Chapter 12: Industry and Services

Chapter 12: Industry and Services
© Barbara Weightman Concept Caching: Bicycle Use and Production in China Copyright © 2012 John Wiley & Sons, Inc. All rights reserved.

Field Note: Branding the Backboard
“Walking through a relatively poor neighborhood in Skopje, Macedonia, with the midday Muslim call to prayer ringing in my ears, the last thing I expected to see was something from my home State of Oregon (Fig. 12.1). But there it was—the unmistakable Nike swoosh on the backboard of a basketball hoop where the local kids play pick-up games!” “ Figure 12.1 Skopje, Macedonia. The Nike “swoosh” is everywhere—even on the backboard of a ba s ketball hoop in this relatively poor neighborhood of Skopje, Macedonia. © Alexander B. Murphy © 2012 John Wiley & Sons, Inc. All rights reserved.

The Industrial Revolution Eighteenth-century inventions brought new uses for known energy sources (coal) and new machines to improve efficiencies (steam engines). During the Industrial Revolution, innovations in iron manufacturing enabled the production of the steam engine and a variety of other products. An expanding trade network focused on Western Europe and brought wealth to those in a position to take advantage of changing circumstances. With the advent of the railroad and steam ship, Great Britain enjoyed even greater advantages over the rest of the world than it did at the beginning of the Industrial Revolution. © 2012 John Wiley & Sons, Inc. All rights reserved.

Ironbridge, England World’s first bridge made entirely of cast iron,
constructed in late 1700s.

Diffusion to Mainland Europe Concept Caching: Fenway Park, Boston, MA As the innovations of Britain’s Industrial Revolution diffused into mainland Europe, proximity to coal fields and connection via water to a port remained crucial. Industrial developments in one area changed the port cities to which they are linked. Once the railroads were well established, some manufacturing moved to or expanded inside of existing urban areas with large markets, i.e. London and Paris. By the early twentieth century, industry began to diffuse from the original European hearth to northern Italy (now one of Europe’s major industrial regions), Catalonia (anchored by Barcelona) and northern Spain, southern Sweden, and southern Finland. © 2012 John Wiley & Sons, Inc. All rights reserved.

Diffusion to Mainland Europe
In early 1800s, innovations diffused into mainland Europe. Location criteria: proximity to coal fields connection via water to a port flow of capital Later Diffusion In late 1800s, innovations diffused to some regions without coal. Location criteria: access to railroad

Field Note “Paris and the Paris Basin form the industrial as well as agricultural heart of France. The city and region are served by the Seine River, along which lies a string of ports from Le Havre at the mouth to Rouen at the head of navigation for oceangoing ships. Rouen has become a vital center on France’s industrial map.” *Could be an audio file. Figure 12.6 Rouen, France. © H. J. de Blij. Figure 12.6 Rouen, France. © H. J. de Blij. © 2012 John Wiley & Sons, Inc. All rights reserved.

Diffusion Beyond Europe Primary industrial regions: western Europe, eastern North America, western Russia and Ukraine, and East Asia North America: Manufacturing began in New England during the colonial period; benefited from the ability of its companies to acquire needed raw materials from overseas sources. Russia and Ukraine: St. Petersburg attracted industries including shipbuilding, chemical production, food processing, and textile making. East Asia: manufacturing in Japan depended on raw materials imported from other parts of the world; dominant region is the Kanto Plain. © 2012 John Wiley & Sons, Inc. All rights reserved.

Examine the map of diffusion of the Industrial Revolution into Europe (Fig. 12.5) and hypothesize what other characteristics (aside from the presence of coal) were necessary for industrialization to take hold in these regions. © 2012 John Wiley & Sons, Inc. All rights reserved.

Location Theory Location Theory – predicting where business will or should be located. Considers: Variable costs Profit maximization Friction of distance Transportation

Factors of Industrial Location
Raw Materials Very few industries use raw materials Most manufacturing is based on the further processing and shaping of materials already treated in some fashion Transportation costs affect industry location

Power Supply (Energy) Power supplies that are immobile or of low transferability may attract activities dependent on them Current technology made less important Industries requiring large amounts of energy still situated near the power source

Labor Spatial variable affecting location decisions and industrial development 3 major traditional considerations price, skill, and amount Labor Flexibility: highly educated workers able to apply themselves to a wide variety of tasks and functions

Market Goods are produced to supply a market demand
Size, nature, and distribution or markets is important in industrial location decisions Ubiquitous industries

Transportation Unifying thread of all factors of industrial location
Modern industry is immediately tied to transportation Use many different form of transportation media

Fordist Production Fordist production: was the dominant mode of mass production that endured from 1945 to 1970, named for Henry Ford. The Fordist period is marked by a surge in both mass production and mass consumption. Vertical integration Friction of distance: the increase in time and cost that usually comes with increased distance over which commodities must travel. Ex.: furniture manufacturing © 2012 John Wiley & Sons, Inc. All rights reserved.

