Presentation on theme: "KEY TOPIC/CHAPTER 11…INDUSTRY Agglomeration assembly line basic industry break-of-bulk brownfield bulk-gaining industry bulk-reducing industry capital."— Presentation transcript:
KEY TOPIC/CHAPTER 11…INDUSTRY Agglomeration assembly line basic industry break-of-bulk brownfield bulk-gaining industry bulk-reducing industry capital cottage industry de-industrialization export processing zone footloose industry Fordism (Post-Fordism) Hotelling Model industrial inertia Industrial Revolution infrastructure economies of scale labor-intensive least-cost theory location theory manufacturing region mass production nonbasic industry outsourcing primary industry raw materials site characteristics situation characteristics secondary industry Alfred Weber 1
CHAPTER 11 INDUSTRY WHERE IS INDUSTRY LOCATED? WHY IS IT THERE? HOW IS INDUSTRY DISTRIBUTED? WHY DO DIFFERENT INDUSTRIES HAVE DIFFERENT DISTRIBUTIONS? WHY DO INDUSTRIES FACE PROBLEMS? 2
Food is needed everywhere and the last chapter showed that food production is widely dispersed. Industry on the other hand is more highly clustered in space than agriculture. Why? 50 years ago industry was highly clustered in only a few MDCs. Now we find it has diffused into LDCs. (But its still highly clustered by being mostly in LDC cities or special zones like Maquiladoras.) Transnational corporations operate globally. Globalization has brought a huge competition between countries trying to attract new industries and those trying to retain them. (Haves vs have nots.) It all started with an event known today as the Industrial Revolution 3
The root of the Industrial Revolution (1700s- early 1800s) was technology. Several inventions set the whole thing off. The steam engine, the train, and electricity changed this world; but more than new industrial changes occurred: The world changed socially, economically and politically because of the IR. You and I live with those changes, good or bad. Prior to the IR, industry was widely dispersed. People made household goods and equipment in their own homes or got them from someone in their local village. Home-based manufacturing is known as a Cottage Industry. One important Cottage Industry, before the IR, was the textile industry where merchants hired putters-out to drop off wool for people to use at home to create products they were paid by the piece to produce. 4
The IR was the collective invention of hundreds of mechanical devices which made production faster. The most important invention was the perfection of the steam engine by James Watt in Iron and textiles were the first industries to increase production by using the steam engine. Diffusion of this technology into all areas of production soon followed. Britain became the first industrial country. Coal mining, transportation (the train and steam boat), textiles, chemicals, and food processing are all benefits of the IR. 5
6 The Industrial Revolution originated in areas of northern England. Factories often clustered near coalfields. Why near coalfields? Coal was the first source of energy used to drive the steam engines that powered the birth of the IR. Canals, and later railroads, were built to connect the coal to the iron mining areas and then on to the seaports. Internal migration began. as people moved from the farms to the new factory and mining jobs. Industrial Revolution Hearth.
7 Diffusion of Railways: The year 1826 saw the first railway open. The chart shows the diffusion of railways and the Industrial Revolution from Britain. The first successful steam train was the Stephenson Rocket because it could reach the amazing speed of 25 mph. Oooh, Aah… But at a steady 25mph you can move goods further and faster than ever before.
The Industrial Revolution radically changed the organization of work. In the new factories, a large number of workers gathered together six or seven days a week to engage in tightly coordinated tasks paced by machinery. This new organization of work implied a sharp distinction between work and home. In earlier types of work, such as farming, trades, and cottage industries, work and home were not necessarily separate spheres and child labor was not a public issue. When the IR began, people sold their farms and moved to the cities thinking that earning money in the new industries would give them a better life. Instead many of them found conditions they didnt expect. Seven days a week with hour work days were common in Once they had sold their farm they couldnt move back. They were misused by the factory system as there were no labor laws; no unemployment, no vacations or health benefits. Women and children were paid ½ the price of men and there were no laws protecting the workers. Children working 12 hours per day had no time for school. The literacy rate in Europe was actually lower in 1850 than it was in Factory owners became the first millionaires. 9
10 Examples of the good and the bad of the IR Early farm tractor which could do much more work than a horse or mule. Child labor…children worked for ½ pay of an adult and didnt have the time to go to school.
Though Britain would have loved to keep all this to themselves, ideas like this cant be kept from others. By the late 1800s, most of Europe and the US were into the mass production game. About 1900, Japan became the first major non-Western country to undergo full industrialization. In the first third of the 1900s, IR diffusion spilled into Russia and Ukraine. Where is the industry distributed? Manufacturing in North America is concentrated in NE U.S. and SE Canada. Though only 5% of the land area these regions house 33% of the population and 66% of the manufacturing output. The two reasons for this are: 1. this is where most of our early population and immigrants came to and 2. closeness to raw materials like coal and iron ore and good transportation; railroads, highways, ports, rivers, and lakes. 11
Industrial areas in the US: A. New England D. Pittsburg-Lake Erie B. Middle Atlantic E. Western Great Lakes C. Mohawk Valley F. St. Lawrence Valley-Ontario Peninsula Changing Distribution of US. Manufacturing: In recent years, the total number of manufacturing jobs in the US has stayed about the same (but the population has grown) but where those jobs are has shifted to the south and the west. The NE has lost 2 million manufacturing jobs in the last 30 years while the south and west have grown by 1 million. Especially large loses have happened in the New York-Philadelphia Textile industry and the Pittsburg-Cleveland steel production centers where ½ of their manufacturing jobs are gone since This region spreading from Philadelphia, PA, to Cleveland, Ohio has been nicknamed The Rust Belt due to the closing of so many factories. 12
13 Major manufacturing regions Western Great Lakes manufacturing region Pittsburgh to Lake Erie region St. Lawrence Valley region Mohawk Valley region New England region Middle Atlantic region Although there are other important areas, these are the six major industrial regions of North America; all clustered in the northeastern U.S. and southeastern Canada.
