1. Industrial Location Spring 2013
Economic Geography
Industrial Location
Spring 2013

2. The Location Decision Primary Industries:located near raw materials
Secondary Industries: less dependent on resource location

3. Principles of Location
Certain input costs of manufacturing are spatially fixed costs, e.g., wage rates set by national or area-wide labor contracts
The ultimate aim of the economic activity is profit maximization
Other input costs of manufacturing are spatially variable costs, i.e.,they show significant differences from place to place
Transportation charges- the costs of accumulating inputs and of distributing products are variable costs

4. Principles of Location
Individual establishments rarely stand alone; they are part of integrated manufacturing sequence and environments in which interdependence increases as the complexity of industrial processes increases, e.g,(agglomeration) the use of common resources- skilled labor or multiple suppliers of product inputs

5. Spatial interaction principles
Friction of Distance- the increase in time and cost that usually comes with increasing distance.
Distance decay- the impact of a function or activity will decline as one moves away from its point of origin.

6. Spatial interaction principles
Complementarity- refers to the needs of one region matching the products of another
Intervening opportunity- reduces attractiveness of more distant locations
Transferability- refers to the ease with which products can be moved.

7. Classic Theory of Industrial Location
Based on the work of Alfred Weber ( )
Sometimes called Weberian analysis
Explains the optimum location of a manufacturing firm in terms of minimizing 3 basic expenses:labor, transport & agglomeration costs
Known as Weber’s Least Cost Theory

8. Assumptions of Weber’s Least Cost Theory
An area is completely uniform physically, politically, culturally, and technologically. This is known as the uniform, or isotropic, plain assumption
Manufacturing involves a single product to be shipped to a single market whose location is known.
Inputs involve raw materials from more than one known source location

9. Assumptions cont’d
Labor is infinitely available but immobile in location
Entrepreneurs minimize costs of production
Transportation routes are not fixed but connect origin and destination by the shortest path; and transport costs directly reflect the weight of items shipped and the distance they are moved

10. Weber’s Locational Triangle

11. Agglomeration
Refers to the clustering of productive activities and people for mutual advantage
When a large number of enterprises cluster in the same area (e.g. city), they can provide assistance to each other through shared talents, services, and facilities; (too much can lead to high rents, wages, and circulation problems

12. Agglomeration- occurs when certain conditions are met:
When a cluster of activities create enough demand for support services
When cultural institutions (schools, hospitals) are attracted to the area
Deglomeration- too many activities (of the wrong type); traffic, pollution, capital shortages, increase in land prices, etc. may lead to a firm relocating elsewhere; expressed in the suburbanization of firms to nonmetropolitan locations

13. Agglomeration
What are some examples of agglomeration in the Greater Boston Area?

14. Some Criticisms of Weber
Labor is mobile and does not exist in unlimited quantities
Plants often produce a variety of outputs for many markets
The terrain is not flat everywhere
Does not account for taxation policies and changes in consumer demands

15. Criticisms Cont’d
The substitution principle suggests that business owners can juggle expenses as long as labor, land rents, transportation and other costs don’t all go up at one time
If labor costs go up, they may be offset by a decline in transportation and rent costs, encouraging the owners to remain in business

16. Factors of Industrial Location:
Raw Materials
Labor: price, quantity & skills
Infrastructure (banks, communication, social services, transportation)
Government policies
Transportation
Energy

17. Modes of Transportation
Railroad
Highway carrier
Inland waterway
Pipelines
Airways
Intermodal containerization

18. A container Port

19. Other Locational Factors
Political Stability
Other Businesses
Taxes
Climate
Personal preference

20. Situation and Site Factors Geography provides companies with 2 type of production costs:
Situation factors
Site factors

21. Situation Factors
Have to do mainly with transportation- bringing raw materials or parts into a factory and shipping the finished goods to consumer or retailers.
If the cost of transporting the finished product is higher than the cost of shipping raw materials, factory should be located to the buyer than the seller and vice versa (e.g. bulk-reducing industries & bulk-gaining industries)
Single-market manufacturers - e.g. clothing manuf
Perishable products- bread, milk, etc

22. Site Factors Focus on varying costs of land, labor, and capital
Preference for rural and suburban areas in contrast to the central city where the land costs are prohibitive
Preference for sites with good access to cultural and sporting events
Labor-intensive industries

23. Four Primary Industrial Regions
Eastern North America (largest)
Western & Central Europe
Russia and Ukraine
Eastern Asia (fastest growing)

24. North America
New England- oldest industrial area; relatively skilled, but expensive labor
Middle Atlantic- b/ween NYC & Washington, D.C. (largest US market); NYC- great relative location- major break-of-bulk (e.g. ship to rail) port
Mohawk Valley- upper NY state along Hudson River & Erie Canal

25. North America Cont’d
Pittsburgh-Lake Erie- b/ween Pittsburgh and Lake Erie (most important steel producing area)
Western Great Lakes Area- extends from Detroit & Toledo on the east to Chicago & Milwaukee on the west; Chicago- 3rd largest urban area- highly centralized
St. Lawrence Valley-Ontario Peninsula- Canada’s most important industrial area- assets: centrality to the Canadian market, proximity to the Great Lakes, & access to cheap hydroelectricity from Niagara Falls

26. Europe
Rhine-Ruhr Valley: steel (West Germany)- greatest in Europe: good resources, accessibility & centrality
Mid-Rhine
United Kingdom: oldest industrial region
Saxony (East Germany) & Silesia (Poland): steel production center
Northern Italy

27. Former USSR
Communists sponsored major industrialization; Moscow, St. Petersburg(shipbuilding), Volga-petroleum & natural gas (East of Moscow), Urals-minerals (further east), even Siberia were major areas of industrialization.
Eastern Ukraine- coal; steel

28. East Asia: Two countries avoided European imperialism
Japan- major regions: Kanto Plains (largest- Tokyo and Kansai District; 2nd largest- Kyoto-Kobe-Osaka)
China- major industrialization under communism (1949); Northeast is industrial heartland; Shanghai & Chang (river) District- 2nd largest

29. Late 20th century and Beyond “Four Asian Tigers”: What development strategy did they use?- export-oriented industrialization
South Korea
Taiwan
Hong Kong
Singapore

30. Export Processing Zones

31. Secondary Industrial Regions
South East Asia: Thailand, Malaysia & Indonesia
Mexico
Brazil
South Africa
Egypt
India
Australia