Factors of industrial location

Types of industries
Primary industry
Secondary industry
Tertiary industry
Quaternary industry

In
this section, we are only confined with
the manufacturing industry.
 Primary industry usually known as
handicrafts.

Itis estimated that in Asia, Africa, and

the Middle East, some 80 - 85 % of the
industrial workers are employed in
handicraft industry.
Manufacturing industry can be
seen as system.

Variousinputs (factors of production) such

as raw material, labour, and power are
brought together in the production process
from which produce an output -- the
product.
 Frequently, the output of one
manufacturing industry becomes input
of the raw materials of another.

e.g.steel is used to make car bodies

and therefore one of the inputs needed
by automobile industry.

Itcan be divided into heavy industry

and light heavy
Manufacturing industries can be also divided into:

a. Processing industries :

- A material may undergo a change in physical

state, chemical composition, volume or mass,
in creating a product more useful to man.

- e.g. Steel making is one of the example. It

change state during process.
 For reference, can see this site :
http://www.nucor.com

http://www.posco.co.kr
Two kinds of processing industry :
1. Initial Processing industries :

- A single raw material is converted into

a more concentrated or useful form.

For example: (1)sugar milling (2)dairy processing

(3)fruit and vegetable canning (4)meat packing
(5)grain milling (6)brewing and wine making etc.
 In some cases, the output of the
processing factory becomes available for
immediate consumption, e.g. butter,
cheese, wine, beer and canned fruit.

In other cases, some treatment of mineral

ores, the output must pass through other
manufacturing for processing before a final
product results.
2. Complex processing industries :
Some types of processing involves more than a single
raw material inputs.

Raw materials are frequently obtained from several

different sources, and often subjected to a series of
lengthy and complex processes that involve a high
degree of organisation and advanced technology.

In some cases, the complex processing industries may

result in a product available for immediate
consumption, or the required further processing or
fabricating,
e.g. steel making, aluminium production, petroleum
refining, sugar refining.
b. Fabricating industries :
Fabricating involves a change in the
physical form but not the state of the raw
materials used.

Fabricating is basically the assembly of

finished or semi-finished product from other
primary or secondary manufacturing
industries

e.g. steel making industry, to produce a

finished products.
 Examples : the manufacture of
automobiles, aeroplanes, ships, all
other types of machinery, furniture, and
clothing are examples of fabricating
industries.
INDUSTRIAL LANDSCAPE:
Some Basic Problems of Industrial Location

1. Distribution Pattern
Not evenly distributed around the earth, with
some manufacturing industries typically
concentrated in certain localities.
 The reasons for the Contemporary Pattern of Location And

the Cause for Dynamic Change of Location:

1. differences in scale or level of study:

micro level or firm level individual firm

meso level an industrial district

macro level an industrial area or a whole

industry
2. differences in the types of industry

e.g.light industry such as textiles make

strong demands for labour.

Heavy industry such as oil refining and

petroleum results little labour but much
capital.
3. differences in special needs:
- need to be close to other industries

-need to lower transportation costs by

cheap sea transport

- others
 4. differences in the motives of the individual
entrepreneur in choosing a location:
some are likely to be motivated by a desire
to maximise profits and will take risks in
doing so.

Other may want simply satisfactory profit

and safe existence.
 Despite these diversifying factors of location, there
are common requirements to all industrialists:
1. the purchase of raw material or semi-
processed materials

2. the processing or assembling of these

raw materials or semi-processed materials
whereby value is added to them.

3. the sale of the finished products.

 4. the payment of transportation costs
involved in the assembly of the raw
materials or semi-processed materials and
the distribution of the finished products.

5. labour supply

6. energy resources

7. capital
II. The Factors affect Industrial Location:
1. Role of Raw Material
The degree of attraction exercised by
raw materials varies according to nature
of the materials themselves.

Raw materials can take many forms:

1. products from a primary industry,

e.g. agriculture, mining, forestry or
fishing.
 2. semi-processed (semi-finished)
products from an initial processing or
complex processing industry, e.g. raw
sugar, steel plates.