US manufacturing jobs in the south and west have grown since the 1970s. Reasons why American Industry has moved south: 1. Right to work states (unions) 2. Climate 3. Close to oil-gas resources 4. If you need to modernize your factory, why not move to a better climate? 14
15 Changes in US manufacturing jobs. The green states are the fastest at gaining manufacturing jobs. The dark grey states are either losing or only slowly gaining manufacturing jobs. Manufacturing Job Gains Are Largest in the west and midwest. Percentage Change in Manufacturing Employment by State, Dec Mar.2013
MANUFACTURING IN EUROPE: THERE ARE 4 MAIN MANUFACTURING REGIONS IN WESTERN EUROPE. 1. RHINE-RUHR VALLEY 2. MID-RHINE 3. UNITED KINGDOM 4. N. ITALY RHINE-RUHR IS EUROPES #1 MANUFACTURING REGION. MID-RHINE IS #2 (CARS) THE UK WAS THE FIRST INDUSTRIALIZED REGION AND STILL IS IMPORTANT. N. ITALYS PO RIVER VALLEY HAS 2/3S OF ITALYS INDUSTRY AND 1/5 OF THE POPULATION. 16
17 Europes productivity and GDP: Productivity of workers Average income per person
18 The major manufacturing regions of Europe: 1.The United Kingdom 2.The Rhine-Ruhr River valley 3.The Mid-Rhine 4.Northern Italy 5.Silesia 6.St Petersburg area 7.Moscow and Central Russia 8.Eastern Ukraine 9.The Volga region Further east (not shown on the map) are the Ural mountain region and the Kuznetsk region of far eastern Russia.
Manufacturing in Eastern Europe: Eastern Europe contains seven key industrial areas: Six of them belong to the former Soviet Union. Four of which became industrial centers in the 1800,s. 1. Central industrial district is Russias oldest industrial area and is centered around Moscow. 2. St. Petersburg industrial district, Russians key seaport. 3. Eastern Ukraine, this area has Europes largest coal deposits and that makes this area a key to producing steel. 4. The Volga industrial district, was constructed during WW2 as a major production center and uses the Volga river for transport to the Black Sea and the world. 5. The Urals industrial district, The Urals have excellent supplies of raw materials and this makes them like our Pittsburg-Cleveland manufacturing area, a key area for steel production. 6. Kuznetsk industrial district, is the top Russian manufacturing area east of the Ural Mountains. It contains Russias largest supply of coal. 7. Silesia includes southern Poland and the northern Czech Republic and is the key manufacturing area of Eastern Europe outside of Russia and the Ukraine. 19
20 The major manufacturing areas of East Asia: Japan, China, S. Korea and Taiwan make up the key producers of E. Asia. Of the list, only China has vast resources of its own.
Manufacturing in East Asia: Japan, China, S. Korea and Taiwan make up the key producers of East Asia. Of the list, only China has vast resources of its own. Although industry is located elsewhere in the world, the 4 regions of N. America, W. Europe, E. Europe, and E. Asia account for most of the worlds industrial production. Why do industries have different distributions? All industries want to make as much profit as possible. Every company ordinarily faces 2 geographical costs: 1. Situation factors: the cost of transporting materials to and from your factory. You want this cost to be as low as possible 2. Site factors: The cost of the land, labor and capital of running a business in this location. 21
INDUSTRIAL LOCATION…WEBERS LEAST COST THEORY. ALFRED WEBER FORMULATED A THEORY OF INDUSTRIAL LOCATION IN WHICH AN INDUSTRY IS LOCATED WHERE THE TRANSPORTATION COSTS OF RAW MATERIALS AND FINAL PRODUCT IS A MINIMUM. (SOUNDS LIKE VON THUNEN???) THE COST OF YOUR SITUATION AND SITE WILL DETERMINE THE BEST LOCATION FOR YOUR INDUSTRY. SITUATION FACTORS LOCATION NEAR INPUTS…BE NEAR YOUR RAW MATERIALS (STEEL MILLS) LOCATION NEAR MARKETS…BE NEAR YOUR CUSTOMERS (COCA-COLA) TRANSPORT CHOICES…BE NEAR EASY/CHEAP TRANSPORT SPOTS (SEA PORTS) SITE FACTORS LAND: THE COST OF THE LAND/RENT/ENERGY/CLIMATE (HEATING AND COOLING). LABOR: THE COST OF WORKERS (UNIONS, RIGHT TO WORK, TRAINING). CAPITAL: THE COSTS OF DOING BUSINESS IN THAT LOCATION (LOAN RATES, TAXES, GOVERNMENT REGULATIONS). 22
THE #1 QUESTION FOR ANY NEW BUSINESS/INDUSTRY IS…DO I NEED TO BE CLOSEST TO MY RAW MATERIALS OR TO MY CUSTOMERS? MAKE THE WRONG DECISION HERE AND YOUR BUSINESS WILL FAIL. THE 4 TYPES OF INDUSTRIES ARE : BULK-GAINING BULK-REDUCING SINGLE MARKET PERISHABLE Your success in all of them, depends on your correct choice of a location. 23
