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Location production and change

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Industries and agriculture

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Location production and change

  1. 1. Location, Production and Change Topic 1 A-level Human Geography
  2. 2. Agriculture Geography • Describe and explain spatial variations in agricultural activity over the earth’s surface • There are many species of crops grown around the world • Within one species, there are many variations • Within one variation there are many methods • Thus agricultural can be highly diverse
  3. 3. Agricultural • The purposive raising of livestock and crops for human needs • Excludes nomadic hunters/ gatherers
  4. 4. Content 1. Agricultural Systems and Food Production 2. The Management of Agricultural Change 3. Manufacturing and Related Industries 4. The management of change in manufacturing industry
  6. 6. Factors affecting Agricultural Landuse Physical Factors • Climate • Slopes/ Relief/ Altitude • Biodiversity/ Ecosystem • Soil Human Factors • Economic Factors • Agricultural Technology • Government Policies and Land Tenure • Markets and Transports • Land availability • Population/ Labor supply
  7. 7. Biological Characteristics • Because plants receive direct energy from sunlight • There is higher energy stored in plants • Yield per hectare in crops are always higher than livestock • More land will be required for raising of livestock than crops • Productivity of crops: How many parts can be used for food • Can the crops be used for anything else (Biofuel, construction) • Note that climate, soil, input and technologies will impact these
  8. 8. Biological Characteristics • Role of pests and diseases – is impacted by the lack of new variations of crops to create resilience • Pests and diseases are parts of natural disaster that can destroy the livelihood of farmers • Biodiversity – in tropical rainforest, not a lot of nutrient exists in soil as it is always being taken up by thick plant • Thus the need for deforestation to clear land
  9. 9. Biological Characteristics • Perennial Crops: Crops that are alive year-round and are harvested multiple times • Can reduce soil erosion by removing the need for fallowing • Extensive roots system more efficient • Preserves water and energy • Annual Crops: A plant that completes its life cycle, from germination to the production of seed within one year. • Needs tilling • At times require irrigation • Need fallowing and reduced input • May be summer/ winter annual
  10. 10. Climate and Agriculture • Climate is an environmental requirement • Every plant has a optimum growth requirement • This arises from a balance between temperature and rainfall
  11. 11. Climate and Agriculture • For every plant there are: • Minimum requirement for temperature and moisture without which no growth would take place • Maximum limit, beyond which growth ceases • Environmental characteristics that arise from the climate • This is called the ABSOLUTE LIMIT
  12. 12. Climate and Agriculture • Production cost increases as the climate condition becomes more adverse • Farmers cultivate only beyond the point when production cost equal profit • Anything lower than this, it is an economic lost • Economic limit can shift according to production cost and changes in price
  13. 13. Climate and Agriculture • There is a geographical limit: Thermal limit for crop growth • Arid areas are not suitable for crop growth e.g. the Sahel
  14. 14. • Semi-nomads, farming and raising livestock • The dry north  soil nutrients • wetter south • Wet season  herds graze on high quality feed in north • and trek several hundred kilometers down to the south, to graze on more abundant but less nutritious feed during the dry period. • Increased permanent settlement and pastoralism in fertile areas has been the source of conflicts with traditional nomadic herders
  15. 15. Water • Rainfed water or Irrigated Water • The former is dependent on the climate • The latter depends on the efficiency of technology
  16. 16. Water • Green water: Precipitation absorbed by soil and plants then released back into the air; thus it is unavailable for human use • Blue water: the precipitation which collects as surface water • In tropical/ equatorial climate, Rainfed water may be enough • Closer to a more savannah climate, there may be a requirement for irrigation