Fordist Production Agglomeration British economist Alfred Marshall: localization Geographer Alfred Weber: least cost theory focused on a factory owner’s desire to minimize three categories of costs: Transportation Labor Agglomeration © 2012 John Wiley & Sons, Inc. All rights reserved.

Least Cost Theory 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
Area is uniform physically, culturally, and technologically 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
Labor is infinitely available but immobile in location Transportation routes connect origin and destination by the shortest path and directly reflect the weight of the items shipped and distance moved

Other Location Models Hotelling’s Model
Location of an industry cannot be understood without reference to other industries of the same kind. Theory: Locational interdependence: indicates that locational decisions are not made independently but are influenced by the actions of others.

Other Location Models Losch’s Model
Manufacturing plants choose locations where they can maximize profit. Theory: Zone of Profitability

Companies use two geographic factors to choose locations for factories:
SITUATION Factors involve the costs of transporting raw materials and finished goods. SITE Factors involve the unique characteristics of particular location.

‘INPUTS’ are the materials needed for production, like ores or component parts.
CAR COMPONENTS IRON ORE

The farther something is transported, the higher the cost
The farther something is transported, the higher the cost. Thus factories are located as close as possible to either inputs or markets.

If the cost of bringing raw materials to the factory is HIGHER than that of transporting finished goods, the factory is optimally located close to INPUTS.

If the cost of transporting finished goods is HIGHER than inputs, the factory is optimally located as close to the customer (market) as possible.

CERTAIN INDUSTRIES TRY TO LOCATE CLOSE TO MARKETS:
BULK-GAINING Industries SINGLE-MARKET Industries PERISHABLE Industries

BULK-GAINING industries are those whose finished products are heavier than inputs (weight is added during production).

The heaviest part of any drink is water.
Because water is available everywhere, beverage producers can ship lighter raw ingredients (bottles, syrups) to factories close to population centers (markets).

LOCATION OF BEER BOTTLING PLANTS IN THE UNITED STATES.

$20 million Coke bottling plant in the Gaza Strip, Palestine

Potato chips are good example of this.
BULK GAINING can also refer to an industry whose final products are HARDER TO SHIP than inputs. STABLE INPUTS Fragile & Bulky Product Potato chips are good example of this.

Producers like Frito-Lay have factories all over the country.
FIGURE PERISHABLE PRODUCTS Potato chips are best consumed when fresh, and they are much bulkier after they have been sliced, fried until they curl, and placed in large air-filled bags. As a result, most are produced relatively close to the market.

These industries locate close to customers to reduce shipping costs.
SINGLE-MARKET Industries are those cater to a very limited number of purchasers, like a single industry or company. These industries locate close to customers to reduce shipping costs.

Workers making seats for Fiat 500Ls
Car components are often built on contract by small manufacturers for large auto companies. Workers making seats for Fiat 500Ls Component factories are located as close as possible to CAR ASSEMBLY PLANTS.

The world’s largest zipper manufacturer, YKK, has one customer – the garment industry.
YKK produces zippers in factories all over the world, wherever major apparel industries can be found.

THINK VON THUNEN’S MODEL!
Producers of PERISHABLE products need to locate near consumers/markets to maintain the freshness of their products. THINK VON THUNEN’S MODEL!

Newspapers are PERISHABLE
Newspapers are PERISHABLE. Their content is time-sensitive and can be outdated after only one day. National newspapers, like the New York Times, are produced in locations around the county to reduce shipping lag.

TONS of inputs are used to make small quantities of steel.
BULK REDUCING industries are those whose finished products are lighter/have less volume than inputs. TONS of inputs are used to make small quantities of steel.