Situation factors: Location near inputs (your raw materials). The farther something is transported, the higher the cost. All industries want to limit this cost as much as possible. Inputs are the costs of bringing raw materials to your factory. Location near inputs is a good idea if it is possible. It all depends on the situation of your product. Is it bulk-reducing or bulk-gaining? Copper-is a heavy ore which when mined has very little pure copper and has to have a lot of refining done to remove the impurities. A bulk-reducing industry is one that takes a raw material and reduces it to a purer and smaller level. In the copper industry, copper ore goes to a refinery (located near the mine to reduce costs) where it is refined into several more concentrated forms; 1. 60% pure copper, 2. 97% pure copper, 3. 99% pure copper. Once it is refined it is lighter and can be shipped out to factories in other areas at a cheaper cost. 24
Huge pit dug in mining millions of train cars of copper ore Hundreds or train cars of copper ore heading to the nearby refinery. 1 ton of pure copper…$5,000 per ton. Each train car holds 100 tons or ore. It takes 3 train cars of ore to make 1 ton of pure copper. Copper production…a bulk reducing industry: 25
26 In bulk reducing industries it is best to locate near the input (raw material) Copper ore is dug and refined into pure copper here. The copper refining industries are also here. But…the leading industrial factory use of copper is here, not very near the mines and refineries. Why?...Because it is cheaper to ship the pure already refined copper long distance than it is to ship the millions of tons of un-refined copper ore.
Secondary Activities: Manufacturing Steel, minimill near Miami recycles junk into new steel. U.S. Steel mills 27
Steel making is another bulk-reducing industry. The key components of steel are coal (coke) and iron ore. New minimills have developed away from the coal-iron ore areas because they use recycled scrap metal for their process. Miami has a minimill using scrap metal from all over our state. Location near markets: For many firms it is more important to be located near the market where the product is sold than near the input. Here the 3 key types of industries are: bulk-gaining, single-market, and perishable. Bulk-gaining: Makes something that gains volume in the process. Soft-drink bottling is a good example. Here the two main inputs placed in the container are; syrup and water. Syrup is concentrated and easy to ship while water is easily available. This makes it easier and cheaper to locate the manufacturing near the consumer rather than manufacturing centers. Other examples are TVs, refrigerators, and cars, where the individual parts are shipped to locations to be assembled and you end up with a bulk-gaining product. 28
Thousands of gallons of H2O with Co2 in it… ++ Empty bottles 55 gallon drums of soft drink syrup Equals?????? Which two of these is easier AND CHEAPER to ship? The final product is bulk-gaining. Coca-Cola manufacturing: 29
30 Top 15 US auto assembly plants… Note that 6 of them are not what we consider to be American Cars. Ford GM Toyota Honda Hyundai BMW Nissan Kia/ Hyundai Automobile production is a bulk-gaining industry. Parts are shipped from many locations to the assembly plants. The assembly plants are located near the largest number of US customers to cut down on shipping costs of the cars to the customers.
31 Quiz yourself: 1.Type of industry that gains volume as the product is made…A) bulk-reducing B) bulk C) recycling D) bulk-gaining 2.Prior to the Industrial Revolution, industry was widely…A) clustered B) unknown C) organized D) dispersed 3.T-F… When the IR began, people sold their farms and moved to the cities thinking that earning money in the new industries would give them a better life. 4. Which of these is not one of the key industrial areas of W. Europe? A) Moscow B) Rhine-Ruhr Valley C) Mid-Rhine D) United Kingdom E) N. Italy 5. __________ are the costs of bringing raw materials to your factory…A) outputs B) occupation costs C) inputs D) site costs 6. In recent years, the total number of manufacturing jobs in the US has…A) grown B) shrunk C) stayed about the same D) stayed about the same but the population has grown E) none of these 7. T-F…Because of the Industrial Revolution the literacy rate in Europe was actually lower in 1850 than it was in An industry which takes a raw material and reduces it to a purer and smaller level, is a…A) bulk-gaining B) bulk-reducing C) recycling D) growth industry E) none of these 9. The ________________ theory says that the best location for an industry is one where the transportation costs of raw materials and final product is a minimum. A) VonThunen B) Boserup C) Webber D) Industrial Hearth E) none of these 10. T-F…Despite the movement of US industrial jobs to the south and west, the key area of the US for industrial production remains the NE.
