1. Services PP #2

2. Why are consumer services distributed in a regular pattern?
Consumer services and business services do not have the same distributions
Consumer services generally follow a regular pattern based on size of settlements
Larger settlements offer more consumer services than smaller settlements

3. Central Place Theory
Selecting the right location for a new shop is probably the most important factor in the profitability of a consumer service
Central Place theory helps explain how the most profitable location can be identified
Central Place Theory
1st proposed in 1930s by German geographer Walter Christaller
Theory applies most clearly in regions that are neither heavily industrialized nor interrupted by major physical features such as rivers or mountain ranges
Concept was further developed in the United States in 1950s
Central Place Theory
A Central place is a market center for the exchange of goods and services by people attracted from the surrounding area
Centrally located to maximize accessibility from surrounding area
Central places compete against each other to serve as markets for goods and services for the surrounding region
This competition creates a regular pattern of settlements

7. Market Area of A Service
The area surrounding a service from which customers are attracted is the market area or hinterland
Market area is like a nodal region
A region with a core where the characteristic is most intense
To establish a market area, a circle is drawn around a node of service on a map
The territory inside the circle is the market area
Customers prefer to get services from nearest location
Consumers near the center of the circle obtain services from local establishments
The closer to the periphery of the circle, the greater the % of consumers who will choose to obtain services from other nodes
The entire United States can be divided into market areas based on the hinterland surrounding the largest urban settlements
About 171 functional regions called “daily urban systems”
To represent central place theory, geographers draw hexagons around settlements
Used instead of circles b/c no gaps

8. Designated Market Areas

9. Size of Market Area The Market area of every service varies
To determine the extent of a market area need two pieces of information about a service
Range and threshold
Range of Service
Definition:
Maximum distance people are willing to travel for use of a service
Range is the radius of the circle drawn to delineate a service’s market area
Expressed usually in travel time (minutes, hours) than in distance
People are willing to go short distances for everyday services, like groceries
Willing to drive further distances for other services, like a concert
Example:
In a large urban settlement a fast-food franchise has a range of roughly 3 miles whereas a concert arena has a range of roughly 60 miles
Threshold of Service
Definition:
Minimum number of people needed to support the service
Every business has a minimum number of customers required to generate enough sales to make a profit
Once range is determined, provider must determine where a location is suitable by counting potential customers
Census data helps with determining population
Example threshold for a supermarket is about 30,000 people
How potential customers are counted inside the range depends on the product
Example: Movie theaters attract younger people
Also wealth is taken into account

10. Market-Area Analysis Profitability of a location
Is a good or service going to be profitable in that location?
Compute range, threshold, and draw a circle with a 15 mile radius and count people within circle
Optimal location within a market
Next question after range and threshold is where IN the market area should the service be located to maximize profitability?
Best location in linear settlement
Gravity model:
predicts that the optimal location of a service is directly related to the number of people in the area and inversely related to the distance people must travel to access it
Customer patterns:
Greater # of people living in a particular place = greater potential customers
Farther people are from particular service, less likely are to use it
Best location in non-linear settlement
Geographers still apply the gravity model to find the best location, following these steps
Identify a possible site for a new service
Within the range of the service, identify where every potential user lives
Measure the distance from the possible site of the new service to every potential user
Divide each potential user by the distance to the potential site for the service
Sum all of the results of potential users divided by distances
Select a possible location for the new service, and repeat steps 2, 3, 4, and 5
Compare the results of step 5 for all possible sites. The site with the highest score has the highest potential number of users, therefore the optimal location for the service

12. Hierarchy of Services and Settlements
Small settlements are limited to consumer services that have small thresholds, short ranges, and small market areas, because too few people live in small settlements to support many services
A large department store or specialty store cannot survive in a small settlement because it needs a large population to support it
Larger settlements provide services having larger thresholds, ranges, and market areas
Services more diverse
We only travel further distances if the price is much lower or unavailable locally

13. Nesting of Services and Settlements
According to Central Place Theory, market areas across an MDC would be series of hexagons of various sizes, unless interrupted by physical features
MDCs have numerous small settlements with small thresholds and ranges, and far fewer large settlements with large thresholds and ranges
Nesting pattern is illustrated with overlapping hexagons of different size
Four different levels of market area
Hamlet
Very small market area, represented by the smallest contiguous hexagons
Village
Town
City
Christaller
Showed that distances between settlements in southern Germany followed a regular pattern
Indentified 7 sizes
market hamlet, township center, county seat, district city, small state capital, provincial head capital, regional capital city
In Germany, Hamlets had an average population of 800
Principle of Nesting Market Areas
Also works at the scale of services within a city

14. Rank-Size Distribution of Settlements
Geographers observed in MDCs that ranking settlements by size (population) produces a regular pattern or hierarchy
Rank-Size Rule
Country’s nth-largest settlement is 1/n the population of the largest settlement
i.e. second largest city is ½ size of the largest
third largest city is 1/3 size of the largest and so on…..
Should graph like a straight line
If it does not graph on a straight line, then the country does not have a rank-size distribution
Important because a country that follows the Rank-size rule, like the United States, tends to be a society that is sufficiently wealthy to justify the provision of goods and services to consumers
Don’t always follow Rank-Size Rule
Primate City Rule
Largest settlement has more than twice as many people as the second- ranking settlement
Largest city is called primate city
Example:
Denmark- Copenhagen
United Kingdom- London
Romania- Bucharest
LDCs often follow primate rule
Indicates that there is not enough wealth in society to pay for a full variety of services
Have to travel much further for shops, hospitals, etc.