3. semi-processed products from a

fabrication industry, e.g. electricity
circuits, car engines.
In term of spatial distribution, raw materials can be classified

into 2 broad types:

1. Ubiquitous raw material which are
found practically everywhere, e.g. water,
sand, atmospheric gases

2. Sporadic or localized raw materials

which are found only at specific sites and
are of many types, e.g. coal, petroleum,
iron ore, bauxite, rubber.
 Ubiquitous raw material cannot exert
strong locational tie or influence on
industrial location as can localised /
sporadic raw materials.

Historically,
many manufacturing industries
had a tendency of locating very close to
their raw materials raw-material oriented.
A. If the lose a great deal of weight or bulk
during the production process, the factories
will be attracted to sources of raw materials
because transport cost can be saved.

e.g. sugar is only 1/8 of the weight of sugar

cane

Goldsmith: one tonne pf raw material produce

a few grams of metal.

Alumina refining which uses about 4 tonnes

of bauxite to produce 2 tonnes of alumina.
 b. If the materials are perishable
e.g.fruits canning, vegetable and food
preservation, palm oil refining, meat-
packing, they have to locate themselves
near their sources of raw.

Initialprocessing has to be carried out on

the site before the raw materials can be
sent and arrive in fresh forms at the market.
c. High value of raw materials per ton
Ifmaterial of high value per ton (e.g.
wool), then it can bear a heavier cost of
transport and plants will be found further
away from away from sources of
materials.

Materialsof low value per unit of weight,

e.g. copper ore will attract industries
near them.
d. Possibility of using substitute materials:
Where materials are substitutable, the
pull of any one of them is reduced, e.g.
either pig-iron or scrap can be fed into
the converter so steel production may
not be set up nearer to the iron
smeltery.
e. Number of materials involved:

Attractionof one material in ONE

direction may be counteracted by pull of
another in a different direction, e.g. iron
and steel industry employs several
types of raw materials and location
based on access to both coal and iron
ore can be found.
f. Influence of freight rate:

Ifthe materials are costly or difficult to

handle, then raw material supply plays a
very important role in location decision.
g. hazardous or dangerous materials
which require to travel long distance

Thesemay include the generation of

nuclear electricity and making of
nuclear armaments.
 A marked decline in the locational pull
or attraction of raw materials on
industrial location because of:

1. improvements in transport

technology which allow raw materials

to be transported over longer distances
at lower costs (cheapening of
transportation).
2. advances in production techniques
which allow the same amount of
products to be produced forma reduced
amount of raw materials.

3. greater attractiveness of the market

location.

4. advantages of agglomeration of
manufacturing industries.
Examples:
A. Sugar milling (case study)
Physical requirements :
1.alluvial flat land with deep and well-
drained soils of volcanic origin.

2.completely (frost-free) - mean monthly

temperatures (should not fall below 18 for
optimum growth.

3. annual rainfall: 2000mm per annum but it

is also necessary to have a slightly dry
period (75mm)
Processing cane into raw sugar :
1. crushing the cane to extract juice. (The
remaining cane fibber is a dry material
called 'bagasse'. This is used as fuel.

2. cleaning dirt out of juice in settling tanks.

3. boiling juice twice to form syrup-coated

sugar crystals. ( )

4. spinning off syrup from crystals.

5. A thick syrup, called molasses ( )is also
spun off in this final centrifuging and this is
then sent to distilleries to be made into
industrial alcohol, rum ( )

6. It is also sold to farmers for stock feed and

fertilizer.
Raw material (case study) :
1. Perishability of harvested cane
transshipment must be avoided.

2. Cane, is an extremely bulky, and

cumbersome crop of low specific value, i.e.
'value per unit weight is low.
 Forexample, an average yield of cane is 84
tonnes per hectare, compared to less than
2.5 tonnes per hectare of wheat and other
cereals.

As a result, cane is difficult and costly to be

transported.
 Therefore,the transport system focusing on
each mill has to be both fast and capable of
handling very large quantities.

Also,it is more economical to keep the haul

as short as possible. Thus, mills have to
located in the midst of their assigned cane
areas.
3. Weight lose material:

Each 7 tonnes of cane brought in from

the fields yields only 1 tonne
approximately of raw sugar in the
milling process.