  17. 17. Water • In certain tropical countries, rain may be influenced by Monsoon • Rain can be concentrated in one season • The frequency to which crops can be grown and harvest reduces, so would the productivity
  18. 18. Climate and Agriculture • Note that climate can varies even within a single country – this is based upon: • Altitude • Latitude • Vegetation Cover • Proximity to the sea
  19. 19. Soil Types • Level of nutrients • Acidity • Saturation • Permeability
  20. 20. Soil Type • Good soils: deep, well drained, neutral and can retain moisture • Texture: Soils with larger grains = more pores = more easy for water to be drained or evaporated • Plant nutrients: 16 – nitrogen, phosphorus, potassium
  21. 21. Soil Type • A closed cycle of nutrients: Roots take up nutrients, plant decompose and give back to soil – nitrogen fixing bacteria play the part • Thus agriculture depletes nutrients from soil • The reducing quality = more erosion
  22. 22. Whittlesey’s Agricultural Regions
  23. 23. Factors used to classify agriculture • Crop and Livestock • Labor and Capital Intensity • Productivity • Consumption Pattern of Production • Methods and Techniques used
  24. 24. Nomadic Herding • The wandering, but controlled movement of livestock, solely dependent on natural forage • Ecological system of agriculture • Subsistence • The most extensive form of agriculture • Livestocks: Sheep, goats, yaks, cattle, horses
  25. 25. Nomadic Herding • Length of stay in each region depends on forage and water availability • Depletion of old pasture = movement • Livestocks feed on forage • Farmers sell/ feed on Livestocks products • Distribution: Saharan Africa, Southwest – Central Asia, Northern Scandinavian nations • Mauritania, Mali, Niger, Chad, Sudan, Libya, Algeria, Mongolia, China, Norway, Sweden, Finland
  26. 26. Distribution of Nomadic Herding
  27. 27. Livestock Ranching • Commercial grazing of livestock over an extensive area • Large land requirement • Low input in capital/ human resources per unit area • Vegetation cover • Sheeps, cattle, goats, horses • Livestock products
  28. 28. Livestock Ranching
  29. 29. Commercial Dairy Farming • A class of agriculture for long term production of milk – dairy products • Utilization of pastures • Labor intensive • High productivity • Associated with industries/ wholesalers • Temperate latitude
  30. 30. Commercial Dairy Farming • Northeastern United States/ Northwestern Europe • Coastal, low-lying meadows • New Zealand, Eastern Argentina, Middle Chile, Republic of South Africa, Eastern Japan, Western Russia
  31. 31. Commercial Crop and Livestock • A mixed system of farming integrating both crops and livestocks • A result of internal and external factors: Physical, economic, political and social • Variable holding sizes • Intense livestock production • Greater ratio of cropland to total agricultural land
  32. 32. Commercial Crop and Livestock • High expenditure on machineries/ farm buildings • Labor input high (technical) • Workload distributed throughout year • Crop rotation to maintain soil fertility • High return but low output per unit area
  33. 33. Commercial Grain Farming • The mechanized production of grain for market purposes • Wheat/ maize • Monoculture • Large/ extensive farming system • Low labor input • Low output per unit area
  34. 34. Commercial Plantation • Commercial farming where crops are grown for profits • Large scale production • Monoculture • Coffee, Tea, Rubber • Estate farming • Export orientes
  35. 35. Commercial Gardening • A business with small area of land that farmer does what he chooses to do with it • Fruits, vegetables, Flowers, cash crops • Smaller land requirements
  36. 36. Mediterranean Agriculture • Combined planting of cereals, vegetables, fruits and raising livestocks • Moderate rainfall and seasonal winter • Can be subsistent and commercial • Specialized and intensive • Supports from the climate
  37. 37. Shifting Cultivation • Small part of the forest cleared • Trees burned – releasing nutrients • Planting/ harvesting • Weeds grow, nutrients drop, yields fall • Move to a different areas • The plot of land left to fallow • Low population density
  38. 38. Fallowing • Conservative use of land • Requiring lower population density • Lately in Africa, Bush fallowing is followed where the plot of land is left to fallow just enough • This leads to Soil Exhaustion • Usually due to increase in population density
