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Industrial agglomeration. Outline. What is industrial agglomeration? What are the characteristics of industrial agglomeration? How does industrial agglomeration occur? Why does industrial agglomeration occur? Is industrial agglomeration good?. What is industrial agglomeration?.

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outline
Outline
  • What is industrial agglomeration?
  • What are the characteristics of industrial agglomeration?
  • How does industrial agglomeration occur?
  • Why does industrial agglomeration occur?
  • Is industrial agglomeration good?
what is industrial agglomeration
What is industrial agglomeration?
  • It refers to high concentration of industrial activities in an area because industries may enjoy both internal and external economies when they cluster together (agglomerate).
is it a phenomenon or process
Is it a phenomenon or process?
  • Agglomeration as a phenomenon: it refers to the spatial clustering or concentration of industrial activities in a relatively small area.
  • Agglomeration as a process: it refers to the snowballing process whereby more and more manufacturing firms cluster or areally concentrate in a relatively small area.
2 forms of agglomeration
2 forms of agglomeration
  • Concentration of related or well-linked factories together and form a specialized industrial region.
  • Concentration of various kinds of factories in the industrial zones in urban area.
spatial effects of ind aggl
Spatial effects of Ind. Aggl.
  • Over time, industrial agglomeration results in the growth of large industrial concentrations, producing different areal patterns of industrial land use. They have large numbers of associated and inter-dependent factories, surrounded and served by residential and commercial areas.
industrial districts
Industrial districts
  • Hong Kong - Kwun Tong, Tai Kok Tsui, Tai Po Industrial Estate
  • Sydney - Paramatta, Alexandria, etc
minor industrial centres towns
Minor industrial centres/towns
  • PRD - Foshan, Dongguang, Shunda
industrial cities
Industrial cities
  • Shanghai (textile)
  • Nagoya/Toyota (car-making)
  • Detroit (car-making)
industrial regions
Industrial regions
  • Silicon Valley in California (electronics)
  • around Inland Sea of Japan (shipbuilding)
  • PRD in South China (toy)
characteristics of an ind aggl
Characteristics of an ind. aggl.
  • Clustering of industrial activities
  • Functional linkages  production linkages + service linkages
  • When materials move from one firm to another (production linkages)
  • As the firms share the specialized services and facilities (service linkages)
  • Economies of scale
tai koo properties
Tai Koo Properties
  • Tai Koo Sugar Refinery (1883 – 1972)
  • Tai Koo Dockyard (1900 – 1972)
  • Tai Koo Coco-cola Bottling Factory (1952-1980s)
quarry bay
Quarry Bay
  • Tai Koo Sugar Refinery was established in 1883
  • With growing trade in raw cane sugar from Java, the Philippines and North Queensland, and ready markets in China and Japan, Taikoo Sugar ran the world's largest sugar plant in its day, and owned small fleet of sugar carrying ships.
what were the original factors and attraction for the sugar factory
What were the original factors and attraction for the sugar factory?
  • Available of land
  • Coastal location
  • Sheltered location
  • Availability of labour
the problem
The problem
  • More than 3,000 workers were needed but the population of Shaukeiwan was only 3,274
  • Hostels were provided and so workers from other places were attracted
  • More jobs mean more income. It in turns increased the purchasing power of people
  • Other related facilities were provided, e.g. clinic, school
tai koo dockyard
Tai Koo Dockyard
  • in 1900, on land adjacent to the sugar refinery, construction work began on Taikoo Dockyard.
industrial agglomeration1
Industrial agglomeration
  • Taikoo Dockyard launched its first riverboat in 1910, soon began to produce coasters for the company.
  • The dockyard was to become one of Hong Kong's biggest, and also one of its most progressive employers, providing its own housing, hospital and school.
snowballing effects
Snowballing effects
  • More jobs  more income  higher purchasing power  development of entertainment (麗池夜總會)
  • More jobs  more settlements  growth of urban population in Quarry Bay
  • More population  more services = more public utilities
snowballing effects1
Snowballing effects
  • Quarry Bay was still an important industrial district in 1970s and 1980s
  • Factories included soft-drinks factory (7-up), Printing (Kodak), car repair centre (大昌行), various electronics ind.
  • The growing population supported the industries which become more profitable and enjoyed the benefits from agglomeration
  • The whole process is cumulative and growth becomes self-sustaining.
myrdal s model of cumulative causation process
Myrdal’s Model of Cumulative Causation Process
  • A new industrial plant set up
  •  extra employment/more jobs
  •  income and the purchasing power ↑as the size of the population grows
  •  increases the demand for consumer goods, houses, schools and services
  •  more employment opportunities in other industries, e.g. in commerce, construction, service, etc.
myrdal s model of cumulative causation process1
Myrdal’s Model of Cumulative Causation Process
  • The new industry itself demands local goods and services.
  • It may attract linked industries which supply it with raw materials (called supplier-industries) or use its products (called user-industries).
myrdal s model of cumulative causation process2
Myrdal’s Model of Cumulative Causation Process
  •  further increases employment and expanding services, public utilities and construction.
  •  attract even more economic activities which become more profitable (enjoying the benefits from agglomeration economies)
  • the expanding city (increase in city scale) reaches the threshold level for various services.
  • Thus, the whole process is cumulative and growth becomes self-sustaining.
reasons for industrial agglomeration

