1. Industrial agglomeration

2. Outline What is industrial agglomeration?
What are the characteristics of industrial agglomeration?
How does industrial agglomeration occur?
Why does industrial agglomeration occur?
Is industrial agglomeration good?

3. What is industrial agglomeration?
It refers to high concentration of industrial activities in an area because industries may enjoy both internal and external economies when they cluster together (agglomerate).

4. Is it a phenomenon or process?
Agglomeration as a phenomenon: it refers to the spatial clustering or concentration of industrial activities in a relatively small area.
Agglomeration as a process: it refers to the snowballing process whereby more and more manufacturing firms cluster or areally concentrate in a relatively small area.

5. 2 forms of agglomeration
Concentration of related or well-linked factories together and form a specialized industrial region.
Concentration of various kinds of factories in the industrial zones in urban area.

6. Spatial effects of Ind. Aggl.
Over time, industrial agglomeration results in the growth of large industrial concentrations, producing different areal patterns of industrial land use. They have large numbers of associated and inter-dependent factories, surrounded and served by residential and commercial areas.

7. Industrial districts
Hong Kong - Kwun Tong, Tai Kok Tsui, Tai Po Industrial Estate
Sydney - Paramatta, Alexandria, etc

8. Minor industrial centres/towns
PRD - Foshan, Dongguang, Shunda

9. Industrial cities Shanghai (textile) Nagoya/Toyota (car-making)
Detroit (car-making)

10. Industrial regions Silicon Valley in California (electronics)
around Inland Sea of Japan (shipbuilding)
PRD in South China (toy)

11. Characteristics of an ind. aggl.
Clustering of industrial activities
Functional linkages  production linkages + service linkages
When materials move from one firm to another (production linkages)
As the firms share the specialized services and facilities (service linkages)
Economies of scale

12. How is industrial agglomeration developed?
A case of Quarry Bay

13. Tai Koo Properties Tai Koo Sugar Refinery (1883 – 1972)
Tai Koo Dockyard (1900 – 1972)
Tai Koo Coco-cola Bottling Factory ( s)

14. Quarry Bay Tai Koo Sugar Refinery was established in 1883
With growing trade in raw cane sugar from Java, the Philippines and North Queensland, and ready markets in China and Japan, Taikoo Sugar ran the world's largest sugar plant in its day, and owned small fleet of sugar carrying ships.

15. What were the original factors and attraction for the sugar factory?
Available of land
Coastal location
Sheltered location
Availability of labour

16. The problem
More than 3,000 workers were needed but the population of Shaukeiwan was only 3,274
Hostels were provided and so workers from other places were attracted
More jobs mean more income. It in turns increased the purchasing power of people
Other related facilities were provided, e.g. clinic, school

17. Tai Koo Dockyard
in 1900, on land adjacent to the sugar refinery, construction work began on Taikoo Dockyard.

18. Industrial agglomeration
Taikoo Dockyard launched its first riverboat in 1910, soon began to produce coasters for the company.
The dockyard was to become one of Hong Kong's biggest, and also one of its most progressive employers, providing its own housing, hospital and school.

19. Snowballing effects
More jobs  more income  higher purchasing power  development of entertainment (麗池夜總會)
More jobs  more settlements  growth of urban population in Quarry Bay
More population  more services = more public utilities

20. Snowballing effects
Quarry Bay was still an important industrial district in 1970s and 1980s
Factories included soft-drinks factory (7-up), Printing (Kodak), car repair centre (大昌行), various electronics ind.
The growing population supported the industries which become more profitable and enjoyed the benefits from agglomeration
The whole process is cumulative and growth becomes self-sustaining.

21. Myrdal’s Model of Cumulative Causation Process
A new industrial plant set up
 extra employment/more jobs
 income and the purchasing power ↑as the size of the population grows
 increases the demand for consumer goods, houses, schools and services
 more employment opportunities in other industries, e.g. in commerce, construction, service, etc.

22. Myrdal’s Model of Cumulative Causation Process
The new industry itself demands local goods and services.
It may attract linked industries which supply it with raw materials (called supplier-industries) or use its products (called user-industries).

23. Myrdal’s Model of Cumulative Causation Process
 further increases employment and expanding services, public utilities and construction.
 attract even more economic activities which become more profitable (enjoying the benefits from agglomeration economies)
the expanding city (increase in city scale) reaches the threshold level for various services.
Thus, the whole process is cumulative and growth becomes self-sustaining.

24. Reasons for industrial agglomeration
What benefits can be obtained from industrial agglomeration?

25. Initial factors and attraction
They refer to the original factors that attract the location of early industries at a certain site.
These factors can be natural or man-made. They start the cumulative process of industrial agglomeration and create the snowballing effects on industrial development and agglomeration.
The area with initial growing factors is known as the growth pole.

26. Linkages Production unit Subcontract Information Service links links
Marketing
links

27. Vertical linkages Garment Factory Cloth Textile Factory
Synthesis fiber
Chemical factory

28. Horizontal Linkages Glass-making Factory Iron & Steel Factory Engine
Tyre-making
Factory
Motor car
assembly factory

29. Diagonal Linkages Jam- Fruit bottling Ice cream making canning Sugar
refinery
Glass bottle
factory
Sugar mill

30. 3 types of Industrial linkages
vertical (one-to-one) linkage - forward and backward linkage
horizontal (many-to-one) linkage
diagonal (one-to-many) linkage
Industries with simple vertical linkages have a very strong production relationship. They can obtain the greatest economic advantages, once they are grouped or agglomerated together in a small area.

31. Benefits from vertical linkages
lower cost of transporting goods from factory to factory, e.g. integrated plants of I&S ind. (transfer economies)

32. Localization economies
energy savings, e.g. I&S ind.
waste products or final products from one industry can be the raw materials of another ∴  specialization in production.
 economies of division of labour + mechanization
discounts can be obtained when several firms buying similar inputs in bulk.
Advertising cost ↓∵ good reputation.
presence of ancillary services
saving of storage
close relationships among factories makes it easy to solve the problems of similar nature and to maintain higher level of production skills.

33. Urbanization economies
a pool of skilled labour and managerial expertise
infrastructure savings
snowballing effect
research & development
attracting investment

34. Diseconomies of scale Physical Economic shortage of land for expansion
shortage of labour
traffic congestion
urban decay
Economic
rising rent
rising labour cost
high tax

35. Social pollution / environmental problems high crime rate
pressure from labour union
pressure from green groups
government policy

36. Solution to industrial agglomeration
Industrial degglomeration/decentralization
(to be discussed in the next lesson)