Industry & Services

1. Industry & Services De Blij Chapter 12

2. Cottage Industry & Guilds- products made at home Pre Industrialization India’s textiles being made in homes on handlooms and spinning wheels.

3. Preindustrial World • The industrial Revolution accelerated development, but it did not begin with it • Modern age is better classified as Industrial Intensification!

4. Where did the Industrial Revolution begin? • The Industrial Revolution originated in areas of northern England in the late eighteenth century. • Factories often clustered near coalfields. • Densely populated regions called “Black Country” b/c of this • Why Great Britain? • Flow of capital • Second agricultural revolution • Mercantilism and cottage industries • Resources: coal, iron ore, and water power

5. Britain • 1st to industrialize gave them what we call: • Comparative Advantage – the ability to produce something more efficiently than any other • Ex: able to manufacture products faster and cheaper since they were the only ones with machines • As opposed to an Absolute Advantage- when a region has more of a resource than any other area • Ex: Saudia Arabia has more oil than any other country, so they have the Absolute Advantage over Oil

6. Flow of Capital into Europe, 1775

7. Industrial Revolution • Inventions lead to the use of machines and inanimate power in the manufacturing process • Suddenly whole societies could engage in seemingly limitless multiplication of goods and services • Rapid bursts of human inventiveness followed • Gigantic population increases

8. 2 main industries diffused with the industrial revolution: Iron Textiles • Iron ore is mined - ore is melted (smelted) - pour iron into molds that can be transported - now called Pig Iron • Pig iron is shipped to be re-melted into something useful • Could be used to make steel with addition of Coal • Coal - bulky so factories located near the coal and iron ore mines • Transportation took on a new meaning - canals and railways were built to transport: people, products and raw materials • Spinning yarn - turns the short threads from cotton plants into continuous yarn needed to weave cloth. Carding is the untwisting of the fibers prior to spinning. • A lot of energy was needed - more than humans could supply - along comes the Steam Engine • All processes to make cloth could now be housed in one building - The Factory

9. Innovations of the Industrial Revolution Watt Steam Engine • Machines were water powered (steam) which brought in new uses for coal as an energy source. • James Watt & Mathew Boulton invented the steam engine Water Pumps for Mines Power Loom Locomotives

10. Innovations • Abraham Darby (1709) created the process to smelt iron. • Mixing the iron ore with limestone and water and smelting it with coke enabled iron workers to pout it in molds creating cast iron. Ironbridge, England World’s first cast iron bridge 1799

11. The first rail lines connected Manchester, a center for textile manufacturing, to Liverpool, a west facing port to the colonies. Steam powered ships would carry the textiles to distant markets.

12. Textiles Production: • Liverpool and Manchester • Iron Production: • Birmingham • Coal Mining: • Newcastle

13. Diffusion to Mainland Europe Same set of locational criteria for industrial zones applied: 1) proximity to coal fields & 2) connection via water to a port 3) large urban markets for purchasing goods

14. Diffusion of Industry Around the World

15. Diffusion to the Northern European Lowlands • Northern France, Southern Belgium, the Netherlands, the German Ruhr, western Bohemia in the Czech Republic, and Silesia in Poland along a belt of iron ore deposits. • Rotterdam, Netherlands, became a major port at the mouth of the Rhine River. Map of Rotterdam – the most important port in Europe & a hub of global commerce

16. Why did Europe have Industrial Success? • Availability of Raw Materials • Colonialism brought in materials from around the world • Skilled labor force • Specialization of major industries • Trading products • Trading routes

17. The Location Decision. . . • Primary Industries- must locate next to resources • Secondary- less dependent on location • Can transport raw materials if profit outweighs cost

18. How Do Location Theories Explain Industrial Location? • Improvements to transportation & communication created a time-space compression making secondary industries less dependent on resource location. • Raw materials can be transported to distant locations to be converted into manufactured products. • LOCATION THEORIES predict where businesses will or should be located. • Assumptions: • Decision makers are trying to maximize their advantage over competition • They want to make as much profit as possible • They will take into account variable costs TRANSPORTATION FRICTION OF DISTANCE LABOR ENERGY