Thus, the overriding consideration in

siting sugar mills is to locate them as
close as possible to the fields with
efficient bulk transport system
B. Copper processing (Case Study)
Highly concentrated into a few
major mining centres :
a. interior south-western U.S

b. the Ural ( )and Caucasus regions

of USSR( )

c.Zambia and Zaire in south-central

Africa( )
 d. east-interior Canada

e. central and northern Chile

f. Peru, the Philippines

 Most of these regions are in relatively
isolated, sparsely settled and
underdeveloped parts of the earth distant
from the major consuming regions.
Distribution of consuming regions

In the advanced nations (industrial regions)

North-eastern part of the USA and Canada,

the-west coast of the USA, western Europe,
European USSR and southern Japan.
2. Locational Factors:
High weight loss ratio - Large amounts
of worthless waste material except for
the small quantities of recoverable gold,
silver, lead, zinc etc are mined with
copper ores.

Inother words, for every 100 tonnes of

copper ore mined, only 1 or 2 tonnes Of
pure copper are yielded.
 Thus,the weight loss ratio is very high (97-
98%) .

Therefore, it is desirable to upgrade the ores

at the mine in order to reduce the transport
costs associated with moving huge
quantities of bulky materials of low specific
value.

Therefore, strong materials orientation

3. Copper manufacturing : (case study)
1. Concentrating the ore
The purpose of this stage is to upgrade the crude
ore by removing most of the waste material. The
concentration mills convert each 100 tonnes of
ore into about 2 or 3 tonnes of copper
concentrate.
In order to save transport cost, nearly all
concentrating mills are found within a few
kilometres of the mines that supply them.
thus, copper concentration is an excellent
example of a materials oriented initial processing
industry.
2. Smelting the concentrate (regarded as part of the initial processing)

- The concentrate from the mills has only about 30

to 40% copper content.

- therefore, the purpose of smelting is to remove

the remaining worthless impurities.

- From 2 or 3 tonnes of concentrate, the smelters

produce about 1 tonne of blister copper, which is
over 99% pure. Thus this stage has weight loss
ratio of approximately 60%.
 Because of this fairly high ratio, smelters
tend to locate close to the concentrators, or
at some point convenient to several mills.
3. refining the blister copper
The blister copper is 99% pure, but is still
unsuitable for the manufacture of electrical
wiring and other items.
Hence, it must be refined by electrolysis to
remove the impurities - gold, silver, zinc, lead
etc. This very low weight loss ratio and the
valuable nature of the by-products, mean that
electrolytic refining is not tied to the mining
regions.
In fact, the high specific value of the blister
copper means that it is economical to
transport it to markets, where power and
labor factors are usually more favorable.
Role of Market
1.
An outstanding locational influence on
modern manufacturing as a whole.

A market location is attractive to many kinds

of industries, particular consumer goods
industries, and likewise many capital goods
industries.
 a. Consumer goods Industries which are
producing goods for consuming markets in large
urban areas.

Textiles and many kinds of processed food are

good examples, with their raw materials sources
widely spaced from their market-based factory
plants.

It is clear that consumer goods industries have to

be sited in densely populated regions such as
cities and conurbations.
 b. capital goods industries - which sell their
products to be further processed or fabricated
by other plants, are less dependent upon
distribution of population.

However, since their products are very often

sold to the consumer goods industries, many
capital goods industries are likewise attracted
to urban-based and market-based locations.

Good example include the production of car

tyres and the assembly of motor vehicles,etc.
Industries have become market-oriented for the following
reasons :

a. The market will exert a strong pull on industry if:

(i) Bulkiness of the products:

If there is an increase in weight
(weight-gaining products), in order to
save on transport cost . e.g.
breweries, soft drink manufacturing
(coca-cola), bottling plant are all
market oriented.
 ii. Perishability of the products, e.g. bakery

iii. Fragility of the product e.g. glassware, camera

iv. If the industries require close personal contact

between producer and consumer. E.g. newspaper

v. If the product is relatively cheap (low value, but

bulky) and transport cost will increase the cost
substantially e.g.cement-making

vi. If a market is a concentrated and specialized one.

e.g. farm machinery industry in US is located near
to mid-west while the cotton picking machine is
produced in the south.
 MARKET, therefore, IS GETTING MORE AND
MORE IMPORTANT IN INFLUENCING THE
LOCATION DECISION OF ENTREPRENEURS.