  39. 39. Intensive Subsistence Cultivation • Labor intensive – using human/ animals energy • Various types of crops including wet-rice • Less Mechanization • Common in populous society • Common in LEDCs
  40. 40. Basic Classification System
  41. 41. AGRICULTURE TRADITIONAL INDUSTRIALIZED Subsistence Traditional Subsistence - Intensive/ Commercialized Traditional Intensive Agro-industrialized
  42. 42. Traditional Agriculture • Subsistence/ Intensive • Subsistence: generates just enough for family • Intensive/ commercial: generates enough crops for commercial purposes
  43. 43. Industrialized Agriculture • Common in MEDCs • Fossil fuels replace human/ animal power • Machineries/ technologies used to improve output per unit area • Monoculture
  44. 44. Monoculture • Same species • Genetically identical crops – genetic designs to increase standardization • More commercial • Higher yield • More vulnerable to diseases
  45. 45. Polyculture • Polyculture: Growing more than one types of crops • Different crops take different nutrients from different layers of soil • Thus polyculture maximizes uptake of soil nutrient • Legumes can also fix nitrogen • Prevents pest – harder to spread across species/ variations
  46. 46. Economic Factors/ Agricultural Technology
  47. 47. Von Thunen’s Theory of Location
  48. 48. Von Thunen’s Theory • The Isolated State 1826 • Main argument: Distance from the market was the main determinant of combination of crop and intensity • Form a good basis but a relatively outdated concept
  49. 49. Theories • Intensity Theory: Labor per unit areas • Crop Theory • Land/ Economic rent: Profits minus production cost, labor cost or other capitals • Thus economic rent measure the profit made from a single factor: Land
  50. 50. An Isolated State • Von Thunen imagined a state where all factors except for distance to markets and crop types/ intensity are constant • A plain, no climatic/ soil variations • Market is located in a town at the central plain • The state has no import/ export
  51. 51. Transportation • Transport by a single common vehicle • Paid for by farmers • Directly proportional to the weight of the products • Cost of transport increasing with as distance increase from market • Thus profit diminishes with growing distance from market – Distance Decay relationship
  52. 52. Intensity Theory • 1 crop grown in isolated state Without fallow • Growing crops closer to market reduces transport cost • Economic rent decline with increasing distance from market With Fallow: there will be no labor for a period of time – reduces labor cost – Lower production in fallowing = lower economic rent
  53. 53. Intensity Theory • Farmers near market realizes he has little to pay for transport • Can therefore increase input of labor: makes it intensive • Farmers further from the market realizes he has more to pay in transport thus reduces cost of input to maximize profits  use more land?
  54. 54. The Crop Theory • How do farmers cope with increasing distance? • Change the combination of crops to maximize profits
  55. 55. Inferences • Perishable commodities e.g. milk – closer to market • Low value per unit area – produced near market – price will equal to transport cost • High value products can tolerate long distances – high price makes up for high cost • Processing/ manufacturing have impacts e.g. milk to cheese, and grain to alcohol
  56. 56. Problems with the Model Time period • Lower technological capabilities in packaging and preserving food • Better infrastructures and transportation • Inclusion of a river to the isolated state allows rings to extend (canals more efficient than roads) • Labor has declined as an input nowadays
  57. 57. Economies of Scale • In this case refers to the ability of a farm to lower costs of production by increasing production • Increase in farm sizes maximize profits • Machineries allow single farmer to operate large farms
  58. 58. Agricultural Technology • Modern agriculture depends a lot on engineering, technology and biological/ physical sciences • Irrigation, conservation and channeling: essential to guaranteeing yields • Agricultural chemistry: Use of fertilizers, insecticides, fungicides, soil structure and nutritional needs of farm animals
  59. 59. Agricultural Technology • Mechanization freed up labors • Increased efficiency/ productivity on farms • Impacts the social structure and transform the agrarian society
