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 high-
technology 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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