INDUSTRY KI#2: Why do industries have different distributions?

Why? SITUATION FACTORS involve transporting materials to and from a factory. A firm seeks a location to minimize the cost of transporting inputs to the factory and finished goods to the consumers. A B

What factors are involved in moving materials? 1. PROXIMITY TO INPUTS Every industry uses some inputs. These may be resources from the physical environment or parts made by other companies. Firms strategically pick the location based on the cost of transporting those imports. (see page 373)

What factors are involved in moving materials? 2. PROXIMITY TO MARKETS For many firms, the optimal location is close to markets, where the product is sold. The cost of transporting goods to consumers is a critical locational factor for three types of industries: perishable products, perishable products, bulk-gaining productions, and bulk-gaining productions, and single market. single market.

What factors are involved in moving materials? 3. TRANSPORTATION Ships are used for very long distances because the cost per km is less. Trucks primarily used for short- distance delivery. Rail – used where available. Air – expensive for bulk items, good for small-bulk, high-valued goods.

Why? SITE FACTORS result from the unique characteristics of a location. Land, labour, and capital are the three traditional production factors that may vary among locations. Costs depend on location Costs depend on location The primary objective is to minimize labour costs The primary objective is to minimize labour costs

LAND Availability of land not the critical factor but the availability of natural and human resources from that land. Different industries are attracted to different resources (low-cost energy, rivers, forests, people, cultural facilities, climate…)

LAND In the 19th century, industry needed to be close to rivers and forests for energy supply 20th century high users will locate where energy is cheapest

LABOUR 150 million people are employed in manufacturing amount the world. China ~ 20%, US ~ 10% Labour intensive industries tend to be located in LDCs and capital-intensive industries in MDCs Less skilled = lower costs = LDC More on page 379

CAPITAL Manufacturing needs capital Some industries specialize in investing in certain industrial production and quite often are located in specific regions e.g. Silicon Valley

CAPITAL Ability to borrow is also a factor. Some financial institutions in many LDCs are short funds, so new industries must seek loans from banks in MDCs. Problem: if the industry in located in an area perceived as politically unstable, high-debt level, poor economic policies…, Problem: if the industry in located in an area perceived as politically unstable, high-debt level, poor economic policies…,

HOMEWORK HW Read pages and summarize the examples given for situation and site factors in the text and explain how each illustrates the factors discussed today.