. Single-market manufacturing: makes products sold primarily in one location. Example: buyers for department stores come to New York City twice a year to see fashion shows and to pick the products they will sell in the upcoming season. The clothing companies are located near New York so they can produce the product easily and quickly. Since these companies are located near New York, their suppliers (zippers, buttons, clasps, etc. are also located near NY). Today auto parts manufacturing shops are located near the auto assembly plants for quick delivery of the parts. Just-in-time delivery is important to save costs. You get the parts just-in-time for your use and they dont sit on a shelf.. Perishable products: Daily newspapers, fresh food, pizza. How to transport your product? Rail, truck, ship, or air? Strange as it may seem, in general, the cost or transportation drops as the distance increases. This is because you must pay for the product to be loaded and unloaded no matter what the distance is. Trucks for short distance, trains and ships for long distances and air for speed. 33 Other important kinds of manufacturing:
Cost to load and unload…$100 $100 Distance traveled………… 5 miles 100 miles $20 per mile cost $1 per mile Transferring your product from one type of travel to another increases the cost; Loading and unloading, storing the product for a period of time, all cost $$$$$. A break-of-bulk point is a location where you can shift goods to various types of transport…sea port with a railroad, great highway and airport is ideal (think about the port of Tampa) Situation factors are important. Location near markets or break-of bulk points have become more important than location near raw materials for many industries in MDCs. This doesnt explain how Japan can be such a manufacturing power as it is not located near raw materials nor is it located near its key markets of the US and Europe. How does Japan do it? 34
All industries have to deal with two factors when deciding their location…situation and site. Lets sum up situation factors: Situation factors are the cost of transporting your inputs to your factory and/or transporting your product to the market (customer). You must know the situation of your business. Are you… a Bulk-reducing industry? a Bulk-gaining industry? a Single market industry? a Perishable industry? Other situation factors to consider are: Which kind of transportation to use Break-of–bulk points Just in time delivery 35
Site factors- The other key geographical cost is the cost of doing business in that location: Once you know your situation you can pick your exact best site. What is the cost of land? What is the cost of labor? And what is the cost of capital also decides where you locate your business. Land: Any non-man-made items needed to produce your product (air, water, soil, rent paid). Modern factories tend to be suburban or rural instead of near the city center because: 1. Factories need land to spread out because it usually is more efficient to have a single story building for factories. 2. Land is also cheaper in suburban or rural areas. Prior to the IR factories located near water and forests for water power and wood. When coal became the dominate power source, locating near the coal fields was important. Since there are fewer coal fields, industry began to congregate in fewer areas. 36
Example of Brownfield land at a disused gasworks site after excavation. The soil is contaminated from removed underground storage tanks and the land can not be used until an often expensive cleaning takes place. Brownfield Land A piece of property that once was a working factory or business which is now abandoned. Often this property is contaminated and needs to be cleaned up before it can ever be used again. 37
Today some other attractors for land in industry include: cheap utility rates, climate, cost of living, personal taxes, available transportation, and recreation. Places which offer these often attract industries to move to their area. Labor: The cost of labor is the cost of providing workers to produce and transport your product. A labor-intensive industry is one where the labor cost is a high percentage of your expense. Labor costs are divided into highly skilled, high paid workers or less skilled, inexpensive paid workers. Textile and clothing industries are prime examples of a labor-intensive business. There are 3 key steps to producing textiles: 1. Spinning of fibers to make yarn 2. Weaving the yarn into fabric…bleaching and dying. 3. Cutting and sewing the final product. 38
The global distribution of spinning, weaving, and sewing is not the same because the type of labor used is not the same. Producing the yarn is usually done near where the fibers originate (Why? Bulk reducing?). China, India, Pakistan, Uzbekistan and the US grow over ½ of the worlds cotton. Here is where you find most of the worlds cotton yarn produced. Synthetic fibers like Nylon and Rayon have traditionally come from MDCs but some LDCs are becoming producers of these fibers. LDCs do make up over 75% of the spun yarn and 86% of the woven cotton (making the cloth). Weaving is more likely to locate in LDCs because of low production costs which offset the shipping costs. US Textile and clothing industries have relocated to be nearer the low-cost employees by moving from the NE in the 1800s to the south (GA, AL, NC). Skilled labor industry: These are industries like medicine, electronics, and computers which require a more skilled worker. Today you will often find them clustered in certain areas which are often near universities. 39
40 GMs Saturn plant Spring Hill, Tenn. GM chose Spring Hill, Tenn., as their Saturn auto plant for several reasons: 1.Near many interstate highways and railroads for easy/cheaper shipping. 2.Within the circle live almost 40% of their customers. Cities like Chicago, Cleveland, Indianapolis, Atlanta and Washington are easy to ship to from this site. 3.Tennessee has cheaper labor costs.
41 The production of clothing…bulk gaining and very labor intensive. Why are so many of our cotton clothes not produced in the USA??? Production of cotton yarn from fiber is clustered in major cotton growing countries, including the U.S., China, India, Pakistan, and Russia. We produce the thread and yarn. Production of woven cotton fabric is labor intensive and is likely to be located in LDCs. China and India account for over 75% of world production. Much of our thread and yarn is shipped out of the US to be made into the cloth that cotton clothing is made from. Sewing cotton fabric into mens and boys shirts is more likely to be located near customers in MDCs, but much production now occurs in LDCs. Making a shirt is bulk-gaining. It is also a labor intensive industry as it needs lots of workers. CHEAP LABOR IS IMPORTANT. It is cheaper to make the yarn and thread, ship that to cheaper labor sites, pay them to make the clothing and then ship that final product to the US, than it is to make the entire product here.