  60. 60. Precision agriculture • No more need to apply water, fertilizer, pesticides uniformly • Calculations of minimum requirements • Thus no wastage • Also: reduced impact on ecosystem, less runoff into rivers/ groundwater • Safety of farm workers
  61. 61. Ladder of Agricultural Technology • Agricultural tools used to till lands, carry sand, conduct weeding, remove soil layer, conduct trenching, carry fertilizers/ materials • There is a ladder of agricultural tools used • Differences in effectiveness/ sophistication
  62. 62. The role of agriculture in society
  63. 63. The Agricultural Revolution (1700) • Period of agricultural development between 18th century to 19th century • Improvement in farm technologies lead to higher productivity • Ability to harvest large amount of food and store them create surplus • This allows social stratification and class differences as more professions develop
  64. 64. Role of Agriculture • Production of food • Provides the basis of subsistence for the population • Modern times: regional/ international trade reduced dependence on subsistence farming • Now food production is more a political decision of how much food to import than a case of when, where and how to harvest
  65. 65. Role of Agriculture • The urban society demands lower price • The primary sector may insist on higher price • This is partly a result of economies of scale • Use of agricultural technologies increases production • Increase in output and productivity comes as a result of specialization
  66. 66. Role of Agriculture • Agriculture becomes more commercialized and interwoven with other sectors • The need for packaging, manufacturing and transportation • Means agriculture also provides job for the secondary and tertiary sectors
  67. 67. Role of Agriculture • Increase in rural-urban migration changes lives of rural population • More professional, more requirements in technical know-hows • In MEDCs, they may become fully industrialized • In LEDCs, some farms are left with only ageing population
  68. 68. Agro-industrialization • The globalization and industrialization of farming on a large scale • Large scale • Use of machinery • Specialized monoculture • IT management • Intensive chemical uses • Low labor input • Vertically integrated with food processing • May be owned by agribusinesses
  69. 69. Agro-industrialization • Intensification: increasing output by increasing amount grown per unit area of land • Mechanization: increased use of machine power over manpower • Land reclamation • Increased chemical uses – more fertilizers – less fallow periods – pesticides protect against pests
  70. 70. Agro-industrialization • Better irrigation: more areas farmed over long period of time • Between transports: increase profits due to reduction in transport cost
  71. 71. The Green Revolution • Second half of the 20th Century • Classical Malthusian theory belied • Doubling of population is true • But did not exceed food production which tripled • Increase in land cultivation: only 30% • Developing world was overcoming chronic food deficit – with the exception of Sub Saharan Africa
  72. 72. The Green Revolution • http://www.pnas.org/content/109/31/12302.full
  73. 73. Globalization of Agriculture • http://www.fao.org/docrep/005/y4671e/y4671e0 c.htm • http://web.missouri.edu/ikerdj/papers/TorontoGl obalization.html
  74. 74. Food security • When all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food which meets their dietary needs and food preferences for an active and healthy life • Food insecurity exists when people do not have adequate physical, social or economic access to food as defined above
  75. 75. Household insecurity • Members are worried about adequacy of food • Foods bought do not last • Cannot afford balanced meal • Needed to ration • Have to eat less • Must acquire food through socially unacceptable means
  76. 76. The different Dimensions • Availability: the wealth of food – indicator: agricultural production • Access: whether or not families/ individuals can access/ buy food – indicator: food prices • Utilization: What food do/ how people eat/ nutritional outcome/ healthcare/ sanitation – indicator: waste rate etc. • Stability: How stable and sustainable the other 3 dimensions are – indicators: political instability/ unemployment rate