19. Variable Costs • Additional costs due to: • Energy, Labor, Transportation • Companies try to minimize these costs because of: • Friction of Distance- increase in time and cost with increasing distance of production (serving markets further away) • Distance Decay- impact of a function or activity will decline as one moves away from point of origin • Says that manufacturing plants will serve close markets • Variable costs will go up as you serve markets further away

20. Factors of Industrial Location Raw Materials • Very few industries use raw materials • Most manufacturing is based on the further processing and shaping of materials already treated in some fashion • Transportation costs affect industry location

21. Factors of Industrial Location • Power Supply (Energy) • Power supplies that are immobile or of low transferability may attract activities dependent on them • Current technology made less important • Industries requiring large amounts of energy still situated near the power source

22. Factors of Industrial Location • Labor • Spatial variable affecting location decisions and industrial development • 3 major traditional considerations • price, skill, and amount • Labor Flexibility: highlyeducated workers able to apply themselves to a wide variety of tasks and functions

23. Factors of Industrial Location • Market • Goods are produced to supply a market demand • Size, nature, and distribution or markets is important in industrial location decisions • Ubiquitous industries • Transportation • Unifying thread of all factors of industrial location • Modern industry is immediately tied to transportation • Use many different form of transportation media

24. Alfred Weber’sLeast Cost Theory • Created the classical model of industrial location theory in 1909 • Explains the optimum location of a manufacturing establishment in terms of the owner’s desire to minimize three basic expenses • Transportation cost, labor, agglomeration (rent)

25. Weber’s Least Cost Theory Expenses to Minimize • Transportation: the site chosen must entail the lowest possible cost of a) moving raw materials to the factory b) finished products to the market. This, according to Weber, is the most important.

26. Weber’s Least Cost Theory Expenses to Minimizes • Labor: higher labor costs reduce profits, so a factory might do better farther from raw materials and markets if cheap labor is available • -ex: China – today

27. Weber’s Least Cost Theory Expenses to Minimize • Agglomeration (rent): when a large number of enterprises cluster in the same area, they can provide assistance to each other through shared talents, services, and facilities -ex: manufacturing plants need office furniture

28. Agglomeration Continued • Too many enterprises clustering together can INCREASE the cost of rent, wages, etc • This has caused some industries to actually LEAVE urban areas – deglomeration.

29. Weber’s Least Cost Theory 5 Controlling Assumptions • Area is uniform physically, culturally, and technologically • Manufacturing involves a single product to be shipped to a single market whose location is known • Inputs involve raw materials from more than one known source location • Labor is infinitely available but immobile in location • Transportation routes connect origin and destination by the shortest path and directly reflect the weight of the items shipped and distance moved

30. Weber’s Least Cost Theory Transport costs: • One market and two sources: • Equal distance and shipping costs dictates a market location • Two weight-losing materials results in an intermediate location

31. Weber’s Least Cost Theory Labor Costs: • Location chosen always has least combined costs • A location may have higher transport costs, but less expensive labor

32. Weber’s Least Cost Theory Agglomeration: • Weber recognized that clustering will result in a per unit savings • Shared benefits • Facilities • Labor force • Infrastructure • Services • Raw materials

33. Weber’s Least Cost Theory Limitations of the Theory: • There are geographic variations in market demand • There are terminal costs (payments at break of bulk points – taxes/tariffs) • Transport costs are becoming less of a factor • Labor is mobile and does not exist in unlimited quantities • Plants often produce a variety of outputs for many markets

34. Weber’s Least Cost Theory Additional Contemporary Considerations • Access to capital • Access to technology • Friendly regulatory environment • Political stability • Land cost • Inertia

35. Substitution Principle • This is the tendency to substitute one factor of production for another to achieve optimum plant location and profit • Must weigh all factors to determine the best, profitable location • Ex: you will pay more for transportation costs if you can save more on labor costs for overall production costs (Using China)

36. Hotelling’s Model • Locational Interdependence- Model seeks to answer question of where like businesses will locate • Ex: why do we see McDonalds right beside Wendy’s, Burger King, and Sonic??? • Basically, why do businesses that sell the same thing locate right beside one another? • Hotelling used ice cream vendors on a beach as an example.

