Economic Geography: Industrial Activity and Location

1. Chapter 22 Notes Industrial Activity and Geographic Location

2. Economic Geography • Economic geographers investigate the reasons behind the location of an economic activity

3. Location Theory • An economic activity is categorized according to: • Purpose • Relationship to natural resources • Complexity • Primary, secondary, tertiary, quaternary, quinary • Location theory attempts to explain the location pattern of an economic activity in terms of the factors that influence that pattern

4. The Location Decision • Primary Industries • Because these deal with the extraction of resources, primary industries must be located where the resources are

5. The Location Decision • Secondary Industries • less dependent on resource location because raw materials can be transported to distant locations to be converted into manufactured products if profits outweigh the costs of transportation

6. The Location Decision • Establishing a model for the location of a secondary industry is difficult because the location depends on: • Human behavior and decision making • Cultural, political and economic factors • Intuition or whim

7. The Location Decision • Models must be based on assumptions and economic geographers must assume that: • Decision makers are trying to maximize their advantages over competitors • Profit maximization • Variable costs must be taken into account (energy supply, transport expenses, labor costs)

8. The Location Decision • Alfred Weber: 1868-1958 • German • The Von Thunen of economic geography • Least Cost Theory • Accounted for the location of a manufacturing plant in terms of the owner’s desire to maximize three costs

9. The Location Decision • Transportation (most important) • moving raw materials to factory and finished goods to market • Labor • High labor costs reduce margin of profit • current economic boom on Pacific rim • Agglomeration • number of similar enterprises clustered in the same area • Shared talents, services and facilities • when excessive, can lead to high rents, rising wages, circulation problems

10. Weber • Sparked spirited debate among economic geographers • Some argued that Weber’s model did not adequately account for variations in costs over time • Substitution principle: when one cost decreases can endure higher costs in another area • Model suggests that one particular site would be optimal but the business could flourish in more than one area • Taxation policies are not accounted for by the model

11. Factors of Industrial Location • Raw Materials • resources involved in manufacturing • steel plants along Atlantic seaboard re. iron shipped in from Venezuela • Europe’s coal and iron ore regions • Iron smelters built near coal fields • Japan’s colonial expansion into E Asia dependencies (China/Korea)due to raw materials available • Japan’s cheap labor allowed them to purchase and transport goods from other locales (substitution principle) • European colonization for resources, periphery to core

12. Factors of Industrial Location • Labor • a large, low-wage trainable labor force will attract manufacturers • Japan’s postwar success based on skills and low wages of workforce, low quality high quantity initially • China emerged with large labor force in 80’s • Taiwan and South Korea emerged to challenge Japan in mid ‘90’s due to cheap labor • pre-NAFTA US and Mexico

13. Factors of Industrial Location • Transportation • highly developed industrial areas are places that are served most effectively by transportation facilities • efficiency • alternative systems • container systems • for most goods, truck is cheaper over shorter distances, railroads cheaper over medium distances, and ships cheapest over longest distances • must consider loading/unloading, actual transportation (cost of transportation increases with distance at a decreasing rate), and weight and volume

14. Factors of Industrial Location • Infrastructure • transportation, telephone, utilities, banks, postal, hotel • China-inadequate local and regional infrastructure • Vietnam-inadequate power, water, transportation

15. Factors of Industrial Location • Energy • used to be much more important than it is today • early British textile mills had to locate near water power • rarely a problem today, except industries needing a huge amount of energy--- metal processing and chemical industries may locate near hydropower (TVA or Pacific Northwest)

16. Other Factors • agglomeration • political stability • receptiveness to investment • taxation policies • environmental conditions (Hollywood)