1. Ch. 11 Industry
Key Issues 3-4

2. Warm Up The most important cost in Weber’s least cost theory is
A. Transportation costs
B. Labor costs
C. Infrastructure costs
D. Energy production costs
E. Land plot costs

3. Site and Industry
Site factors result from the unique characteristics of a location. Land, labor and capital are the three traditional production factors that vary among locations.
LABOR is the most important site factor at the global scale.
Labor-intensive industries are industries in which wages and other compensation paid to employees constitute a high percentage of expenses.
Why is labor a greater cost in the U.S and other MDCs?
What is the difference between labor-intensive industry and high-wage industry?

4. TEXTILES are labor-intensive!
Spinning fibers and other prep-work to make yarn
Weaving or knitting yarn into fabric
Finishing the fabric
Cutting and sewing fabric
Where are spinning, weaving and assembly done? Think about cost and market location.

5. Labor

6. Land Prior to Industrial Revolution—located near rivers or forests
Industrial Revolution—Located near coal fields
Now usually near hydroelectric power sources

7. Land – A Critical Site Factor
Early factories were located in urban areas, why?
Modern factories are located in rural areas, why?

8. Capital (money, money, money)
Why do certain industries locate in certain regions with regard to capital?
Motor City…
Silicon Valley…

9. Capital Many LDCs don’t have the funds must borrow from MDCs
MDCs may not loan money if industries are to be located in a country with an unstable political system, high debt, or poor economic policies.

10. PRODUCTION IN FACTORIES
Cottage vs. Commercial
Cottage Industry
Commercial industry
Small scale production
At home
Hand made, or simple machines
Pre Industrial Revolution, everywhere
Now mainly LDCs
Large scale production
In factories
Machine made
Post Industrial Revolution
Mainly MDCs, but through outsourcing spreading to LDCs
PRODUCTION AT HOME
PRODUCTION IN FACTORIES

11. Where is Industry Expanding?
How are factory locations changing in MDCs and LDCs?
Intraregional
Interregional
International

12. Why are location factors changing for industry?
In the 21st century, labor is a site factor that is changing dramatically for industry…but WHY?

13. Intraregional Shifts
Historically: Factories inside cities—close to market, close to labor
Multistory buildings
Modern: Factories moved to suburbs or rural—more available land
Single story buildings

14. Interregional Shift
Manufacturing in the US has shifted from the Northeast to the South and West
South—historically low in manufacturing due to Civil War and lack of infrastructure
Tennessee Valley Authority
Air conditioning
Right-to-work laws
1910 opening of LA Port and 1914 Panama Canal opened up the west

15. Interregional Shift Europe—Shifting from Northwestern to Southeastern
European government policies have encouraged the relocation to poorer locations
European Union Structural Funds
In both Europe and the US there have been interregional shifts. The difference is in Europe government policies have encouraged the relocation to poorer countries in the EU

16. New Industrial Regions
China
1980—80% of steel in MDCs and 20% in LDCs
2005—45% of steel in MDCs and 55% in LDCs

17. Asia China: Textiles, steel, household products
World’s largest supply of low cost labor and world’s largest market
Special Economic Zones
Asian companies tend to be more successful in the US than vice versa because Asian businesses know more about US culture than US businesses know about Asian culture.

18. Special Economic Zones

19. Latin America Mexico and Brazil
Clustered in large cities for access to markets
1960s-1990s Self Sufficiency Model
1980’s & 1990’s abandoned high tariffs and protectionist policies
NAFTA
Maquiladoras must compete with even cheaper labor in Asia

20. Maquiladoras in Mexico

21. Central Europe East of Germany and West of Russia Fall of Communism
Poland, Czech Republic, Hungary
Cheaper labor, proximity to Western Europe’s markets
European Union
Central European workers are less skilled, but cheaper than Western Europe. They are more expensive, but more skilled, than Asia and Latin America. And they are near the markets of Western Europe

22. Central Europe

23. Why are Location Factors Changing?
Proximity to Low-Cost Labor
Textile and Apparel Industry
New York Garment District—large supply of European immigrants
Mid-20th Century—Moved to Appalachian/Ozark mountains—99% of US hosiery and sock producers
Interstate highway, few unions
Now Latin America, China, and other Asian countries.

24. Outsourcing
New international division of labor—transfer some work to LDCs, keep highly skilled laborers in MDCs
Identifying comparative advantage

25. International Shifts in Industry
East Asia – China with rapid industrial growth and cheap labor, Japan with high-tech and automobile industry, South Korea with ship production, steel production and automobiles.
South Asia – India with textiles, some automobile manufacturing growing and consumer industries.
Latin America – Mexico with cheaper labor and close proximity via maquiladoras. Brazil with consumer industries.
Why are steel and clothing industries moving to LDC’s?

26. Return to Traditional Locations
Why?
Proximity to Skilled Labor
Fordist—mass production
Post-Fordist—flexible production
Teams
Problem-solving
Leveling
Example: Some industries remain in the NE US and NW Europe because of skilled labor and proximity to markets.
Post Fordists tend to have more flexible work rules

27. Just-in-Time Delivery
Shipment of parts and materials to arrive at a factory moments before they are needed
Reduces inventory costs and size of factory
Some disruptions
Labor unrest
“Acts of God”