Market is population centre

Concentration of industry will create market
The distribution cost is higher than
procurement cost
EXAMPLES: The Changing Pattern of Oil Refinery from raw

material to market location (case study)

 1.The high proportion of wastes meant that it was
uneconomical to transport crude oil very far before
refining. It is natural that refineries established in
the early days were at the source areas.

2. Near the turn of the century came the first big

demand for petrol owing to the development of the
motor vehicle, and this meant that a substantial
proportion of former waste became an important
market product.
 3. The proportion of waste was further diminished
by the development of the cracking process.
Cracking is, however, an expensive process but
only a limited amount of waste is produced.

4. The overall result of these changes in demand

is that today up to 95% of crude oil can be made to
yield marketable products.

One of the main reasons, therefore, for the

location of refineries at source, a high proportion of
waste has disappeared, and it is no accident that
in recent years we have seen a marked shift to
market location.
5.Market refineries are more flexible in the
sense that they can accept the crude oil
from competing regions, while source
refinery is virtually tied to using oil from a
single source.

In the Suez Crisis, for example, when the

supplies of oil from the Middle East to
Western Europe were interrupted, British
refineries were able to switch to Venezuelan
oil.
 6.Skill man are more easily to found in
developed countries (market) than at the
underdevelop countries (raw material)

In developed territories where the danger of

"civil strike and political instability is at
minimum.
 Itis therefore surprising that political and
strategic refineries have encourage the
development of market-oriented refineries in
the post-war years.

This is a notable trend for modern industry

to seek a market location, and this is true of
the oil-refining industry. The strength of the
attractive power of the market should be in
no doubt to anyone.
3. Role of Transportation
Terminal costs: are incurred because of the costs
due to loading, unloading and temporary storage,
and the cost of preparing shipping documents

Haulage costs: are related to the distance of the

journey covered, and include fuel costs, labor
costs, maintenance costs and depreciation on the
means of transport vehicle concerned.
 Most modern industries find it necessary to
bring in raw materials from a large number
of sources, and to distribute their finished
products to a large number of markets.

Usually manufacturing industries prefer

locations with good transport infrastructure
(e.g. road, railways, harbors and airports)
 1. coastal ports e.g. Sydney, London,
Rotterdam.
2. railway centers e.g. Chicago (with 27
rail lines converging upon it), Paris.

Ports, canals, roads, railway, and airports

have all, at different times and to different
degrees, been important influences on
industrial location. Thus, industrial location
and technological change in transport are
linked together.
 Advantages:
(i) Water transport offers the lowest cost per
tonne per km for long hauls.

(ii) It is the cheaper means. It usually have very

large cargo capacities and the natural water route,
(rivers, seaway and oceans )needs little
maintenance.
Disadvantages :
(i) Sea transport much slower than other
means of transport.
(ii) It may be disturbed easily by storm and
other adverse weather conditions.
(iii) Deep-water harbors well sheltered from
strong wind must be available, or else heavy
investment may be necessary artificial
harbor improvements.
(iv) Heavy capital investment are required
for the construction of container terminals.
R I M
1. At either R or M, only 1 set of terminal
costs is incurred.

2. At any intermediate site I between R and

M, 2 sets of terminal costs are incurred,
one for the procurement of raw materials
and one for the distribution of finished products.

3. Since a lot of terminal costs could be saved, it

would be cheaper to locate the manufacturing
plant at either R or M than at any intermediate
point I.
 Case 2 :
Locationat the break-of-bulk point
(transhipment location)

- for manufacturing plants the consignment

of which requires transhipment, i.e.

transfer from one carrier to another, e.g.
from railway to sea transport).
 The place where transfer from one carrier to
another occurs is referred to as a break-of-bulk
point or transshipment point.

