THE

ORGANIZATION OF
PRODUCTION
(i) Industrial linkages
(ii) Location of business enterprise
INDUSTRIAL LINKAGES
An industrial linkage exists when one industry is dependent on another industry’s
output as an input to its own.
Example: the rum industries of Barbados, Trinidad and Jamaica depend on the sugar
industry’s molasses in order to produce rum. Tourism in the Caribbean islands
depends on the entertainment, agriculture, handicraft, hotel, and transport industries

Linkages can be backward or forward and can involve an industry in primary

production linking with an industry in secondary production.
Some industrial linkages by sector in the Caribbean.
Primary Secondary Tertiary

Asphalt Road building Transportation (taxi)

Oil production Oil refining (gasoline) Service stations (gasoline)

Citrus production Citrus canning and labels Sale at groceries

Poultry production Poultry processing Restaurant and hotel industry

Example
Mining of sand and limestone (primary production) links forward to
the hotel construction industry (the secondary sector), which is linked
further to the tourism industry (tertiary).
You may observe from these examples how industries can ‘spin off’from one another, hence they are also called spin-off industries. A very important
aspect of linkage industries is that when there is a direct and strong link between industries, they ‘feed off’one another.

Example
More tourist arrivals means more taxi drivers, more tour guides, more orders for meat, milk, vegetables, fruits, souvenirs, entertainment and so on.
 
You should be able to appreciate that employment and therefore incomes in these sectors will increase. This is how these sectors grow and become vibrant.
Sometimes, if raw materials are imported, then the linkage becomes an international one and incomes may leak away to pay for these materials.
Benefits of and problems that hinder industrial
linkages
The benefits of industrial linkages can be summarized as follows:
 Employment is created at all levels.
 A country can have multi-sectoral growth that is balanced rather than one-sided.
 Such linkages can encourage large-scale production that may meet domestic as well as export
demand.
 Linkages can lead to valuable foreign exchange earnings.
 Linkages foster self-sufficiency and self-reliance.
 Linkages can contribute to the skilled labor pool in the country.
 Linkages promote regional cooperation and prosperity.
 Linkages promote innovation and the capacity for new technology.
 Industrial linkages promote industrialization of the economy, eventual sustained economic
growth, and an increased standard of living for a region.
Although industrial linkages are desirable for the development of the Caribbean
economies, there are problems that retard linkages.
These include:
 There is a shortage of venture capital to extract raw materials, start manufacturing
and carry out successful export marketing.
 Loan capital from multilateral landing agencies is only provided for infrastructure
development (i.e., road, bridges, ports, utilities).
 Access to foreign markets is not guaranteed.
 Availability of raw materials is in some cases limited.
 Heavy machinery is expensive to buy and set up.
 Exchange rates in the Caribbean are not in favor of weak Caribbean currencies
when compared to industrialized countries.
LOCATION OF BUSINESS ENTERPRISES

It is important to investigate the reasons for the location of business enterprise and
industry. One of the most important decisions an entrepreneur has to make when
setting up or expanding his business is where to site or locate this firm or new branch.
Factors determining location
The following list shows factors affecting the location of businesses.

 GEOGRAPHICAL FACTORS
o Climate
o Land terrain
 AVAILABILITY OF RAW MATERIALSN AND SUPPLIES
 AVAILABILITY OF INFRASTRACTURE
o Power
o Water
o Transport
 AVAILABILITY OF LABOUR SUPPLY
o Health facilities
o Level of education
 GOVERNMENT SUPPORT
o Industrial estates
o Factory shelves and warehousing facilities
o Common amenities, for example, water, power supply, telecommunication
 AVAILABILITY OF LINKAGE INDUSTRIES
o The presence of local input
o Support services such as marketing
 THE MARKET
o Size and age
o Income level
o Closeness to clients

Firms may be located close to their suppliers if raw materials are bulky and too
expensive to transport. The availability of power, energy and transport are crucial
factors in determining the best location of a firm since firms require not only
reliable supply, but also a cheap supply in order to minimize the cost of production.
Low costs