Reasons for industrial agglomeration

What benefits can be obtained from industrial agglomeration?

initial factors and attraction
Initial factors and attraction
  • They refer to the original factors that attract the location of early industries at a certain site.
  • These factors can be natural or man-made. They start the cumulative process of industrial agglomeration and create the snowballing effects on industrial development and agglomeration.
  • The area with initial growing factors is known as the growth pole.
slide26

Linkages

Subcontract

links

Information

links

Service

links

Production unit

Subcontract

links

Marketing

links

vertical linkages
Vertical linkages

Garment Factory

Cloth

Textile Factory

Synthesis fiber

Chemical factory

horizontal linkages
Horizontal Linkages

Glass-making

Factory

Iron & Steel

Factory

Engine

Factory

Tyre-making

Factory

Motor car

assembly factory

diagonal linkages
Diagonal Linkages

bottling

Jam-

making

Fruit

canning

Ice cream

Sugar

refinery

Glass bottle

factory

Sugar mill

3 types of industrial linkages
3 types of Industrial linkages
  • vertical (one-to-one) linkage - forward and backward linkage
  • horizontal (many-to-one) linkage
  • diagonal (one-to-many) linkage
  • Industries with simple vertical linkages have a very strong production relationship. They can obtain the greatest economic advantages, once they are grouped or agglomerated together in a small area.
benefits from vertical linkages
Benefits from vertical linkages
  • lower cost of transporting goods from factory to factory, e.g. integrated plants of I&S ind. (transfer economies)
localization economies
Localization economies
  • energy savings, e.g. I&S ind.
  • waste products or final products from one industry can be the raw materials of another ∴  specialization in production.
  •  economies of division of labour + mechanization
  • discounts can be obtained when several firms buying similar inputs in bulk.
  • Advertising cost↓∵ good reputation.
  • presence of ancillary services
  • saving of storage
  • close relationships among factories makes it easy to solve the problems of similar nature and to maintain higher level of production skills.
urbanization economies
Urbanization economies
  • a pool of skilled labour and managerial expertise
  • infrastructure savings
  • snowballing effect
  • research & development
  • attracting investment
diseconomies of scale
Diseconomies of scale
  • Physical
    • shortage of land for expansion
    • shortage of labour
    • traffic congestion
    • urban decay
  • Economic
    • rising rent
    • rising labour cost
    • high tax
slide35
Social
    • pollution / environmental problems
    • high crime rate
    • pressure from labour union
    • pressure from green groups
    • government policy
solution to industrial agglomeration
Solution to industrial agglomeration
  • Industrial degglomeration/decentralization

(to be discussed in the next lesson)