  77. 77. Chronic Food insecurity • Caused by widespread poverty • Economic injustice, lack of assets • Lack of accessibility • Case study: Horn of Africa • https://www.unicef.org/media/media_49619.html
  78. 78. Transitory food insecurity • Sudden lack of food • Short term fluctuations in food level/ accessibility • Natural disasters • Conflicts • Thailand
  79. 79. Political Factors
  80. 80. Why governments intervene • To ensure food security • Protect farmers from instability in prices in agricultural products • Declining importance of the agricultural sector in recent times – gap of income between primary and secondary sectors increase
  81. 81. Price support loans • This loan tides the farmers over until they can sell their products • Government sets a price for each farm that it can support • If farmers cannot sell crops at this price • Government keeps the crops • Farmers keep the loans
  82. 82. Production controls • Limit production of surplus crops • So that the price does not drop too much • Farmers who do not comply will be penalized through losses of price support loan
  83. 83. Income Supplements • Payments for farmers of major crops during years when price do not reach adequate levels
  84. 84. Centrally Planned Economy • In command economy such as communist states, production has always been controlled • For example, former Soviet Union and China • Influence of government remain relatively strong in China for example
  85. 85. EU’s Common Agriculture Policy • The CAP • Set of rules/ regulations governing agricultural activities in the EU • Introduced in the 1960 to ensure adequate supply of post-war food production • Quite expensive to run, takes up a lot from taxpayers
  86. 86. Social/ Cultural Factors
  87. 87. Social Cultural Factors • Many decisions at farms can be based upon the farmers themselves • These farmers can be governed by their cultures, traditions and social standing • Unlike manufacturing industries where capitalism is paramount, agriculture is far more sensitive to socio cultural impacts
  88. 88. Culture of Shifting Cultivation • One of the oldest systems of agriculture • Still used today • This is a from of traditional agriculture which is changing as the farmers come into contact with modernized farming
  89. 89. Legal rights and land tenure • Land tenure is the way in which land can be owned • In the past: inheritance law reduces sizes of famers – also dowry law • Keeps farming at subsistence level
  90. 90. Gender cultures • The dowry law means women are regularly marginalized in traditional agriculture in land and property owning • Agricultural reforms in the mid century failed to look at this – many women lost possessions and lands • Pushes women to other areas of the society
  91. 91. Problem with Land Tenure • Land is the main mean of subsistence for many farmers • Their only properties – can be directly linked to poverty • Involve management of natural resources • Management of floodplains in irrigated croplands
  92. 92. Agricultural Systems
  93. 93. A system • Farms operate as a system • Input (Labor, energy, capital) • Processes (planting, tilling), • Outputs - products
  94. 94. Behavioral Inputs • Factors that influence farmers’ personal decisions • Age • Knowledge • Ambition • Experience • Perception
  95. 95. Economic Inputs • Transport • Technology • Markets • Government • Capital • Buildings
  96. 96. Cultural Inputs • Tenure • Farm Size • Inheritance
  97. 97. Physical Inputs • Temperature • Slope • Precipitation • Aspect • Wind • Soils • Altitude
  98. 98. Arable Farms • Only cultivate crops • Not involved with livestocks • May be mono or polyculture • Crops can change over time following markets demand
  99. 99. Pastoral Farms • Keeping/ rearing of livestocks
  100. 100. Mixed Farms • Both livestocks and polyculture crops
  101. 101. Organic Farms • Do not use chemicals • No pesticides, insecticides, herbicides • Animal manures/ natural fertilizers (fish bones) are used • Higher input of labor: e.g. more weeding • More environmental friendly: no nitrate runoff • Output of much higher prices
  102. 102. Agricultural Changes
  103. 103. Intensification of Agriculture • Increasing yield per hectare when scientific advancement allows such changes to occur • Use of HYV(High Yield Variety) • Use of fertilizers • Use of herbicides • Irrigation systems
  104. 104. Intensification of Agriculture • This has led to increase in food production over the last 60 years • Associated with the green revolution
