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Locational Factors for Industries

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Presentation on theme: "Locational Factors for Industries"— Presentation transcript:

1 Locational Factors for Industries

2 Factors affecting industrial location

3 Locational Factors Physical Factors Land Raw materials Power / Energy
Human Factors: Labour Transport Market Technology Capital Behavioural factors Government Policy Agglomeration

4 Land Land: Heavy industries: A large area of cheap low flat land.
Location Size Landform Cost Heavy industries: A large area of cheap low flat land. Light industries: Small apartments are also OK.

5 Raw Materials Raw materials Ubiquitous Localized Water, Air, Soil……
Iron ore, coal, gold, tin, ……

6 Raw Materials Characteristics of Raw Materials
Weight loss or Weight gain Degree of perishability Value per unit of weight Availability of substitute materials Number of materials involved in production Source of supply Raw materials oriented / Market oriented

7 Raw Materials Decreasing importance of raw materials
Improvement in Transport Improvement in industrial techniques Others: New raw materials / Substitution Recycling

8 Power / Energy Type of Power Electricity Water  H.E.P. Fossil fuel
Coal Oil Natural Gases Nuclear Electricity Aluminum Smelting as a Power Oriented Industry

9 Labour Cost of Labour – Wage Level Skills of Labour Labour Mobility
Highly skilled, Semi-skilled, Unskilled Labour Mobility Highly skilled (highly mobile) Semi-skilled (fairly mobile) Unskilled (least mobile Reputation

10 Labour Labour-oriented Industries Declining in importance
Machines / Robots Still very attractive for labour-intensive industries Labour-oriented Industries

11 Transport Import raw materials Export finished products
Transport cost was the critical factor affecting industrial location in the past

12 Transport Transport costs decreasing with increasing distance

13 Transport Freight Rates

14 Transport Mode of transport

15 Transport Mode Long distance Short distance Speed Goods Type Water
Cheapest Highest Slow Bulky, low value, non-perishability Rail Cheap High Fast Bulky Road Fair Door to door, light Air ------ Fastest High value, fragile Perishability

16 Market Markets are where the finished products will be finally go.
Markets attract many industries to locate Good infrastructure Transportation, Electricity supply, water supply, drainage system, communication……. Large population size Large labour force Skilled labour Obtain advanced technology Industrial agglomeration

17 Market Some industries are more likely to be located near markets
Perishable products: eg. Bread, cakes…. Fragile products: eg. Bottled drinks, porcelain….. Bulky and low value products: eg. Brick-making….. Labour intensive industries: eg. Toy-making, electrical goods…. Keep close contact with consumers: eg. Jewellery, printing… Involve large quanities of raw materials: eg. Electric Appliance.. Specialized products: eg. Automobile parts manufacturers located near auto making centre

18 Technology Technology is very importance It is a localized factor
It change the production process completely It is a localized factor Ways to obtain technology From advanced countries (developed world) Universities Research Centre

19 Technology It costs much capital for research
Technology-intensive industry = Capital-intensive industry

20 Behavioural Good decisions Real World Full knowledge of information
Rational Objective Real World Incomplete information Irrational Subjective

21 Behavioural Entrepreneur is not an Economic man
Entrepreneur is a Satisficer

22 Behavioural Decision Making Process

23 Behavioural Behavioural Matrix

24 Behavioural Improvement of entrepreneur skill

25 Government Policy Cycle of industrial development

26 Government Policy Rationale of government intervention
Strategic reasons: eg. China, USA Economic reasons Promote overall economic growth Promote the growth of a particular industry Diversify the economy Ensure regional economic balance Ensure efficient ultilization of resources

27 Government Policy Indirect role Indirect role of governments

28 Government Policy Effect of government intervention
Extending Spatial Margins Regional Multiplier Cumulative Causation

29 Government Policy Extending Spatial Margins

30 Government Policy Regional Multiplier K = 1 / MPS
Where K is the multiplier MPS is the marginal propensity to save Example: MPS=0.2; K=1/0.2=5; initial input=$1000 $1000+$800+$640+$ ……+$m=$5000 $5000 is five times of the initial input $1000

31 Government Policy Cumulative Causation

32 Agglomeration Industrial Linkages Locational choice
Continuing operation of firms at given location Constraint on movement

33 Agglomeration Types of Linkage Material Linkages (Tangible)
Process Links Sub-contract Links Service Links Marketing Links Information Linkages (Non-tangible) Banks, stock-brokers, telephone and face to face contact between firms

34 Agglomeration Forms of Linkages I

35 Agglomeration Forms of Linkages II

36 Agglomeration Complexity of Linkages

37 Agglomeration Reasons for agglomeration (External Economies of Scale)
Transport savings Access to skilled labour Presence of ancillary services. Possibility of internal economies Infrastructure savings Attract investment Research and development

38 Agglomeration Industrial Inertia / Geographical Inertia
Once a factory has been built on a particular site, it will tend to remain there even though the original factors no longer exist. It is a very important factor for hindering the movement of industries.

39 Agglomeration Reasons for industrial inertia Costs of moving
Presence of a pool of labour Costly to move a skilled labour Costly to train unskilled labour Presence of associated industries Infrastructure might not be a available in the new area Reputation

40 Agglomeration Decentralization (Suburbanization of industries)

41 Agglomeration Factors affecting decentralization Expansion of firm
Redevelopment of inner cities Inner city problems which hinder firms development Demand for office space in the central city Suburbanization (population & market) Nature of industry Government Encouragement

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