The main four modes are TRUCK, TRAIN, BOAT, & PLANE.
SHIPPING is an important cost for manufacturers, and they choose a their MODE OF TRANSPORT to match their situation and needs. The main four modes are TRUCK, TRAIN, BOAT, & PLANE.

TRUCK TRANSPORTATION Trucks are most often used for short-distance delivery, where their fast loading/unloading can be taken advantage of. Most economical for deliveries within the same day.

TRAIN TRANSPORTATION Trains are most often used for multi-day shipping across wide expanses, like from the East to West coast. Though expensive to load and unload, they do not need to stop during their journey, and run very efficiently.

SHIP TRANSPORTATION Ships are used to transport materials long distances if they are not time-sensitive, as it takes much longer than land transport. They can cross the oceans and carry vast amounts of goods in a single load.

PLANE TRANSPORTATION Air is the most expensive form of transport by far, so it is used for high-value, low-bulk, time-sensitive goods. The USPS and other mail/delivery carriers use air transport for their fastest shipping options.

The cost per mile decreases at different rates for each of the four modes, because loading and unloading expenses differ by mode of transportation.

Companies that use multiple transport modes utilize break-of-bulk points, which are locations where rapid transfer among different modes is possible.

Flexible Production and Product Life Cycle Flexible production systems: Firms can pick and choose among a multitude of suppliers and production strategies in distant places, and then quickly shift their choices in response to adjustments in production costs or consumer demand. Commodification: Goods that were not previously bought, sold, and traded gain a monetary value and are bought, sold, and traded on the market. Product life cycle: Changes in the production of a good over time take place. © 2012 John Wiley & Sons, Inc. All rights reserved.

The Global Division of Labor Labor is concentrated in the global economic periphery and semiperiphery to take advantage of lower labor costs, whereas research and development is primarily located in the core. David Harvey: time–space compression. Just-in-time delivery: Companies keep just what they need for short-term production and new parts are shipped quickly when needed. Spatial fix: In choosing a production site, location is only one consideration. Outsourced: moved offshore. © 2012 John Wiley & Sons, Inc. All rights reserved.

CALL CENTERS are a good example of an outsourced industry.
Rather than pay Americans high wages to attend to customer service, companies pay Indian firms far less to do the same task.

There is no ‘cost’ to locating call centers in India- operations are done over the phone and internet in real-time. Indian call center workers are trained to mimic American accents and intonation.

Outsourcing contrasts with the older model of industry, called VERTICAL INTEGRATION.
In this system, companies owned and tightly controlled every part of the production process, from inputs to the final product.

Made in America or Designed in America? Commodity Chain: Consumption, or purchasing an item, is the end point in a commodity chain that affects places in a variety of ways. © 2012 John Wiley & Sons, Inc. All rights reserved.

This is called the NEW INTERNATIONAL DIVISION OF LABOR.
While some jobs can be done with cheap outsourced foreign labor, others still need to be done by skilled workers in traditional industrial centers. This is called the NEW INTERNATIONAL DIVISION OF LABOR.

FoxConn workers assemble Mac components in southern China
APPLE’s PRODUCTS are an excellent example of this division. While many high-tech parts are made in places like Japan, Europe, or the US, the product itself is assembled in China for very cheap. Apple ‘makes’ nothing- except the PROFIT. FoxConn workers assemble Mac components in southern China

Major Influences on the Contemporary Geography of Manufacturing
Transportation: Intermodal connections, places where two or more modes of transportation meet in order to ease the flow of goods and reduce the costs of transportation. Regulatory Circumstances: Regional trade organizations such as the North American Free Trade Agreement (NAFTA) and the European Union (EU) have trade agreements that influence where imported goods are produced. Energy: The role of energy supply as a factor in industrial location decisions has changed over time. © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity
Deindustrialization is a process by which companies move industrial jobs to other regions. New industrial regions emerge as shifts in politics, laws, capital flow, and labor availability occur. East Asia has become a particularly important new region of industrialization. © 2012 John Wiley & Sons, Inc. All rights reserved.

ABANDONED FACTORY IN DETROIT
Industry is- in general- shifting away from traditional manufacturing regions in NORTHWESTERN EUROPE and the NORTHEASTERN UNITED STATES. ABANDONED FACTORY IN DETROIT

Many industries are moving away from these areas toward more competitive regions. Often, they are chasing lower LABOR costs.

