Industrial Location

Factors affecting Industrial Location

By

Sreenath B.

• Definition of Manufacturing : Manufacturing is the activity of changing raw materials into semifinished or finished products Locational Factors in industry : Land Relief - Industry needs to be on flat land, particularly when factories are large. Drainage - Industry needs to be on dry land with good drainage and without a flood problem Cost of the land - Factories need cheap land, particularly for large-scale industry which occupies a lot of land Area of the land - Large-scale industry needs extensive space for buildings, storage and future expansion. But small-scale industry needs less space and it can be located in flatted factories

Raw materials In processing industries raw materials are turned into semi-finished manufactured goods These are then used as an input to assembly industries These assembly industries produce finished products for consumers e.g. the steel industry (a processing industry) makes steel (a semi-finished product) from iron ore (a raw material) which is then used by manufacturers of cars (an assembly industry): Factories need good access to suppliers of raw materials or semi-finished products to minimize the transport costs Some industries need a great amount of raw materials and their cost of transporting raw materials forms the major part of the total cost To minimize the cost, they are located near to the raw material source - raw material-oriented industries

Power resources include : coal, petroleum, natural gas and H.E.P. In industrialized countries, power in form of electricity is easily available through the power lines Except for industries which use up a lot of power. For example, aluminium smelting needs a large amount of electricity As a result, aluminium smelters are found very near to the sources of power Industries such as these are called power-oriented industries

Labour supply Characteristics of Labour which are important to industrial location : Quantity of Labour Supply - this is particularly important to industries which employ a lot of people (labour-intensive industries), e.g. clothing industry Skills of labour - Some industries need labour which has particular skills. It is better for such industries to be located in an area where there is skilled or educated labour. This will save the time and money of training the labour force. Cost/Wage of labour - This is particularly important to labour-intensive industries. Businessmen want to obtain cheap labour Industrial relations - The relationship between the workers and the management. Poor industrial relations can cause disputes and strikes. This will reduce the output

Market Markets may be individual customers as well as other industries Markets may also be local or overseas For some industries which make very bulky or heavy goods, or goods which are fragile or perishable, this transport cost can be high. Such industries have to be located near to the market in order to minimize the transport cost. These are called market-oriented industries The size of the market is positively related to the size of population and the incomes of the people People with high incomes have a high purchasing power and means a large market A large market is particularly attractive to market-oriented industry

Transport Raw materials are collected by factories and the finished products are distributed to markets. These involve costs and organization Industries therefore like to locate near to good and cheap transport facilities Transport is particularly important for industries which : are raw material-oriented or market-oriented, e.g. steel industry have many suppliers of raw materials or many buyers of the products Comparison among transport media : water transport is the cheapest but the slowest mode of transport. It is therefore suitable for industry which needs bulk transport

Rail and road transport is more expensive and faster Air transport is the most expensive and efficient, and it is suitable for industry which needs quick and light transport

Entrepreneur The entrepreneur is the person who decide :

what to produce how to produce where to sell the products the location of the factory Theoretically, an entrepreneur seeks a maximum-profit location Practically, he may not always have the complete information, and he may have other perceptions or considerations

Entrepreneur is not always rational, and so will not always be where profits are at a maximum.

Historical factor Industries still remain in the location rather than moving away to a new location even though original attraction of a location has weakened or even disappeared This phenomenon is called industrial inertia Reasons are : The factory may be very large and it would be too expensive to move Agglomeration economies are formed. Production cost can be much reduced as related industries located together. Costs are reduced because :

a skilled labour force has been attracted infrastructure is available, or the cost of building infrastructure can be shared there are established linkages with suppliers and buyers Example of this agglomeration : steelworks in Pittsburgh in the U.S.

Government policy Industry brings many benefits to the country and to the area where the industry is located governments around the world operate differently in different economies:

In planned economies, such as China, governments actively and directly make the location decisions in state planning. They develop industries in particular regions by building factories, providing capital or labour through migration policies In market economies, governments affect industrial location more indirectly by changing the business environments for industry Supportive governmental policies : Tax benefits to factories Grants and low interest loans to factories Developing infrastructure (e.g. electricity supply) Building housing estates Restrictive governmental policies : Higher taxes for factories Refusing planning permissie Tight pollution control Depopulation policy

Locational requirements of some types of industries Raw material oriented industries they are : using raw materials which have heavier weight or larger size than the finished products. These are weight loss or bulk loss industries. Using raw materials which are perishable or fragile they can save transport costs if they are located near to the sources of materials With improvement in technology and efficiency, many industries now require a lower quantity of raw materials to produce the same quantity of output. The locational pull of raw materials has reduced

Power-oriented industries In the 19th century, coal had strong locational pull on industry. The earliest industrial areas in Europe and the U.S.A. were all located on coalfields This was because a large amount of coal was needed in industries such as iron and steel Influence of coal and other power resources on industrial location has been reduced today, because : improvement in production technology has raised the efficiency so that less power is required to produce the same quantity of output development of power line systems allows industry to obtain electricity easily other forms of power such as oil and gas are developed which are easy to transport

Labour-oriented industries labour-intensive industry which needs abundant, cheap, semi-skilled labour force An example is the textile and clothing industry of Hong Kong. In the l950s and l960s, the low wages in Hong Kong was one of the main factors behind the growth of the industry On the other hand, a pool of skilled and educated labour supply is attractive to some industries producing hightechnology products, e.g. computer making.

Market-oriented industries transportation of finished products is very costly in these industries, because: the finished products show an increase in weight or size in production, e.g. beer industry (weight gaining) and car industry (bulk gaining)

the finished products are fragile,e.g. glass manufacture the finished products are perishable, e.g. baking industry the finished products are easily outdated, e.g. newspaper industry These types of industries have to be near the market in order to minimize the transport and handling costs

Footloose industries This refer to those industries which can locate almost anywhere without varying the transport cost Entrepreneur, however, will often choose a location where agglomeration economies are found A recent trend in more developed countries is for footloose industries to locate on planned industrial estates, to take the advantages providing by institution/government

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