  105. 105. Extension of cultivation • Extending land under cultivation through construction of irrigation system or moving into marginal land • Tends to lead to more deforestations • Sterilized landscape • Produces cheap food
  106. 106. Local alterations to ecosystem • Increase soil erosion: Deforestations • Leaching of nitrate: use of fertilizers • Lower soil fertility: Growing crops without fallowing cycle • Reduced biodiversity: Deforestation
  107. 107. Regional alterations to ecosystem • Pollution of groundwater: Irrigation, fertilizers/ pesticides used • Eutrophication: Fertilizers such as nitrates and phosphates used
  108. 108. Global alterations to ecosystem • Atmospheric conditions affected by: • Reduced forest covers • Less evaporation due to less interception by vegetation • Less cloud cover • Drier climates in certain areas • Changes to circulation pattern
  109. 109. Soil degradation • Physical loss and reduction in quality of topsoil associated with nutrients decline and contamination • Can impact both rural and urban environment • Leads to pollution/ flooding
  110. 110. Soil profiles • A soil horizon making up layers of soil • Thinning of soil profile • Means lower quality • Less water storage • Less nutrient storage • Reduction in crops yield
  111. 111. Impacts • Carbon dioxide in the air comes from losses of forest land • Lack of vegetation cover = land more reflective • Soil degradation most severe in marginal lands • Heavy, sustained use of fertilizers is dangerous • Increase fine soil aggregates
  113. 113. Industrial Location • The strategic placement of various economic activities in relation to specific human and physical factors • Wide range of factors affect total cost  impacting decisions of industries • The importance of factors change over time
  114. 114. Physical Factors • Site: availability, relief, drainage, bedrock, proximity to water supply • Raw materials: Bulky/ light • Energy: Energy requirement of industries • Natural Route: Essential in the past and also today as related to the role of import and export
  115. 115. Human Factors • Capital: Area where investment rate is high • Labor: Reputation, turnover and mobility of labor, quantity and quality • Transport: Access to infrastructures • Markets: Location/ size • Government: Regulations and incentives • Quality of life: Matters to skilled personnel
  116. 116. Weber’s Theory • Weber’s theory posits that industries are most likely to be located at the location where transport cost of raw materials and final products are together minimum • He looks at 2 cases: Weight-loss and Weight- gain industry
  117. 117. Weber’s Theory • Weight-loss: Where the final product is lighter than the raw material e.g. cloth, sugar, small metal products • Weight-gain: Where the final product is heavier than the raw material e.g. coca cola, juice
  118. 118. Weber’s Theory - Assumption • The idea that resources are localized – can be found only in certain areas, ubiquitous resources negligible • Market center is constant • Spatial patterns of labor cost constant
  119. 119. Weber’s Theory • Transport costs are determined by weight of raw materials/ final products and distance from source of raw materials to factory/ distance from factory to market • The problem is to find the point of industrial location where overall transport cost would be at its lowest
  120. 120. Weber’s Theory • The location could be 1 of the 3: 1. Source of Raw material 2. The Market 3. Point x between Source and market
  121. 121. Weber’s Theory • Weber imagines a triangle made up of three points • The apex represents the market (C) • The other two points linking the base represents most advantageous locations of raw materials (M1, M2) • From there, economists can then plot the point within the triangle that would result in lowest transport cost
  122. 122. Weber’s Theory • Weight loss industries would concur more transport cost from source to factory than transport cost from factory to market • Therefore, any weight loss industries would likely be located closer to its bulkiest raw materials • This maximizes the transport cost from factory to market by increasing distance – the originally low cost means even at its maximum, final cost will remain relatively low • This is because the high transport cost associated with transportation of heavy raw materials has been minimized by placing the factory closer to the source.
