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.

 Itis 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”.the product. . labour. and power are brought together in the production process from which produce an output -.  Variousinputs (factors of production) such as raw material.

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steel is used to make car bodies and therefore one of the inputs needed by automobile industry.g.  Itcan be divided into heavy industry and light heavy . Frequently.  e. the output of one manufacturing industry becomes input of the raw materials of another.

chemical composition. e. in creating a product more useful to man. Steel making is one of the example.g. It change state during process. . A material may undergo a change in physical state. volume or mass. Processing industries : .Manufacturing industries can be also divided into:  a. .

co.posco. can see this site :  http://www.com  http://www.kr . For reference.nucor.

. A single raw material is converted into a more concentrated or useful form. Initial Processing industries : . 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.Two kinds of processing industry : 1.

butter. some treatment of mineral ores. . the output of the processing factory becomes available for immediate consumption. cheese. wine.g. the output must pass through other manufacturing for processing before a final product results.  In other cases. e. beer and canned fruit. In some cases.

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 Raw materials are frequently obtained from several different sources.2.g. the complex processing industries may result in a product available for immediate consumption.  In some cases. petroleum refining. sugar refining. and often subjected to a series of lengthy and complex processes that involve a high degree of organisation and advanced technology. . or the required further processing or fabricating. aluminium production.  e. steel making. Complex processing industries :  Some types of processing involves more than a single raw material inputs.

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 Fabricating is basically the assembly of finished or semi-finished product from other primary or secondary manufacturing industries  e.b. to produce a finished products.g. . Fabricating industries :  Fabricating involves a change in the physical form but not the state of the raw materials used. steel making industry.

and clothing are examples of fabricating industries. all other types of machinery. aeroplanes. furniture. Examples : the manufacture of automobiles. ships. .

.INDUSTRIAL LANDSCAPE: Some Basic Problems of Industrial Location 1. with some manufacturing industries typically concentrated in certain localities. Distribution Pattern Not evenly distributed around the earth.

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.g.  Heavy industry such as oil refining and petroleum results little labour but much capital.light industry such as textiles make strong demands for labour. differences in the types of industry  e.

others .3. need to be close to other industries -need to lower transportation costs by cheap sea transport . differences in special needs: .

. Other may want simply “satisfactory” profit and safe existence. 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.

Despite these diversifying factors of location. the purchase of raw material or semi- processed materials  2.  3. the processing or assembling of these raw materials or semi-processed materials whereby value is added to them. . the sale of the finished products. there are common requirements to all industrialists:  1.

capital . labour supply  6. 4.  5. energy resources  7. the payment of transportation costs involved in the assembly of the raw materials or semi-processed materials and the distribution of the finished products.

The Factors affect Industrial Location: .II.

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products from a primary industry. agriculture. Raw materials can take many forms:  1. mining. Role of Raw Material  The degree of attraction exercised by raw materials varies according to nature of the materials themselves. .1. forestry or fishing.g. e.

raw sugar. semi-processed products from a fabrication industry. semi-processed (semi-finished) products from an initial processing or complex processing industry. .g.g. 2. steel plates. electricity circuits. e.  3. car engines. e.

e. Sporadic or localized raw materials – which are found only at specific sites and are of many types. sand. e.g. iron ore. petroleum.In term of spatial distribution. bauxite. coal. atmospheric gases  2. rubber. raw materials can be classified into 2 broad types:  1. water.g. . Ubiquitous raw material – which are found practically everywhere.

 Historically. many manufacturing industries had a tendency of locating very close to their raw materials – raw-material oriented. Ubiquitous raw material cannot exert strong locational tie or influence on industrial location as can localised / sporadic raw materials. .

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.  Alumina refining – which uses about 4 tonnes of bauxite to produce 2 tonnes of alumina.g. . e. sugar is only 1/8 of the weight of sugar cane  Goldsmith: one tonne pf raw material produce a few grams of metal.