Here, the terminal costs are unavoidable, and

hence the step-up in the procurement cost curve
moving towards the market, and the step-up in the
distribution cost curve moving towards the material
source.

A market orientation or materials orientation will

incur these additional terminal costs, which push up
the total transport costs at either location.
 However, if the manufacturing takes place at the
transshipment point, some of the reloading
terminal costs may be avoided, especially if the
manufacturing process results in some weight
reduction and/or bulk reduction.

Break-of-bulk locations are frequently least cost

location for manufacturing plants which process
bulky raw materials arriving by sea, e.g. sugar
refining, oil refining, steel milling.
Case 3 :
 1. the finishing products are bulkier or more
fragile than the new material.
2. the finished products may require special

handling facilities, e.g. refrigeration.

3. raw materials can be carried in bulk

carriers and trains whereas the finished

products cannot.

e.g. furniture-making/ manufacture of washing machines,

processing of agricultural products into chilled/frozen foods.
 As a result of lower assembly costs
relative to distribution costs, such
industries tend to be located at or near
their market.
4. The role of Labour
Labour is needed to operate any industrial
plant but the type and amount vary from
industry to industry.

In some industries, labour input is a large

cost item while other may be of minor
importance.
 Labour is relatively immobile factor, difficult
to move to new areas or to new jobs.
Largely for this reason, labour-intensive
industries may be attracted to areas that
have a surplus of labour.
 For these industries labour costs, form a
very high proportion of total costs and, if
costs vary from place to place, may exert a
strong locational influence.

a. i. quantity of labour
Labour intensive ratio =
number employed /value of shipment from
factory
b. Labour varies spatially in quality and quantity.

Labour costs are determined by 3

main consideration:

(i) payments to workers:

(ii) educational level of workers and costs
of training workers
(iii) Stability of labour force
5. The role of capital
a. Fixed capital land, construction of factory
building, machinery for processing and social
capital (social services) of the area, including
public housing, school, hospital. It also include
physical infrastructure (e.g. road, railways).

b. Working capital - It is needed to finance the costly

factory system, to pay wages, purchase stock of
material, component parts, finished product not
yet sold and money (money capital)
 The location effect of capital:
- Fixed capital is much more immobile,
difficult and costly to move. This is the
reason for geographical inertia.

Money capital can be obtained from

investment of manufacturers, sale of shares
to private investors, loan from banks,
insurance companies and government.
More mobile.
6. The Role of Power Resources
a.
Cost of energy varies over space:
A known resources may not be used
because of its inaccessibility, e.g. oil in
Siberia.
 b. There is also time variation in demand
and supply.

Technological advances may make formerly

useless to be valuable and desired.
 Thefuel and power resources obtained
from modern industries are coal, natural
gas, petroleum, water power and nuclear
energy.

The fuel can be directly or indirectly, that is,

the fuel is converted to energy in another
form usually easier for transport e.g. coal to
produce electricity.
7. The Role of Government /
Government Influence
 Government influence is increasing felt
in the development of industries in
many developed and developing
countries, whether they have a free
enterprise economy (i.e. laissez-faire),
mixed or planned economy.
 In particular, government influence on
manufacturing location is most marked in the
planned economies in socialist countries.

Government exhibits its influence through

- infrastructure
- government spending
- legal framework
- education and training facilities
 In free economic local
government:
a.On a local scale, conflict of interest (the
problem of noise, dirt, smoke, offensive
smell, danger and traffic congestion)
between industrial landuse and other e.g.
residential, educational, recreational has
led the city government to introduce zoning
laws.
 b. Government may set up regulations
controlling the maximum hours of work, the
minimum age of work, minimum wages etc.
to protect the labors from the capitalists'
exploitation.

c. To encourage dispersion by offering

cheap land, industrial estates, better
transport system and all infrastructure.
Ways of government intervention
or influence
Traiffs
Quotas
Subsides & bounties
Government ownership
Lease restriction
Loans
Strategic consideration
Tax concessions
Some possible measures of
government intervention include:
1.Provision of infrastructure in areas
established for industrial development