Manufacturing shift in the UNITED STATES

Between 1950 and 2010- 6 million manufacturing jobs were lost in the Northeastern US 2 million manufacturing jobs were created in the South and West The 4 million ‘disappeared’ jobs were relocated abroad.

Southern Industrial Lag
Until the 1930s, the South was the most undeveloped region of the US. Little development had been realized there following the Civil War, leaving the region with weak infrastructure.

Starting in the 1930s, the gov’t launched major infrastructural projects in the South. Roads were built, electrical systems completed, and life improved.

Though development finally arrived, by one metric the South lagged far behind the rest of the country- WAGES. Rooted in a traditional and agricultural culture, incomes had not risen in the South as they had elsewhere.

Industries such as steel and textile production began to relocate in order to take advantage of the South’s greatest industrial resource- CHEAP LABOR.

Many manufacturers continue to be lured south by so-called RIGHT-TO-WORK LAWS.
These laws prohibit ‘closed’ union shops, weakening the power of collective bargaining.

AFL-CIO factory Workers
At ‘closed’ factory, you HAVE to be part of the union to get a job. Right-to-Work laws make this practice illegal, weakening unions. AFL-CIO factory Workers This leads to lower wages and reduced worker protections – good for industries, bad for workers.

23 states today have right-to-work laws
Average wages and rates of union membership are far lower here than elsewhere in the country. = Right-to-Work state

Right-to-work laws send a message that union activity will not be supported or tolerated, making workers less likely to even attempt to organize.

Many manufacturers in EUROPE have shifted since 1950 from the highly-developed Northwest toward more peripheral regions in the South and East.

Workers assemble Audis in Hungary
European gov’t policies have promoted this shift. Richer states shifting from secondary to tertiary economic activity receive subsidies, while capital is provided to lagging regions in the South and East. Workers assemble Audis in Hungary

Massive auto-assembly plant near Barcelona
Spain’s Catalonia region has been a beneficiary of this shift, today hosting widespread textile and auto production. Massive auto-assembly plant near Barcelona Wages in Barcelona are now higher than in the rest of Spain; some companies are talking about relocating again.

Several post-Communist eastern countries have also seen substantial development under this scheme.
Countries like Hungary and the Czech Republic are attractive to industry because of their cheap labor, access to major markets, and growing local consumption.

New Centers of Industrial Activity The Rise of East Asia Four Tigers of East and Southeast Asia: South Korea, Taiwan, Hong Kong, and Singapore. The tigers emerged as the first newly industrializing countries (NICs). Hong Kong became mainland China’s gateway. To the world, a bustling port, financial center, and break-of-bulk point, where goods are transferred from one mode of transport to another. © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity The Rise of East Asia The industrial growth of Singapore also was influenced by its geographical setting and the changing global economic division of labor. In 1997 risky lending practices and government investment decisions caused Thailand’s currency to collapse, followed by its stock market. By early 1998 one of the Four Tigers, South Korea, required a massive infusion of dollars to prevent economic chaos. © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity The Chinese Juggernaut China’s major industrial expansion occurred during the communist period. Under state planning rules, the Northeast district became China’s industrial heartland, a complex of heavy industries based on the region’s coal and iron deposits located in the basin of the Liao River. The second largest industrial region in China, the Shanghai and the Chang Jiang district , developed in and around the country’s biggest city, Shanghai. * © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity The Chinese Juggernaut China’s large labor force has attracted hundreds of international companies. The Northeast has become China’s “Rust Belt.” Today, the Chinese government is pushing industrialization into the interior of the country, with new investment flowing into poorer parts of the central and western portions of the country. © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity The Chinese Juggernaut BRICS: Brazil, Russia, India, China, and South Africa; these countries are evidence of a shift in global economic power away from the traditional economic core. India has recently become the world’s sixth largest economy. India has no major oil reserves, so it must spend heavily on oil energy. © 2012 John Wiley & Sons, Inc. All rights reserved.

Field Note “Humen is one of the Pearl River Delta cities that has been transformed by the rise of China. The small textile factory I visited provided insights into the opportunities and challenges that are confronting China today. The 40 or so employees were mostly young, but there were a few older folks. They were making women’s clothes for the French market.” *Could be an audio file. Figure 12.14 Humen, China. © Alexander B. Murphy © 2012 John Wiley & Sons, Inc. All rights reserved.

