Y because
of the quick demand and concentration of
customers.
• Car Parts-only a few customers (large car
companies) located near manufactures.
Perishable Products
• Stuff that goes bad.
• Fresh food producers must get their product
to customers quickly.
• Newpapers- news gets old so people must
locate their printing offices near big market
areas so people can get quick information.
Shipment
• Ship, Rail, Truck or Air?
• Which one is cheaper depends on how far it
must go.
• The further the distance the cheaper (per
mile) because 10miles or 1000miles you still
must pay people to load and unload your
goods.
• Trucks-cheapest for short distances
• Ships-if water is available and your going far
this is cost effective.
• Air-Most expensive but if customers are
requesting fast service this is the best.
• However, with many stops the price increases.
• Break-Of-Bulk Point—transfer mode of
transportation _sea ports or air ports.
Site Factors
• Land
• Labor
• Capital
Land
• manufactures need a large space to build their
factories.
• Most factories will be built in suburban and
rural areas where land is less expensive.
• Also, available resources to help run the
company influence its land area.
– Coal: near coal fields
– Electricity: depends on cost
Labor
• Labor prices (what you must pay your
employees) vary from country to country and
also state to state.
• Labor-Intensive Industry- where a company
spends a large amount of their cost on
workers.
– Two forms: Highly Skilled and Expensive and Low
Skilled and Inexpensive.
Unskilled/Low-wage
• Textile and Clothing Industries.
• LDC’S perform these jobs.
• In MDC’S factories are located in areas where
people might be less educated and are forced
to settle for a lower wage.
• Southeast US
Skilled/High Wages
• Electronics and Computer Manufactures.
• Primarily done in MDC’s where people are
educated in this specialized field.
• Factories are located near Universities, large
Urban areas and regionally in the NE and West
Coast
Capital= $$$$
• In order to build factories manufactures must
borrow money.
• Factories will be built in areas where money is
more easily attainable (where they can get it)
• If an area is known for supporting industry by
providing loans people will put their business
there. Ex: Silicon Valley
• This is a huge factor that separates LDC’s and
MDC’s
• Communities want business! More Jobs!
Agglomeration
• Centralization of features of an industry for the
mutual benefit of the industry as a whole.
• Think Mall—each store is benefitted by the
concentration of all of the other stores.
• Draws consumers to one location each
benefitting through proximity.
• Detroit for example had multiple competing auto
manufactures in the same city.
Alfred Weber
• Created the classical model of industrial
location theory in 1909
Least-Cost Theory
• Explains the optimum location of a
manufacturing establishment in terms of
minimizing three basic expenses
– Transportation cost, labor, agglomeration
Least Cost Theory
1) Transportation: the site chosen must entail
the lowest possible cost of
A) moving raw materials to the factory
B) finished products to the market. This,
according to Weber, is the most important.
Least Cost Theory
2) Labor: higher labor costs reduce profits, so a
factory might do better farther from raw
materials and markets if cheap labor is
available
-ex: China – today
Least Cost Theory
3) Agglomeration: when a large number of
enterprises cluster in the same area, they can
provide assistance to each other through
shared talents, services, and facilities
-ex: manufacturing
plants need office
furniture
5 Controlling Assumptions
1. Area is uniform physically, culturally, and
technologically
2. Manufacturing involves a single product to
be shipped to a single market whose
location is known
3. Inputs involve raw materials from more
than one known source location
5 Controlling Assumptions
4. Labor is infinitely available but immobile in
location
5. Transportation routes connect origin and
destination by the shortest path and
directly reflect the weight of the items
shipped and distance moved
Situation and Site isn’t everything
• With the global community that exists today
not all businesses need to be in a place that is
best for bulk-gaining or bulk-reducing nor
does Land, Labor and Capital mean as much.
• Corporations look at many factors when
choosing a location for their business, profit is
a major driving force in location of industry.