If the materials are perishable  e. meat- packing. vegetable and food preservation. b.  Initialprocessing has to be carried out on the site before the raw materials can be sent and arrive in fresh forms at the market.fruits canning. palm oil refining. . they have to locate themselves near their sources of raw.g.

g.  Materialsof low value per unit of weight.g. . High value of raw materials per ton  Ifmaterial of high value per ton (e. e. wool).c. copper ore will attract industries near them. then it can bear a heavier cost of transport and plants will be found further away from away from sources of materials.

Possibility of using substitute materials:  Where materials are substitutable.d. the pull of any one of them is reduced. 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. .g.

Number of materials involved:  Attractionof one material in ONE direction may be counteracted by pull of another in a different direction. .e. iron and steel industry employs several types of raw materials and location based on access to both coal and iron ore can be found. e.g.

f. Influence of freight rate:  Ifthe 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

 Thesemay 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) .

completely (frost-free) .Physical requirements :  1. annual rainfall: 2000mm per annum but it is also necessary to have a slightly dry period (75mm) .alluvial flat land with deep and well- drained soils of volcanic origin.  3.  2.mean monthly temperatures (should not fall below 18 ℃ for optimum growth.

cleaning dirt out of juice in settling tanks. spinning off syrup from crystals. (The remaining cane fibber is a dry material called 'bagasse'. . 2.Processing cane into raw sugar : 1. crushing the cane to extract juice. This is used as fuel. 3. ( 糖漿 ) 4. boiling juice twice to form syrup-coated sugar crystals.

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.5. rum ( 酒 ) 6. It is also sold to farmers for stock feed and fertilizer. A thick syrup. .

. i. is an extremely bulky. 2. and cumbersome crop of low specific value.Raw material (case study) : 1. Cane. 'value per unit weight is low.e. Perishability of harvested cane transshipment must be avoided.

an average yield of cane is 84 tonnes per hectare. cane is difficult and costly to be transported.5 tonnes per hectare of wheat and other cereals. Forexample. compared to less than 2.  As a result. .

mills have to located in the midst of their assigned cane areas. . Thus.  Also.the transport system focusing on each mill has to be both fast and capable of handling very large quantities. Therefore.it is more economical to keep the haul as short as possible.

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.3.  Thus. the overriding consideration in siting sugar mills is to locate them as close as possible to the fields with efficient bulk transport system .

Zambia and Zaire in south-central Africa( 桑比亞、扎伊爾 ) . Copper processing (Case Study) Highly concentrated into a few major mining centres :  a.B.S  b. the Ural ( 烏拉爾 )and Caucasus regions of USSR( 高加索山脈 )  c. interior south-western U.

 d. Peru. east-interior Canada  e. central and northern Chile  f. the Philippines .

. sparsely settled and underdeveloped parts of the earth distant from the major consuming regions. Most of these regions are in relatively isolated.

western Europe. European USSR and southern Japan. .Distribution of consuming regions In the advanced nations (industrial regions) North-eastern part of the USA and Canada. the-west coast of the USA.

Locational Factors:  High weight loss ratio . lead. zinc etc are mined with copper ores.Large amounts of worthless waste material except for the small quantities of recoverable gold.  Inother words. silver. for every 100 tonnes of copper ore mined. only 1 or 2 tonnes Of pure copper are yielded. .2.

 Thus. 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. strong materials orientation .  Therefore.the weight loss ratio is very high (97- 98%) .  Therefore.

3. Copper manufacturing : (case study) .

 In order to save transport cost. Concentrating the ore  The purpose of this stage is to upgrade the crude ore by removing most of the waste material. nearly all concentrating mills are found within a few kilometres of the mines that supply them. .  thus. The concentration mills convert each 100 tonnes of ore into about 2 or 3 tonnes of copper concentrate. copper concentration is an excellent example of a materials oriented initial processing industry.1.

