Geo2101

Carlesa Duncan

12/0613/0712

The term Industry does not only refer to manufacture but all forms goods and service produced.

There are in fact types of industry, namely;

Primary- extractive activities

Secondary- manufacture

Tertiary-retailing and transport

Quaternary –knowledge economy

The placement and expansion of industry are the primary concerns of all governments.

Whether used internally or exported produce from Industrial activities provides revenue Source:

Waugh,D 2002 .

Source; www.nationalgeographic.com

Industry -economic activity concerned with

the processing of raw materials, manufacture

of goods in factories and the services which

surround the use of these goods.

Location -a particular place or position.

Industrial location is therefore the strategic

placement various economic activities in

relation to some specific factors.

Source ;(www.freedictionary.com).

Industrial location

Raw material

Government policies

Labour supply

Markets Land and environment

Capital

Energy

Transport

Raw material availability- material index = total weight or raw material/total weight of finished product

Supply of energy- inefficient, unreliable or costly supplies of energy.

Transport- terminal cost and long haul cost

Markets- bulkiness, perishability, size and prestige

Capital – working, physical or fixed and social capital.

Land and environment – terrain and climate

Government policies- taxes and laws

Labor cost - cost,quality and quantity

Source-Bilj.H 2001

Advantages

Employment

Variation of products

Higher GDP

Independence

• Disadvantages

Migration

Pollution

Monopolies and exploitation

Shifts in preferencesSource:Waugh.D 2002

When attempting to predict where business will or should be located we should consider 3 basic assumptions:

That business owners want to maximize their advantages over competitors;

That they also want to maximize their profits; and

That they will take into account variable costs such as energy supply, transport costs, labour costs, etc.

(Source- Getis.J etal, 2001)

In doing so we will come across many theories

which can be labelled in either of 3

categories:

Least cost

Profit maximisation or zone of profitability

and

Locational independence

Weber's model seeks to design a least-cost

industrial location sighting 3 basic economic

factors:

1. Transportation cost

2. Labor cost

3. Agglomeration economies

Source- Getis.J etal, 2001

Assumptions

1. An isolated state:, uniform transportation

system in all directions on a flat relief plain ,

uniform terrain

2. Localized & ubiquitous materials

(transported and original material )

3. Market location & size are fixed.

4. Transportation cost as a function of: mass of

raw materials & distance travelled by one mode

of transport expresses tones per km eg ships

5. Labor is available only at several fixed

location: in large supply, immobile, equivalent

skills & labor cost

6. Perfect competition: profit-maximization /

cost-minimization, perfect knowledge, all

entrepreneurs-economic men motives for, no

monopoly

7. The best / optimal location: the one with

minimal production cost (least cost location)

Material index

= weight of localized raw material inputs

--------------------------------------------------

weight of finished products

Only localized materials are included in the weight calculation

MI=1:no weight changes mostly at an intermediate location

MI>1: raw material-oriented therefore cheaper to locate near to the raw material

MI<1: there would be a gain in weight and / or bulk during processing

– tends to be closely market

Source- Getis.J etal, 2001

The Isotims & Isodapanes

-Weber's technique for mapping the spatial variation in transport costs is useful in order to find the low cost model.

-Isotims (lines joining places of equal transport costs of a particular raw material (procurement costs) / output (distribution cost)

-Isodapanes (lines joining places of equal total transport costs).

Source- Getis.J etal, 2001

The creation of the concept of critical isodapane – the set of points that equals the rise in transport costs to smaller wage costs.

Changes in the industry location happen if the point of cheaper labour cost is

within the critical isodapane

where savings in labour cost are > the added costs of transport incurred when moving closer to the cheaper labor supply

Read by a labour coefficient the higher the index, the greater the likelihood of the industry’s diversion from the LCL

Referring to the clustering of industrial plants

to achieve LCL through: the reduction of inter-factory transport costs

greater specialization

the use of larger machinery

established pool of skilled labor and expertise

the prestige / reputation

the development of local market knowledge.

It uses the same ratio as the labour

coefficient.

Advantages of agglomeration

Savings for a firms via bulk purchase and

transport, etc

Labour cost savings

Presence of auxiliary services (availability of

infrastructure & specialist services, e.g. power)

Savings from specialization

Modes of transport competition between different transport systems.

Rigid assumption of isotropic surface. It was realized that prices factors of production and market prices were not fixed

Government intervention on the location of industries has grown eg zoning laws, subsidies, taxes etc

Weight loss assumptions are narrow for value-added, other qualities of raw materialsalso have impact on industrial location

States that the correct location of an industry lies where is profit is greatest

Where Net Profits =revenue from sale –production costs and

Profit max = Max sales

www.wikipedia.com

The substitution principle

Indicates that industrial processes that decline in amount of one input (e.g labor) can be replaced with an increase in another (e.g land rent).

Spatial margins of profitablity Points linear to the areas within which a firm’s profit

max

Location anywhere within the margins insures some profit.

It’s okay to have less than perfect knowledge of the area

Personal considerations are allowed.

Such acceptable sites are called satisficing locations

Source- Getis.J etal, 2001

Optimal site

Taxation or labor costs

Changes in consumer demand

Infrastructure

Energy supply

Example: bauxite conversion aluminum needs

tremendous amounts of electricity

The core or

central nucleus of

all commercial

land use in a city

(Knox, 2001)

It is surrounded

mixed land use

followed by

residential areasSource- Getis.J etal, 2001

High land values

Major retail area

High portion of main offices

Tallest buildings

Greatest volume of traffic

Constant infrastructural changes

Cities are not know for available land

In order to maximise profit business need points at which consumers congregate most

Thus higher rents are charged closer to the central business district

en.wikipedia.org

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Location theory is the basis urban design

Both Weber and Losch provide good models

that can still be used today relaxing some

assumptions e.g terrain and economic

behaviour

In general large manufacture businesses can

be either raw material oriented or market

oriented

Market oriented industries will pay higher

rents as they get closer to the CBD

However the following must be considered

Mass production

Plant size

Increases in capital

Trade agreements

Imperfect competition and monopoly

Multi faceted corporations etc

Technological advancements

D, W. (2002). Geography an Integrated Approach. Delta: Nelson Thornes.

J, B. H. (2001). Human Geography, Culture, Science and Space. New York.

Getis. J.(2001).Human Geography, Landscape of human activity, Mc Grawhill, New York ,New York.

Lewis G.L,(1993) People and the Environment, Longman science and technology, Essex, England.

www.wikipedia.com

stonito.com