Fordist production is the technique of requiring a worker to perform only on task over and over (the assembly line). Post-Fordist production is the new idea of allocating workers to teams which have several tasks to perform. Capital: Human made goods needed to produce your product, plus the cost involved in borrowing money to do business in that place. Capital includes, taxes, tools buildings, vehicles, and machinery. LDCs have a real problem in this area. Countries with an unstable government find it hard to buy machinery and to convince banks in stable MDCs to loan money to businesses in their country. Local and national governments will offer special incentives to industries to locate there: grants, low-cost loans, tax breaks are a few of these incentives. So how do you find the perfect location for your business? This is not an easy question to answer. Many industries today can be very footloose as the use of fax machines, and the internet allows them more freedom to control products at a longer distance. When one company buys another they inherit the purchased companies facilities and may continue operating there though it may be an inferior location. The preference of the owner also decides many of the locations of businesses. A footloose industry doesnt worry much about its location. Footloose industries are hurting brick and mortar stores like shopping malls because many shoppers are shopping online instead of in a store. 42
Lets sum up site factors: Site factors are the cost of doing business in THAT PARTICULAR LOCATION. (Pinellas County or Hillsborough county? Florida or Oregon? New York or Chicago?) Site factors include the cost of; Land, Labor, and Capital. Land is anything not man made, needed to set up and operate the industry…raw materials (inputs), rent, property you locate on. Labor is the cost to hire, train, and keep workers. Is your business labor intensive? Do you need highly skilled workers? Capital is the cost of human things needed to do your business. Taxes, buildings, machinery, tools, vehicles, electricity, etc. 43
Call centers, which handle thousands of help lines, phone and internet sales, will locate where ever they can hire workers cheaper. India has been the worlds leader in call center jobs, but other LDCs are competing with India for these jobs. All you need is a phone and a computer. A Footloose industry in Lakeland Florida. 44
Industrial problems from a global perspective: The most basic problem on a global scale is the gap between the world demand for products and the world capacity to produce them. For some products the global capacity to produce them has increased more than the demand for them. WHY?????? Can it be bad to have too much stuff? From the beginning of the Industrial Revolution up to about 1970 the demand for goods in MDCs increased along with the increase in population and wealth. The growth formula was: More people with more wealth = more demand for goods. This demand was met by building more factories which hired more workers who became wealthier and demanded more goods. A upward spiral of jobs, demand and production. This was good and many got wealthy…but… 45
HOWEVER…Since 1970 demand for goods in MDCs has slowed…why?????? (Chapter on population) Population…in MDCs the number of customers is dropping. Saturation of some goods (TVs, cell phones) Now you know why cell phones change so often. Wages have not risen as fast as prices have. Increased quality has caused consumers to keep goods longer and not replace them as soon. Changing technology has reduced the demand for some goods (steel). The diffusion of some industries has weakened the amount that the previously top producers need to produce or can sell. Less need for steel plus the fact that more countries now know how to produce it= more steel factories not running full time. Jobs are cut. 46
47 Steel is another industry which has seen a dramatic change in the last 40 years: The U.S., Soviet Union, and Japan were the largest steel producers in 1973, and with the rest of Europe, accounted for 90% of global steel production. Since the 1970s, steel production has generally declined in MDCs and increased in LDCs, especially in China, India, Brazil, and South Korea. Though there is less demand for steel, many steel mills are kept going through government help because no country wants to go out of an important business like steel and depend upon other nations for steel…nations that could cut them off someday. Industrial problems in MDCs: Countries at all levels of development face the similar problem of making their industries competitive in an increasingly integrated global economy. Although they share the same goal, each country faces the problem in a different way with different circumstances. Industries in MDCs must protect their markets from new competitors while industries in LDCs try to get more of the business and develop more markets. (The haves vs. the have nots again.)
The impact of trading blocs: Todays world trade competition isnt really between countries. It is more like a competition between trade blocs which are countries which work together. Trade gangs!!!! The 3 big trade blocs today are: Western Europe, Western Hemisphere and East Asia. Within each bloc they work together to compete against the other blocs for business. Western Hemisphere bloc: With NAFTA, (North American Free Trade Act) most trade barriers between the US, Canada, and Mexico have been removed. Other countries from the Western Hemisphere may join the union. The European Union: has eliminated trade problems between most European nations and they are acting more like one country to share production and to compete world wide. Japanese companies play the leading role in the economies of East Asian countries (S. Korea and China) but hard feelings left over from WW2 still haunts some of the trade and trust between China, S. Korea, and Japan. 48
BRICS…the new up and coming trade/business/banking world power. Brazil, Russia, India, China, South Africa. While they have not yet formed a trade bloc, they are setting up their own version of the World Bank so they can loan money to each other and help each other in business/trade. This could soon become the 4 th big trade bloc in the world and probably the biggest as they have 43% of the worlds population, 18% of the worlds GDP and 53% of the financial capital to do business with. 49
Competition among trading blocs: The 3 trading blocs have promoted internal cooperation, yet they have erected trade barriers to restrict other regions from competing effectively. The EU slaps a tax on products from non-EU members. Japan has a very difficult, slow, and costly permit system to keep foreign companies from selling in Japan. Transnational Corporations: The business, cooperation, and competition that take place between trading blocs is done mostly by large transnational corporations (Multinational corporations). A Transnational corporation operates factories in countries other than the one the headquarters is in. The original transnational corporations were American but in recent years Germany, Japan, France and the UK have all developed TNs. Why would one country or corporation locate industries in another country? Locating your factories in other countries is done for several reasons: Because of lower site factors like labor/raw materials, taxes, or land; To overcome that countries restrictions on imports; To make up for the lack of growth in sales in the countries you are already in (mostly MDCs); To create new markets for your goods as you have already saturated the market in the countries you are already in; (Japan builds car parts and electronic factories in the US. BMW and Mercedes are in North Carolina) 50