2. . Thus this stage has weight loss ratio of approximately 60%. . the smelters produce about 1 tonne of blister copper. the purpose of smelting is to remove the remaining worthless impurities. .From 2 or 3 tonnes of concentrate. which is over 99% pure. Smelting the concentrate (regarded as part of the initial processing) .therefore.The concentrate from the mills has only about 30 to 40% copper content.

. Because of this fairly high ratio. or at some point convenient to several mills. smelters tend to locate close to the concentrators.

3.  In fact. . This very low weight loss ratio and the valuable nature of the by-products. where power and labor factors are usually more favorable. lead etc. the high specific value of the blister copper means that it is economical to transport it to markets. zinc. refining the blister copper  The blister copper is 99% pure. it must be refined by electrolysis to remove the impurities .gold. silver. mean that electrolytic refining is not tied to the mining regions.  Hence. but is still unsuitable for the manufacture of electrical wiring and other items.

. An outstanding locational influence on modern manufacturing as a whole. and likewise many capital goods industries. A market location is attractive to many kinds of industries. particular consumer goods industries.Role of Market  1.

 a. with their raw materials sources widely spaced from their market-based factory plants.  Textiles and many kinds of processed food are good examples. .  It is clear that consumer goods industries have to be sited in densely populated regions such as cities and conurbations. Consumer goods – Industries which are producing goods for consuming markets in large urban areas.

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. b. .which sell their products to be further processed or fabricated by other plants.etc. capital goods industries . are less dependent upon distribution of population.  However.  Good example include the production of car tyres and the assembly of motor vehicles.

breweries. .g. 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).Industries have become market-oriented for the following reasons : a. soft drink manufacturing (coca-cola). e. bottling plant are all market oriented. in order to save on transport cost .

g. If a market is a concentrated and specialized one. .g.g. camera  iv. glassware. Fragility of the product e. Perishability of the products.cement-making  vi. If the industries require close personal contact between producer and consumer.g. e.g. bakery  iii. If the product is relatively cheap (low value. E. farm machinery industry in US is located near to mid-west while the cotton picking machine is produced in the south. ii. newspaper  v. e. but bulky) and transport cost will increase the cost substantially e.

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 . MARKET. therefore.

EXAMPLES: The Changing Pattern of Oil Refinery from raw material to market location (case study) .

Near the turn of the century came the first big demand for petrol owing to the development of the motor vehicle.The high proportion of wastes meant that it was uneconomical to transport crude oil very far before refining.  2. 1. and this meant that a substantial proportion of former “waste” became an important market product. It is natural that refineries established in the early days were at the source areas. .

 4. an expensive process but only a limited amount of waste is produced. Cracking is. a high proportion of waste has disappeared. The proportion of waste was further diminished by the development of the cracking process. The overall result of these changes in demand is that today up to 95% of crude oil can be made to yield marketable products. . however. and it is no accident that in recent years we have seen a marked shift to market location. 3.  One of the main reasons. therefore. for the location of refineries at source.

when the supplies of oil from the Middle East to Western Europe were interrupted. British refineries were able to switch to Venezuelan oil.  In the Suez Crisis. .5. for example.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.

 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.

 Itis 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. road.g. harbors and airports) . and to distribute their finished products to a large number of markets.  Usually manufacturing industries prefer locations with good transport infrastructure (e. railways.

Sydney. coastal ports e. Rotterdam. roads. at different times and to different degrees. . railway.  2.g. industrial location and technological change in transport are linked together.  Ports. Thus. Chicago (with 27 rail lines converging upon it). London. canals. and airports have all. Paris. 1. railway centers e.g. been important influences on industrial location.

(rivers.  (ii) It is the cheaper means. . seaway and oceans )needs little maintenance. It usually have very large cargo capacities and the natural water route. Advantages:  (i) Water transport offers the lowest cost per tonne per km for long hauls.

or else heavy investment may be necessary artificial harbor improvements.  (iii) Deep-water harbors well sheltered from strong wind must be available.  (iv) Heavy capital investment are required for the construction of container terminals. .Disadvantages :  (i) Sea transport much slower than other means of transport.  (ii) It may be disturbed easily by storm and other adverse weather conditions.