15. Periodic Markets
Services at the lower end of the central place hierarchy may be provided at a periodic market
Definition:
collection of individual vendors who come together to offer goods and services in a location on specified days
Typically set up in a street or other public space
Provides goods to mainly residents of LDCs or rural areas of MDCs
Vendors often mobile, part-time, provide small quantities
Frequency varies by culture
Muslim countries
Rural China
Korea
Africa

16. Why do Business Services Locate in Large Settlements??
Every urban settlement provides consumer services to people in a surrounding area
But not every settlement of a given size has the same number and types of business services

17. Hierarchy of Business Services
Services in World Cities
World cities are most closely integrated into the global economic system because they are at the center of flow of information and capital
Business services concentrate in disproportionately large numbers in world cities
New forms of transportation and communication services were expected to reduce the need for clustering of services in large cities
Example: the Railroad in the 19th century or motor vehicle in the 20th century
In some cases opposite

18. Hierarchy of Business Services
Business services in world cities
Clustering of business services in the modern world city is a product of the Industrial Revolution
World cities attract the headquarters of banks, insurance companies, and specialized financial institutions
Shares of major corporations are bought and sold on the stock exchanges, which are located in world cities
Lawyers, accountants, and other professionals cluster in world cities to provide advice to major corporations
Advertising agencies, marketing firms, and other services concerned with fashion and style also locate in world cities
Consumer services in world cities
Because of large size, world cities have retail services with extensive market areas
But they may have even more retailers than large size alone would predict
A disproportionately large number of wealthy people live in world cities
Leisure services of national significance cluster in world cities
Example: concerts, plays, professional sporting events
Contain largest libraries and museums

19. Hierarchy of Business Services
Public services in world cities
World cities are centers of national or international political power
Most are national capitals, often contain:
Palaces, mansions for heads of state
Imposing structures for national legislature
Courts
Offices for government agencies
Also clustered in world cities are offices for groups having business with the government
Foreign embassies, labor unions, etc.
Exception!!!
New York City is unlike other world cities, it is not the nation’s capital
Home to the world’s major international organizations, the United Nations, it attracts thousands of diplomats and bureaucrats

20. Hierarchy of Business Services
Four Levels of Business services
World Cities
Dominant
London, NYC, Tokyo
Each is largest city in one of three main regions in developed world
Major
Chicago, L.A., D.C., Brussels, Frankfurt, Paris, Zurich, Sao Paulo, Singapore
Secondary
Houston, Miami, San Fran, Toronto
Bangkok, Bombay, Hong Kong, Manila, Osaka, Seoul, Taipei
Berlin, Madrid, Milan, Rotterdam, Vienna
Buenos Aires, Caracas, Mexico City, Rio de Janerio
Johannesburg, Sydney
Command and Control centers
Contain headquarters of large corps, well developed banking facilities, etc.
Two divisions: regional, subregional
Specialized Producer-service centers
Offer more narrow and highly specialized variety of services
One group specializes in management and R&D activities related to specific industries
Example: motor vehicles- Detroit, Steel- Pittsburgh, semi-conductors- San Jose, CA
Second group specializes as centers of government and education
Notably state capitals that also have a major university
Example: Albany, NY; Raleigh-Durham, NC; Columbia, SC
Dependent centers
These provide relatively unskilled jobs and depend for their economic health on decisions made in world cities, regional command and control centers, and specialized producer-service centers
Four sub-types in United States
Resort, Retirement, and Residential Centers
Manufacturing centers, Military centers
Mining centers

21. Business Services in LDCs
In the global economy, LDCs specialize in two distinctive types of business services:
Offshore financial services
Provide two important functions
Taxes
Taxes on income, profits, and capital gains are typically low or non-existent
Corporations have incorporated in an off-shore center also have tax-free exemption regardless of nationality of owners
U.S. loses an estimated $70 billion in tax revenue each year
Privacy
Secrecy laws can help evade disclosure in home countries
Can protect assets from malpractice suits or divorce
Can hide illegal activities
Example: Cayman Islands
Back-office functions
Known as business-processing outsourcing (BPO)
Include processing insurance claims, payroll management, transcription work, etc.
Also includes centers for responding to billing or technical inquires
LDCs attract BPO because:
Low wages
Ability to speak English

22. Economic Base of Settlements
A settlement’s distinctive economic structure derives from its basic industries
Basic Industry
export outside of settlement
Can be identified by computing the % of community’s workers employed in different types of businesses
The % of workers employed in a particular industry in a community is then compared to the % of all workers in the country in that industry
If % is much higher in the local community, then that type of business is a basic economic activity
Non-basic Industry
customers live in same community
Economic base
unique collection of basic industries defines its base
Important because exporting by the basic industries brings money into the local economy
Stimulates the provision for more non-basic consumer services for the settlement
That attracts new workers, who bring more families
That brings more consumer services to meet new needs

23. Economic Base of Settlements
Specialization of Cities in Different Services
Settlements in the U.S. can be classified by their type of basic activity
Each type of basic activity has a different spatial distribution
Concept of basic industries used to be referred to as manufacturing
In post-industrial America, increasingly the basic economic activities are in business, consumer, or public services
Examples:
Business Services
General business : large metro areas such as L.A., NYC, and Chicago
Computing and data processing: Boston and San Jose
High-tech: Austin, Orlando, Raleigh- Durham
Management-consulting: D.C.
Consumer Services
Entertainment and Recreation: Atlantic City, Las Vegas, Reno
Medical Services: Rochester, Minnesota
Public Services
State capitals
Large Universities
Military bases

24. Economic Base of Settlements
Distribution of Talent
Individuals possessing special talents are not distributed uniformly among cities
Some cities have a higher % of talented individuals than others
Correlation found between the distribution of talent and the distribution of diversity in the largest U.S. cities