For different industries, there will be different

advantages that will affect the costs of this industry. Low
costs lead to bigger profits, which is the reward to the
entrepreneur, so a firm or industry naturally locates
where it is believed costs will be low.
Factors to consider
The factors which affect an industry’s location can be divided into three basic categories which give the mnemonic NAG:
1. Natural advantages;
2. Acquired advantages;
3. Government policy.
Natural advantage or geographical factors
Natural advantages are those that occur naturally, such as climate, geology and good soil
Natural advantages Industry Territory
Rock structure Oil, bauxite Oil-Trinidad, Barbados
Bauxite-Jamaica, Guyana
Sea Fishing All islands
Tourism, hotel Antigua, Jamaica, Barbados,
St Lucia, all islands
Climate    
Cool Coffee Jamaica
High rainfall Rice, bananas Guyana, Windward Islands
Deep water harbor Industrial production Point Lisas, Trinidad
Forest Timber Guyana

Example
The cool climate of Jamaican Blue Mountains means high-quality coffee. Similarly, high rainfall
contributes to successful banana crops in the Windward Islands, Dominica, Grenada and St Vincent
but less so in Antigua and St Kitts & Nevis.
Acquired advantages
Acquired advantages have been created by the country, rather than occurring naturally.

 Power: After the Industrial Revolution in England, the main source of power was coal that
was costly to transport. Many industries were located near to the coalfields. In Trinidad,
the Point Lisas Industrial Estate has an electrical power station to cater for the industrial
needs of the many industries located there.

 Labor supply: Skilled and available labor is a basic need of all industries. As labor will
not travel long distances, firms tend to locate near to their labor supply, as is the case, for
example, with sugarcane production in Barbados.

 Transport: Most industries concentrate near to major highways so that it is easy to take
raw materials to the factories and then the finished product to their targeted markets.
Closeness to rail, sea and air transport are important factors in low cost of production.
 Markets: some industries produce goods which cannot be hauled for long
distance, e.g. glass, electronic equipment and perishable items. These industries
must locate near to their markets to save cost of breakage or spoilage.

 Infrastructure: a reliable supply of electricity, water and communication are

vital to keep down the cost of production. For example, power shortages and
water flow interruptions can result in disruption of plants and factories and loss
of production. Expensive machinery may also suffer damage. Costs can escalate
as a result.
 Cost of land: the price of land will have an important influence on where a
business enterprise is located. Many industries take place in very large buildings
occupying several hectares of land. Cheap land is usually not to be found near
towns but outside of it. In most cases, cheap land for industry is found in industrial
estates.
 Regional specialization: (Economies of concentration): When an industry is well
sited in a particular area, the region acquires benefits, which all the firms in a
region enjoy. Firms wishing to engage in similar production tend to locate in that
particular area to take advantage of the benefits. When the natural advantages of a
region attract firms there, and then those firms remain in that region in order to
benefit from other advantages (i.e. regional specialization or economies of
concentration), this is called industrial inertia.
Location due to government policy
Caribbean governments all try to influence the location of business enterprise for a variety of reasons:

 To relieve congestion near town centres which causes noise, air and water
pollution, crime, illegal squatting and a host of other social problems;
 To reduce the disparities in employment between regions, e.g. between towns and
villages;
 To prevent a region’s overdependence on the prosperity of a single industry.
These problems are called regional problems and governments seek to resolve them
by embarking upon regional policy.
Solutions to regional problems
There are basically two ways to deal with regional problems:

1. Taking work to the workers: Governments provide incentives for firms to locate
in certain areas where unemployment is high. Examples of these are tax holidays,
training grants, low rents, grants to defray the cost of machinery; and enterprise zones
(also known a export processing zones or EPZs).
2. Taking workers to the work: This is a strategy that has not really worked,
because people are reluctant to uproot and leave areas where strong ties have
developed. Another reason why this strategy has failed is the shortage of housing and
rents that ae affordable.