R I M .

2. At either R or M.1. At any intermediate site I between R and M. Since a lot of terminal costs could be saved. only 1 set of terminal costs is incurred. it would be cheaper to locate the manufacturing plant at either R or M than at any intermediate point I. . 2 sets of terminal costs are incurred. one for the procurement of raw materials and one for the distribution of finished products. 3.

g. e.for manufacturing plants the consignment of which requires transhipment. Case 2 :  Locationat the break-of-bulk point (transhipment location) . transfer from one carrier to another.e. . i. from railway to sea transport).

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. and hence the step-up in the procurement cost curve moving towards the market. which push up the total transport costs at either location. The place where transfer from one carrier to another occurs is referred to as a break-of-bulk point or transshipment point.  A market orientation or materials orientation will incur these additional terminal costs.  Here. and the step-up in the distribution cost curve moving towards the material source. the terminal costs are unavoidable.

steel milling. oil refining. e. . if the manufacturing takes place at the transshipment point.  Break-of-bulk locations are frequently least cost location for manufacturing plants which process bulky raw materials arriving by sea. especially if the manufacturing process results in some weight reduction and/or bulk reduction. However. some of the reloading terminal costs may be avoided. sugar refining.g.

Case 3 : .

 3. processing of agricultural products into chilled/frozen foods.  2. the finished products may require special handling facilities. 1. refrigeration.g. e. e. the finishing products are bulkier or more fragile than the new material. raw materials can be carried in bulk carriers and trains whereas the finished products cannot. furniture-making/ manufacture of washing machines. .g.

. such industries tend to be located at or near their market. As a result of lower assembly costs relative to distribution costs.

4. In some industries. labour input is a large cost item while other may be of minor importance. The role of Labour Labour is needed to operate any industrial plant but the type and amount vary from industry to industry. .

labour-intensive industries may be attracted to areas that have a surplus of labour. . difficult to move to new areas or to new jobs. Labour is relatively immobile factor. Largely for this reason.

form a very high proportion of total costs and.  a. For these industries labour costs. quantity of labour Labour intensive ratio = number employed /value of shipment from factory . if costs vary from place to place. may exert a strong locational influence. i.

b. Labour varies spatially in quality and quantity.  Labour costs are determined by 3 main consideration: (i) payments to workers: (ii) educational level of workers and costs of training workers (iii) Stability of labour force .

It also include physical infrastructure (e. finished product not yet sold and money (money capital) . railways). road. to pay wages. Fixed capital – land. Working capital . school. purchase stock of material. component parts. machinery for processing and social capital (social services) of the area. construction of factory building. including public housing. b.g. The role of capital a.It is needed to finance the costly factory system. hospital.5.

The location effect of capital: . .Fixed capital is much more immobile. This is the reason for geographical inertia. difficult and costly to move. insurance companies and government. loan from banks.  Money capital can be obtained from investment of manufacturers. More mobile. sale of shares to private investors.

Cost of energy varies over space: A known resources may not be used because of its inaccessibility. .g. The Role of Power Resources  a.6. oil in Siberia. e.

There is also time variation in demand and supply. b. .  Technological advances may make formerly useless to be valuable and desired.

the fuel is converted to energy in another form usually easier for transport e. . natural gas.g. water power and nuclear energy. that is.  The fuel can be directly or indirectly. coal to produce electricity. petroleum. Thefuel and power resources obtained from modern industries are coal.

The Role of Government / Government Influence .7.

mixed or planned economy. whether they have a free enterprise economy (i. Government influence is increasing felt in the development of industries in many developed and developing countries. laissez-faire).e. .

government influence on manufacturing location is most marked in the planned economies in socialist countries.legal framework  .infrastructure  .education and training facilities . In particular.government spending  . Government exhibits its influence through  .