Disparities within the trading blocs: Not everything and everyplace is equal WITHIN the trading bloc…US/Canada/Mexico. The lack of a universal distribution of industry has caused trouble within the individual countries. (Illegal immigrants to the US from Mexico.) European disparities: N. Italy has 3 times more wealth than S. Italy. Paris is more modern and wealthy that the west & south of France. Much more unemployment in northern England than in the south. Income in the south of England is 25% higher than the north or west. W. Germany is far more wealthy that the eastern part (40 years of Communism in the east didnt help). The EU spends funds to try to improve the least productive area of its membership. The EU helps Greece, Ireland, and Portugal. 51
US disparities: The south has traditionally been among our poorest region…it is now growing faster in development that any other area. The north was once our richest area…it is now shrinking in industry and jobs. Now that all MDCs (including us) are in a period of shrinking economic growth, it becomes hard to justify our government spending $ to try to develop one part of our country when another part may suffer. Growth in all regions has stagnated (stopped). Industrial problems in Less Developed countries: LDCs are busy trying to do what made the MDCs powerful…develop mass production capabilities to supply jobs and business. But they face problems: 1. Old problems: A. Distance to the markets in the MDCs. B. Inadequate Infrastructure…do they have up to date tools, transportation, machines, technology, education? How do they pay for getting these items? 2. New Problems for LDCs: A… MDCs once could count on selling to LDCs as the LDCs didnt have its own production of goods and had to buy the MDCs product(s). LDCs cant count on selling their products to MDCs as MDCs produce their own. The LDC is stuck selling only to itself and that is a very limited market. (Car factory in Bolivia or Haiti sells to who?) 52
B… Remember that two key questions to creating a business are: access to raw materials and site factors. Access to raw materials: Many of the raw material mines are already owned by a transnational corporation from another country. How does the LDC get the raw material? They may not be able to buy raw materials found in their own country. Site factors: LDCs often have cheap labor but do they have the skilled labor and the education to create hi tech goods? MDCs are willing to transfer the low paid non-skilled jobs to the LDC, but they keep the highly paid skilled jobs in the MDC because those jobs pay more. Todays international division of labor…the MDCs have mostly tertiary jobs while the LDCs have the lower paying primary and an increasing number of secondary jobs. The haves vs. the have nots again. 53
So, exactly why would an American factory move out of the US? Lets say we are the Broyhill furniture manufacturing company. We have been making fine wood furniture in N. Carolina for 100 years. Why would we consider moving our factory out of the US or have our furniture manufactured for us in another country and just shipped to us? Lets look at the costs to make one bedroom suite: Wood needed to make our product: 1.American lumber producers have to pay : A)$15+ an hour to labor B)Fees to the EPA. Taxes C)Replant trees cut down. D)Costs to produce the finished wood. E)Shipping costs to our factory. F)Social Security, retirement, vacation and health benefits for American workers. Total cost, $250 Wood needed to make the Chinese product: 1.Chinese lumber producers have to pay: A)$3+ an hour B)Replant trees cut down (1/2 the price done in the US) C)Costs to produce the finished wood D) Shipping cost to the factory. Total cost. $100 54
The cost to produce a bed room set: A)Skilled wood worker gets $20+ an hour. 3 workers with 8 hours of work each to make the set. B)Loading and shipping the product. C)Advertising. D)Social Security, vacation, retirement, and health benefits. E)Utility and building costs of the factory. F)Taxes both local and federal. Total cost (including the cost of the wood) $900 The cost to produce the same bed room set in China: A)Skilled woodworker in China gets $3+ an hour. 3 workers with 8 hours of work each to make the set. B)Loading and shipping to the US. C)Advertising. D)Utility and building costs of the factory. Total cost (including the cost of wood and shipping to the US) $550 In the furniture store the Broyhill set will sell for $1800 while the Chinese set will sell for $$1100…Which one will most consumers buy? Broyhill could just close their American factories and hire the Chinese factories to make furniture with the Broyhill name and still make a profit. Many American companies do. 55
56 Chapter 11 Test. These questions come from a combination of our slides, your text book, and common knowledge you should have discussed in your AP classroom. They are very typical of what you will see on the National Exam. 1) The Industrial Revolution originated in Great Britain in approximately… A) 1950 B)1650. C) D) ) The cottage industry system involved manufacturing… A) in the home. B) of steam engines. C) in small factories. D) of hand-made luxury goods. 3) Eastern North America is the continent's manufacturing center in part because it has access to the continents… A) best-maintained transportation systems B) largest markets. C) most extensive sources of essential raw materials D) all of the above 4) Demand for many industrial goods in more developed countries has been stagnant in recent years, in part because of…A) substantial salary increases B) low prices for many goods C) market saturation D) rapid population growth 5) In contrast to Fordist production, Post-Fordist production is more likely to…A) dominate transnational corporations B) introduce more flexible work rules. C) place more importance on site factors. D) assign each worker one task. 6) A company which uses more than one mode of transport will often locate near…A) suburbs. B) break-of-bulk points. C) consumers. D) raw materials. 7) Significant site factors include all but which of the following? A) transportation B) capital C) labor D) land 8)The lowest-cost form of transporting goods very long distances is…A) airplane B) truck. C) train. D) boat. 9) A copper concentration mill tends to locate near a copper mine because it is a…A) site factor B) bulk-reducing industry. C) perishable industry D) specialized manufacturer.