2.Provision of land (often cheaper and more

extensive land) for industrial use. e.g. Tai Po
and Fo Tan Industrial Estates in the N.T,
Hong Kong
 3. Establishment of manufacturing industries in
depressed regions and new industrial areas
(a) In countries of planned economies, e.g. China,
the Chinese government has established a
large petroleum refinery and petrochemical
works at Urumqi in Xinjiang in order to achieve
regional economic balance and industrial
dispersion.
(b) In countries of mixed economies, e.g. Britain
and France, the governments can establish
nationalized plants in depressed regions and
rural areas.
 e.g. The British government has
established new factories such as Ford
at Halewood (near Liverpool), British Leyland
at Bathgate (near Edinburgh), etc.

4. Introduction of favourable terms of trade to

industries in order to attract foreign investment
and the establishment of technology-intensive
industries
e.g. By granting tax concessions (low rates on
profit taxes)
 5.Protection of the country's own-industries
and/or new industries
e.g. By imposing tariffs on imported finished
products or raw materials; and imposing
quotas on imports
 6.At city or regional levels, governments
may adopt zoning policies which specify
the site of industries in various industrial
districts

(e.g. Tai Po Industrial Estate for industries

not possibly accommodated in the inner
city's multi-storey buildings) and/or
industrial regions. e.g. Metropolitan Sydney,
Australia
 7. Setting up of training institutions for industries
in specified industrial estates or regions

8. Introduction of anti-pollution laws and traffic

control regulations to reduce pollution and other
environmental problems in existing problem
areas.
 9 Town planning measures and strong central
planning
These may :
(a) limit the establishment of repulsive industries
(e.g. leather tanning)and environmentally
dangerous industries (e.g. chemical works) to
some specified regions
(b) encourage the development of cleaner
industries and force the manufacturers to adopt
sewage treatment of their waste products
before discharge/disposal
Case Study (1) :CHINA'S IRON AND
STEEL INDUSTRY AFTER 1949

Case Study(2): Government influence on

industrial location in Australia

Please refer to the online notes

8.The Role of Technology Change
Technology as a factor of manufacturing
location is needed in the production,
transport and marketing of the finished
products.

In particular, technological advances in

various aspects affect considerably the
location of manufacturing industry.
 Firms tend to be located at the site where
the total costs are minimized. Changes in
technology at any state of production will
alter the least cost point and induce a
locational shift.
9. Climate and Water Supply
a. Climate:
certain agriculture raw materials are
limited by the climate, e.g. equatorial
climate rubber for processing.
availability of water may influence the
location of textile industry.
cost of heating, cooling, humidifying and
dehumidifying.
types of demand may depend on the
climate e.g. heater in cold environment.
b. Water supply:
water can serve as raw materials e.g.
soft drink, wine
washing and cooling e.g. textile, paper
making
10. Land Space

a. The increasing scale of manufacturing factory

demands for a more spacious site. A lot of
industries take a sub-urbanized location, e.g.
motor vehicle assembly, oil refinery
While smaller labour-intensive industry are in
residential buildings or flatted-factory building.

b. Physical demand of the industry

e.g. ship building demands a water frontage.
 c.Cost of the land
Land prices vary from region to region.
Rental will normally decrease from the city
center. But, it is determined by the market
Mechanism.
 11. Personal Factors: Behavioral and Random
factors for decision making

a. Geographical inertia many

industries are located at the place
where they were set up even though
the favourable factors have been
faded out.
 b. In making decision on the location of
plants, most of the industrial entrepreneurs
do not have complete knowledge about the
various factors of production and the
general business conditions.

Accordingly, industries can rarely hope to be

sited at places with minimal costs, i.e.
optimal locations. Personal consideration
may influence the final decision on a
location.
 c. Economic factors are seldom the only
factors considered in the building of a
factory plants; non-economic factors also
enter the consideration in many locational
decisions.

Many industrialists would be satisfied with a

high level of profits; profit maximization is a
motive more applicable to large
manufacturing plants than to small and
medium size manufacturing firms.