37. Hotelling’s Model of Locational Interdependence • Location of an industry cannot be understood without reference to other industries of the same kind. Theory: • Locational interdependence: • indicates that locational decisions are not made independently but are influenced by the actions of others.

38. Hotellings, cont. • Model says: • Start at locations far away from one another • Want to MAXIMIZE sales • Constrain the other’s territory to bring sales up • Causes them to move closer together until they are back to back • Model Shows: • Industry location can’t be understood without looking at other like industries • Downsides • Only variable is wanting to maximize sales • Cost for customers is greatest at center of beach • They have to walk further from end of beach, so they may not come

39. Losch’s Model – Zone of Profitability • Manufacturing plants choose locations where they can maximize profit. • He added the spatial influence of consumer demand and production costs to his calculations. To the left and right of the zone, distance decay will make sales unprofitable.

40. Major Industrial Regions of the World Before 1950 Four Primary Industrial Regions: 1) Western & Central Europe 3) Russia & Ukraine 2) Eastern North America 4) Eastern Asia

41. Western and Central Europe Late 18th Century: Britain France Belgium Netherlands Germany: 3 districts? (the Ruhr, Saxony, & Silesia) Early 20th Century: Italy: What area? Spain: What area? Sweden Finland

42. Manufacturing Centers in Western Europe Fig. 11-6: The major manufacturing centers in Western Europe extend in a north-south band from Britain to Italy. Manufacturing Belts of Germany (3): The Ruhr – based on the Westphalian coal field; known for high-quality resources, good accessibility, and proximity to large markets Saxony – (near former Czechoslovakia) known for light manufacturing such as optical equipment, cameras, refined textiles, and ceramics. Silesia - (now apart of Poland)based on high-quality coal reserves & iron ore

43. Major Manufacturing Regions of North America Light Industry Chemical industries Heavy Industry -Benefitted from overseas resources -Large coal and gas reserves to provide energy to manufacturing plants -US capitalized on industry after Western Europe destruction during WWI and WWII

44. American Manufacturing Belt • Extends from the northeast to Iowa, and from the St. Lawrence Valley to the Ohio and Mississippi rivers. • New York port serves as a major break-of-bulk point, where cargo is transported from one mode of transportation (truck/train). Generates employment, activity, & wealth. • Erie Canal dug to connect east coast to Great Lakes

45. Industrial Regions of North America Erie Canal was dug to connect east coast to the Great Lakes Wide Range of Manufacturing includes: Steel Mills Chemical Industries Electrical Appliances Auto Industry Fig. 11-4: The major industrial regions of North America are clustered in the northeast U.S. and southeastern Canada, although there are other important centers.

46. Other North American Regions • Southeastern district – iron, cotton, tobacco • Southwestern district – meatpacking, flour mills • Western district – this area has grown due to increased trade with Asia (part of the Pacific Rim)

47. Manufacturing Value Change Fig. 11-5: The value and growth of manufacturing in major metropolitan areas in the U.S. between 1972 and 1997.

48. Agglomeration - note how the parts plants locate near the assembly plants.

49. Former Soviet Union • Ukraine (western region of the USSR) helped make the USSR and industrial power • Developed industry in: • Moscow – large market & labor force • Leningrad – (formerly St. Petersburg) oldest manufacturing center in Russia developed by Peter the Great • Along the Volga River – dams & hydroelectricity • Used the Trans-Siberian railroad & rivers for transportation • Major resources/manufacturing: • Coal, timber, machinery, iron ore, and oil

50. Former Soviet Union – Russia & Ukraine Machine building, optical products, medical equipment, shipbuilding, chemical production, food processing, textiles Fig. 11-7: Major manufacturing centers are clustered in European Russia and the Ukraine. Other centers were developed east of the Urals.