New Centers of Industrial Activity Where From Here? It has been suggested that a combination of technological changes and developments in the global economy have reduced the significance of location and made place differences increasingly insignificant. What is needed is a greater understanding of how places have changed as a result of new production methods, new corporate structures, and new patterns of industry. © 2012 John Wiley & Sons, Inc. All rights reserved.

New Influences on the Geography of Manufacturing
Transportation on industrial location Development of infrastructure: containers, refrigeration Intermodal connections Regional and global trade agreements NAFTA, EU WTO: ~150 countries, promotes free trade to eliminate quotas Proximity to Energy sources in industrial location less important Pipelines and tankers deliver fuel to far away places 2.5 million miles of pipelines in NA

How Have Deindustrialization and the Rise of Service Industries Altered the Economic Geography of Production? Service industries (tertiary industries) encompass the range of services that are found in modern societies. Quaternary industries: the collection, processing, and manipulation of information and capital. Quinary industries: activities that facilitate complex decision making and the advancement of human capacities. © 2012 John Wiley & Sons, Inc. All rights reserved.

Geographical Dimensions of the Service Economy
Deindustrialization did little to change the basic disparities between core and periphery that have long characterized the global economy. The industrial zone of the northeastern United States (around the Great Lakes) lost much of its industrial base and is now commonly called the Rust Belt. The Sun Belt is a secondary industrial region that has made the transition to a viable service economy fairly successfully. Concept Caching: Mount Vesuvius © 2012 John Wiley & Sons, Inc. All rights reserved.

Geographical Dimensions of the Service Economy New Patterns of Economic Activity Technologies such as GIS can help to model the best locations for new businesses, office complexes, government centers, or transportation connections. Major retailers change the economic prospects and physical landscapes of the places where their headquarters are located. Ex.: Walmart The locational influences on quaternary services are more diverse. Those who work in the quinary sector tend to be concentrated around governmental seats, universities, and corporate headquarters. © 2012 John Wiley & Sons, Inc. All rights reserved.

Guest Field Note Fayetteville, Arkansas
“For most geographers, the simple act of daily observation of the world around them becomes a profoundly satisfying habit. For the last 17 years, my daily observations have been of the rapidly changing urban/economic landscape of northwest Arkansas, one of the fastest growing metropolitan areas in the United States.” Credit: Fiona M. Davidson, University of Arkansas Figure 12.18 Fayetteville, Arkansas. Credit: Fiona M. Davidson, University of Arkansas Figure 12.18 Fayetteville, Arkansas. © 2012 John Wiley & Sons, Inc. All rights reserved.

High-Technology Clusters
The goal of a high-technology corridor is to attract designers of computers, semiconductors, telecommunications, sophisticated medical equipment, etc. Ex.: California’s Silicon Valley Growth pole spurred economic development in the surrounding area. Technopole: an area planned for high technology where agglomeration built on a synergy among technological companies occurs. High-technology industries have become such an important symbol of the postindustrial world that local, regional, and national governments often aggressively pursue firms in this sector. © 2012 John Wiley & Sons, Inc. All rights reserved.

Figure Plano-Richardson, Texas. The Plano-Richardson Telecom Corridor is located just north of Dallas and is home to telecom corporate headquarters, such as Electronic Data Systems Corporation’s headquarters in this photograph. © EDS/AP/Wide World Photos. © 2012 John Wiley & Sons, Inc. All rights reserved.

Tourism Services The tourism boom began in the global economic core as incomes and leisure time increased for a rapidly expanding segment of the population. Tourism is likely to continue to expand despite dips in travel at the beginning and end of the first decade of the twenty-first century. The economic impacts of tourist-related development are far-reaching. © 2012 John Wiley & Sons, Inc. All rights reserved.

Place Vulnerabilities in a Service Economy
Mechanization can have a negative impact on service jobs. Places dominated by the service sector cannot exist without extensive connections with other places because those living in such places still need food and material products. Economic decision making in a globalized economy can easily become disconnected from the fate of individual places and regions. Ex.: the financial services industry © 2012 John Wiley & Sons, Inc. All rights reserved.

How does a place change when deindustrialization occurs? Consider a place that has experienced deindustrialization, and research recent news articles on the Internet to find out how the economy of the place has changed since the loss of industry. What has happened to the place and its economy? © 2012 John Wiley & Sons, Inc. All rights reserved.

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