57 10) Copper concentration is a bulk-reducing industry, because…A) copper ore is low-grade B) the mills are near the mines. C) the final product has a much higher value per weight. D) refineries import most material from other countries. 11) The first industries to increase production through extensive use of the steam engine were…A) iron and chemical. B) mining and textile. C) textile and iron. D) transport and steel. 12) Approximately three-fourths of the world's industrial production is concentrated in four regions. Which of the following is not one of these four regions? A) Eastern North America B) eastern Europe C) eastern Russia D) Japan 13) Europe's principal industrial areas include all but which of the following? A) northwestern Germany and southern Netherlands B) northern England and southern Scotland C) southwestern France and northeastern Spain D) west-central Germany and northeastern France 14) Today, the most significant industrial asset of the Western Great Lakes region is its… A) access to the nation's transportation network. B) large market area. C) proximity to essential raw materials. D) skilled labor force. 15) The main impact of the growth of regional trading blocs is…A) increased cooperation among countries within trading blocs. B) increased cooperation between trading blocs. C) increased competition among countries within trading blocs. D) all of the above 16) The biggest industrial challenge for more developed countries is… A) lack of access to markets. B) lack of raw materials. C) unequal distribution of industry. D) unmet consumer demand. 17) By subsidizing industries such as steel and textile, governments contribute to the global problem of…A) higher prices. B) job loss. C) lower consumer demand. D) oversupply. 18) Which production is most likely to be located in less developed countries? A) yarn B) textile C) shirts D) All are equally likely. 19) Which of these industries is most dependent on low-cost labor? A) automotive B) electronics C) steel D) textile 20) Soft drink bottling is an example of a …A) perishable industry. B) specialized industry. C) bulk-gaining industry. D) communications-oriented industry.
58 21)The location of a Maquiladora plant is a good example of the importance of… A) situation factors. B) site factors. C) Post-Fordist production. D) break-of-bulk points. 22) Situation costs are critical to a firm which wishes to…A) avoid labor unions. B) minimize production costs inside the plant. C) minimize transport costs. D) identify unique characteristics of a particular location. 23)In order to become a major industrial power, Japan has had to overcome which of the following problems? A) high labor costs B) abundant energy sources C) distance from consumers D) all of the above 24)Proximity to Russian consumers is the most significant industrial asset of which region? A) Central B) Kuznetsk C) Urals D) Volga 25)Compared to other industries, aluminum manufacturers are more likely to locate near sources of…A) low-cost labor. B) low-cost land. C) low-cost energy. D) Aluminum oxide. 26)The growth of manufacturing was retarded in the United States during the nineteenth century primarily because of…A) abundant raw materials. B) distance from markets. C) labor surpluses. D) all of the above 27)Prior to the Industrial Revolution, the distribution of industry was… A) clustered. B) concentrated. C) dispersed. D) randomly distributed. 28)The Industrial Revolution began in… A) Great Britain. B) Japan. C) the Soviet Union. D) the United States. 29)The Industrial Revolution in Europe diffused… A) from east to west. B) from west to east. C) from north to south. D) from south to north. 30)Russian manufacturers were more likely than American manufacturers to locate near… A) consumers. B) raw materials. C) transportation. D) all of the above The following questions are written at the high school level. You will find some questions from part one often rewritten here. This is all designed to help you transition to the college/AP style of written questions.
59 *** Questions following the 3 stars are questions which have been on previous National Tests exactly as it is written here. 31. *** An example of an important physical site characteristic is a…A) major airport B) grid street pattern C) major central park D) natural harbor E) public sports facility 32. Europe's principal industrial areas include all but which of the following? A) northwestern Germany and southern Netherlands B) northern England and southern Scotland C) southwestern France and northeastern Spain D) west-central Germany and northeastern France. 33. Eastern North America is the continent's manufacturing center in part because it has access to the continents…A) largest markets. B) most extensive sources of essential raw materials. C) best-maintained transportation systems. D) all of the above 34. In order to become a major industrial power, Japan has had to overcome which of the following problems? A) high labor costs B) abundant energy sources C) distance from consumers D) all of the above 35. *** Which of the following has contributed most to the de-industrialization of regions like the English midlands and the North American Manufacturing Belt? A) The increased percentage of women in the labor force B) competition from foreign markets C) environmental legislation D) the formation of free-trade associations E) the decline of labor unions 36. A copper concentration mill tends to locate near a copper mine because it is a…A) bulk-reducing industry. B) perishable industry. C) site factor. D) specialized manufacturer. 37. Situation costs are critical to a firm which wishes to…A) avoid labor unions. B) minimize production costs inside the plant. C) minimize transport costs. D) identify unique characteristics of a particular location. 38. *** A clustering of doctors offices and pharmacies near hospitals is BEST explained by the benefits of… A) decentralization B) agglomeration C) intervening opportunity D) Von Thunens model E) enfranchisement 39. Minimills are more likely than integrated steel mills to select locations because of access to A) government subsidies. B) labor. C) markets. D) raw materials. E) agglomeration 40. The location of a Maquiladora plant is a good example of the importance of …A) situation factors. B) site factors. C) Post-Fordist production. D) break-of-bulk points.