On a local scale. residential. In free economic local government:  a. educational. conflict of interest (the problem of noise.g. dirt. recreational has led the city government to introduce zoning laws. danger and traffic congestion) between industrial landuse and other e. . smoke. offensive smell.

industrial estates. b. minimum wages etc. To encourage dispersion by offering cheap land.  c. Government may set up regulations controlling the maximum hours of work. better transport system and all infrastructure. to protect the labors from the capitalists' exploitation. . the minimum age of work.

Ways of government intervention or influence  Traiffs  Quotas  Subsides & bounties  Government ownership  Lease restriction  Loans  Strategic consideration  Tax concessions .

Tai Po and Fo Tan Industrial Estates in the N.T. e. Hong Kong .Provision of infrastructure in areas established for industrial development  2.Some possible measures of government intervention include:  1.g.Provision of land (often cheaper and more extensive land) for industrial use.

g. China.g. the governments can establish nationalized plants in depressed regions and rural areas. 3. 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. e. Establishment of manufacturing industries in depressed regions and new industrial areas (a) In countries of planned economies. Britain and France. e. (b) In countries of mixed economies. .

g. The British government has established new factories such as Ford at Halewood (near Liverpool). By granting tax concessions (low rates on profit taxes) . British Leyland at Bathgate (near Edinburgh). e. etc.g. Introduction of favourable terms of trade to industries in order to attract foreign investment and the establishment of technology-intensive industries e.  4.

and imposing quotas on imports .g. 5.Protection of the country's own-industries and/or new industries e. By imposing tariffs on imported finished products or raw materials.

g. Australia . Tai Po Industrial Estate for industries not possibly accommodated in the inner city's multi-storey buildings) and/or industrial regions.At city or regional levels. governments may adopt zoning policies which specify the site of industries in various industrial districts  (e. Metropolitan Sydney. e.g. 6.

Introduction of anti-pollution laws and traffic control regulations to reduce pollution and other environmental problems in existing problem areas. Setting up of training institutions for industries in specified industrial estates or regions  8. . 7.

g. 9 Town planning measures and strong central planning These may : (a) limit the establishment of repulsive industries (e. 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 . leather tanning)and environmentally dangerous industries (e.g.

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.

Changes in technology at any state of production will alter the least cost point and induce a locational shift. . Firms tend to be located at the site where the total costs are minimized.

9. Climate and Water Supply .

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. Climate:  certain agriculture raw materials are limited by the climate.  types of demand may depend on the climate e.g. e. humidifying and dehumidifying.a. heater in cold environment. equatorial climate rubber for processing.  availability of water may influence the location of textile industry. cooling.g.  cost of heating.

Water supply:  water can serve as raw materials e. wine  washing and cooling e. paper making . soft drink.g.b.g. textile.

10. . b. Physical demand of the industry e.g. ship building demands a water frontage. Land Space a. oil refinery While smaller labour-intensive industry are in residential buildings or flatted-factory building. A lot of industries take a sub-urbanized location. The increasing scale of manufacturing factory demands for a more spacious site.g. e. motor vehicle assembly.

it is determined by the market Mechanism. But. Rental will normally decrease from the city center. c.Cost of the land Land prices vary from region to region. .

. Personal Factors: Behavioral and Random factors for decision making  a. 11. Geographical inertia – many industries are located at the place where they were set up even though the favourable factors have been faded out.

most of the industrial entrepreneurs do not have complete knowledge about the various factors of production and the general business conditions. . Personal consideration may influence the final decision on a location. b.e. optimal locations. In making decision on the location of plants. i.  Accordingly. industries can rarely hope to be sited at places with minimal costs.

profit maximization is a motive more applicable to large manufacturing plants than to small and medium size manufacturing firms. .  Many industrialists would be satisfied with a high level of profits. non-economic factors also enter the consideration in many locational decisions. c. Economic factors are seldom the only factors considered in the building of a factory plants.