1. Chapter 11, Key Issues 2-4
Industry

2. Why are Situation factors important?
Key Issue 2
Why are Situation factors important?

3. Industrial Location Factor # 1
Situation factors
Proximity to inputs:
When inputs weigh more than final products
Bulk-reducing industry: an industry in which the inputs weigh more than the final products
Raw copper to refined copper
Diamond industry

4. Copper Industry in North America
Fig. 11-8: Copper mining, concentration, smelting, and refining are examples of bulk-reducing industries. Many are located near the copper mines in Arizona.

5. Copper Mine in Arizona
The Lavender Pit Copper Mine in Bisbee, Arizona operated between 1951 and 1974.

6. Industrial Locator Factor # 2
Proximity to markets
When product gains weight during production
Bulk-gaining industry: makes something that gains volume or weight during production
Beverage production
Car production

7. Location of Beer Breweries
Fig : Beer brewing is a bulk-gaining industry that needs to be located near consumers. Breweries of the two largest brewers are located near major population centers.

8. Integrated Steel Mills
Fig. 11-9: Integrated steel mills in the U.S. are clustered near the southern Great Lakes, which helped minimize transport costs of heavy raw materials.

9. U.S. Steel Mill (Gary, Indiana)
The integrated steel mill of U.S. Steel in Gary, Indiana.

10. Chevrolet Assembly Plants, 1955
Fig a: In 1955, GM assembled identical Chevrolets at ten final assembly plants located near major population centers.

11. Chevrolet Assembly Plants, 2007
Fig b: In 2007, GM was producing a wider variety of vehicles, and production of various models was spread through the interior of the country.

12. Motor Vehicle Parts Plants
Fig : U.S.-owned parts plants are clustered near the main final assembly plants. Foreign-owned plants tend to be located further south, where labor unions are weaker.

13. How to ship?
Trucks: Short distance, easy load/unload, 1 day drives the best
Trains: Over 1 day travel, slower than trucks but no rest stops
Ships: Long distances & low cost, used for overseas
Air: Most expensive, small, high valued products

14. Break of bulk point
Company locations based upon location where transfer among transportation modes is possible.
Used by companies that use multiple transportation methods
Ex: sea-ports near airports

15. Container Ship in Seattle Harbor
Most shipped goods are packed in uniformly sized containers that can quickly be transferred from ships to trucks or trains.

16. Why Are site factors important?
Key Issue 3
Why Are site factors important?

17. Site Factors 3 main factors – land, labor, capital
Most IMPORTANT site factor at a global level is labor – variation of labor costs around the world is large

18. Labor
Around the world, approximately 150 million people work in manufacturing – 20% in China, 10% in U.S.
A Labor-intensive industry is one in which wages and other compensation constitute a high % of expenses. (Labor costs average 11%) *US auto industry is not labor-intensive
Average wage paid to manufacturing workers in most MDCs is $20/hr + health care, retirement pensions, etc.
In most LDCs, average wage is less than $5/hr with limited benefits

19. Textile Industry Labor-intensive industry
High percent of women in manufacturing jobs
3 steps to textile/apparel production
Spinning of fibers from natural and man made materials – More likely in LDCs
Weaving or knitting of yarn into fabric (includes bleaching or dyeing) – more like in LDCs
Cutting and sewing of fabric for assembling into clothing – Most likely in MDCs

20. Unskilled textile production in LDCs:
Spinning
Weaving

21. More skilled textile production:
Apparel assembly

22. Land
Not just a space on earth, but relates to energy sources, climate, etc
Aluminum production requires a large amount of electricity
Locate nears dams for cheap electrical power
Alcoa – largest and oldest producer in Wolrd, located in U.S.

23. Capital $$$$$$$$$$$$$$$$$$$$ Availability to borrow funds
Auto industry in MI – loans from Eastern banks
Silicon Valley in Cali – loans from local banks
LDCs do not have easy access to capital

24. Why are location factors changing?
Key Issue 4
Why are location factors changing?

25. Industrial Expansion Changing distribution within MDCs
Intraregional shifts in manufacturing
In contrast to the U.S., European government policies encourage relocation
Interregional shifts in manufacturing
New industrial regions
Asia
Latin America
“Central” Europe

26. U.S. Production Workers 1950 & 2005
Fig : States in the Northeast and Southern Great Lakes traditionally associated with manufacturing accounted for two-thirds of manufacturing in 1950 but only two-fifths of manufacturing in 2005.

27. Steel Production, 1980
Fig a: The U.S., Soviet Union, and Japan were the largest steel producers in 1980.

28. World Steel Production, 2005
Fig b: By 2005, steel production had increased in developing countries but declined in the more developed countries.

29. Distribution of Steel Production 1980 & 2005
Fig : Developed countries accounted for 80% of world production in 1980 but only 45% in LDCs increased from 20% to 55%. China is now the world’s largest producer.

30. Changing Location Factors
Attraction of new industrial regions
Proximity to low-cost labor
Outsourcing: independent suppliers produce parts

31. Labor Cost per Hour MDCs and LDCs
Fig : Hourly wages can be under $1 in many LDCs compared to well over $10 in many MDCs.

32. U.S. Clothing Production 1994 - 2005
Fig : The percent of U.S. made clothing has declined sharply since the 1990s while imports have increased.

33. Why are maquiladora’s spatially distributed on U.S. –Mexico border?
Factories owned by American companies built in Mexico near the U.S. border because of the availability of cheap labor
Why are maquiladora’s spatially distributed on U.S. –Mexico border?
Close to major U.S. cities & points of entry
Easy to transport goods into U.S.
Mexican government preferred location

34. 4 reasons Mexico is an important global location of industrial organization
LABOR
Inexpensive labor costs in Mexico
New global division of labor – manual labor in LDCs
POLTICAL
Mexico’s stable gov’t & good relations with U.S.
North American Free Trade Agreement passed between U.S. and Mexico
No Mexican tariffs on imports/exports

35. 4 reasons Mexico is an important global location of industrial organization
3. ECONOMIC
Mexico’s expanding middle class & skilled labor
Rise of transnational corporations
U.S. economy shifting to tertiary
4. TRANSPORTATION
* proximity to U.S. markets
* border/transportation system well established

36. Test Breakdown Introduction 1 3% Key Issue 1 8 26.67% Key Issue 2 7
Section
Number of test questions
% of test devoted to this section
Introduction 1 3%
Key Issue 1 8
26.67%
Key Issue 2 7
23.33%
Key Issue 3 6
20%
Key Issue 4