A company which uses more than one mode of transport will often locate near… A) break-of-bulk points. B) consumers. C) raw materials. D) suburbs. E) capital 42. Significant site factors include all but which of the following? A) capital B) labor C) land D) transportation 43. Pepsi bottling is an example of a…A) perishable industry. B) specialized industry. C) bulk-gaining industry. D) communications-oriented industry. E) agglomeration 44. Which of these industries is most dependent on low-cost labor? A) automotive B) electronics C) steel D) textile E) health care 45. *** The internet is reshaping traditional economic arrangements by…A) reinforcing the dominance of the central business district for retail sales B) expanding the importance of express package delivery systems C) increasing the importance of rail transportation as compared to truck transportation D) bringing consumers and producers into face to face contact E) creating more enclosed shopping malls 46. A manufacturer of women's and children's underwear is more likely than a manufacturer of electronic computing equipment to locate in what region of the United States? A) Midwest B) northeast C) southeast D) west 47. Which production is most likely to be located in less developed countries? A) Yarn B) textiles C) shirts D) All are equally likely. E) none are very likely 48. Demand for many industrial goods in more developed countries has been stagnant in recent years, in part because of A) low prices for many goods. B) market saturation. C) rapid population growth. D) substantial salary increases. E) guest workers 49. The biggest industrial challenge for less developed countries is…A) lack of access to markets. B) lack of raw materials. C) stagnant population in their country. D) overproduction E) cheap labor 50. Which of these is not a problem for MDC factory production? A) Stagnant demand B) lack of workers C) high quality of the produce D) stagnant population in MDCs
You are planning to open a factory to produce cooling fans for a new all electric car. This is the only product you plan at this time to produce. The all electric car will be produced in only one plant which is located near Nashville Tennessee. With this information answer the following questions about how you decide where to locate your fan factory. 51. The situation of your factory is…A) bulk-gaining B) bulk-reducing C) perishable D) land E) single-market-manufacturing 52. This situation tells you to locate near…A) the site B) the raw materials C) the market D) the cheapest labor E) the lowest capital cost 53. After figuring your situation you now figure your…A) site B) market C) labor cost D) shipping cost E) next product to produce 54. The key part of your site decision comes from…A) labor costs B) land costs C) capital costs D) all of these 55. Which of your site factors involves youre cost for taxes, loans, and tools? A) land B) bulk-gaining C) bulk-reducing D) labor E) none of these
62 This photo shows a new phone/telemarketing center in downtown Clearwater, Florida. This center takes orders from all over the world for 5 major US companies whose factories are in New York. A.Explain 2 reasons why these northeastern factories would locate their call centers in Clearwater. B. Explain why Clearwater should not plan on the call centers as part of their long range plans for the city. Free Response question #1: __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________
63 FR #2: According to Alfred Webbers Least Cost Theory, three factors determine the location of a manufacturing plant; location of raw materials, location of the market and transport costs. Using the map and Weberian theory, explain the location of ethanol plants in the US. (Ethanol is made from corn.) _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________
64 Answer Key: 1. C 14. A 27. C 40. B 53. A 2. A 15. A 28. A 41. A 54. D 3. D 16. C 29. B 42. D 55. E 4. C 17. D 30. B 43. C 5. B 18. C 31. D 44. D 6. B 19. D 32. C 45. B 7. A 20. C 33. D 46. C 8. D 21. B 34. C 47. C 9. B 22. C 35. B 48. B 10. C 23. C 36. A 49. A 11. C 24. A 37. C 50. B 12. C 25. C 38. B 51. E 13. C 26. B 39. C 52. C
65 Free response answers: FR#1: This is worth a total of 35 pts. Your answers should be something like the following: A. 1. One reason would be that Florida, like most other southern states, is a right to work state which means that unions are not strong in this area and southern workers will accept lower pay. Call center workers in NY/NJ expect higher pay than workers in Florida. The businesses save money by having their call center in Clearwater, Florida. ( 10 pts.) 2. A second reason is that the call center is a footloose job, meaning that it doesnt need to be located near the actual factories as all they do is take the orders over the phone or internet. Locating for cheaper labor make a great deal of sense in this kind of industry. (10 pts.) B. Because this call center is footloose they could re-locate to another cheaper location at any time. All they have to move is computers and phones. Clearwater should not plan great things or spend large amounts of money to help this business. (No new roads or special buildings for this business) (15 pts.) FR#2: This is worth 20 total points. The map shows the location of ethanol plants and areas of heavy corn production. A huge amount of corn is used to make smaller amounts of ethanol. This is a bulk-reducing industry. The ethanol plants need to locate near the corn in order to save on transportation costs of shipping large amounts of corn, as it is cheaper to ship the smaller amounts of ethanol. Those plants which are not near the corn (California, Seattle) are located where they are, due to very high populations of customers. In those cases, shipping in the corn is cheaper than shipping the ethanol.
Calculating your grade on test #11. Add how many you got correct on the multiple choice part (55 possible) to how many points you scored on the FR portion (55 possible)…110 total. The following scale will show the approximate score if this test were the real AP exam. Remember that this is an approximation. While 65-74% is normally the range for a 3 on the test, it is not definite. Over the years I have seen scores as low as 60% be the low portion of a 3 score. Out of 110 possible points: is most likely a is most likely a is most likely a 5 Before moving on to topic/chapter 12, lets take a practice test on chapters