  123. 123. Weber’s Theory • Weight gain industries concur more costs of transportation from factory to market • Therefore any weight gain industries would be located closer to the market • This will maximize the lower transport cost between factory and market by increasing distance • However it will minimize the higher transport cost between source and factory • Thus the overall transport cost will be lower
  124. 124. Weber’s Theory • Labor costs is another factor • Weber posits that areas with lower labor costs can be more beneficial if the reduced cost of workers make up for the increase in cost of transport
  125. 125. Weber’s Theory and Agglomeration Factor • Agglomeration is another important factor • Weber assumes that agglomeration reduces production cost and transport cost by 20 dollars per unit of production • Thus agglomeration of industries have the impact of moving industries away from areas of lowest transport cost
  126. 126. Raw Material • Processing Industries use the raw materials directly • This used to be the most common type of industries but now manufacturing industries use components from other firms • Weber’s Theory influences this point immensely • Tidewater location will be popular with industries using imported raw materials • Break-of-bulk points: where cargo is unloaded and placed in new mode of transport
  127. 127. Markets • Other than the cost of transports studied in Weber’s Theory • Market also influences location in terms of cost of distribution • Industries where fashion and tastes play huge roles • Industries that produce cars may locate themselves in specific countries to understand the demand there
  128. 128. Energy • In the Industrial Revolution, industries grow near coalfields – main source of energy • Coalfields soon become points where transport infrastructures grow in hubs as well • Nowadays, electricity allows further expansions • However may industries remain where the usual advantageous point is: Industrial Inertia
  129. 129. Energy • Decline in coal use has led to urban decay and industrial decline in those areas • In MEDCs, industries have moved elsewhere, leaving those regions of inner city underdeveloped • Most modern industries are footloose: not tied down to any areas of energy requirement
  130. 130. Energy • Some industries are still constrained by energy requirement • Electro-metallurgical/ electro-chemical industries require a large amount of energy • Thus they might choose to locate themselves close to hydro power plants where electricity is cheaper • In LEDCs, electricity grid or natural gas pipeline may not reach every point
  131. 131. Transport • Once an important factor • The share in total cost of transport has dropped due to improvement in infrastructures and transport technologies • Increase in production of higher value lower bulk goods
  132. 132. Transport • Two components of transport cost: • Fixed costs – Equipments used to handle/ store goods + the cost for providing transport system • Line-haul costs – costs of actually moving the goods (fuel costs and labor wages)
  133. 133. Transport – Fixed Cost ranked • Road is lowest: only a driver, roads and trucks needed • Rail: More loading crew, larger space, more infrastructures of rails and trains • Water: More crew, boats, danger • Pipeline: More expensive infrastructure cost • Air: more expensive infrastructures: planes
  134. 134. Transport – Impact of line-haul costs • Cost of transportation by road increases most steeply with distance • Rail increases less steeply • Lower line-haul costs for water and pipeline • Increase in distance does not impact the linehaul cost for pipeline
  135. 135. Transport – Impact of line-haul costs • Thus at close distance, the industries may choose transportation by roads where fixed cost is lowest • Further away rail may be more suitable • Then water and pipeline
  136. 136. Transport Per tonnes Distance Road Rail Water Pipeline
  137. 137. Transport – Type of loads • Perishable/ breakable commodities more costly to move • Required careful handling • Robust goods cost less to move e.g. iron ore/ coal
  138. 138. Transport – Type of Journey • Where changes in modes of transports are required: more costly • Associated with more danger e.g. canals/ rivers – more costly
  139. 139. Transport – Degree of competition • Different firms offering transport ask for different prices • Availability of different modes may influence prices
  140. 140. Land • Space requirements differ with types of industries/ size of firms/ productions • Modern industries – more space efficient • Horizontal structure more preferred • Transportation may take up more spaces • Cost of land is important
  141. 141. Land • Space requirements  affects distance from cities • Landuse zonation/ greenbelts • Panning restrictions: growth of urban areas • Population increases • Movement towards the conservation of nature/ environment
  142. 142. Capital • Finance invested to start up a business and to keep it in production • Fixed capital: immobile, money invested in plant and machinery • Working capital: money used for investment • Usually obtained from shareholders/ banks
  143. 143. Capital • Social capital: investment in housing, schools/ other amenities valued by the community • During industrial revolutions – availability of capitals – geographically constrained by: • Location of major capital raising centres • Limited accessibility of education • This led to clustering of industries
  144. 144. Capital • Rapid diffusion of information nowadays change that • Mobility of money/ capital • This is less so in LEDCs • The role of perceived risk: political instability and lack of law and order
  145. 145. Capital • Substitution of Capital instead of labor • Reduce cost and improve quality • Capital has become more important • There is now a higher threshold of capital requirement for a business to succeed • Allowing few businesses to monopolize the markets
  146. 146. Labor • Cost, quality, availability, reputation • Cost of labors measured in: wage rates, unit costs • Wage rates: regular payment to workers • Unit cost: Productivity (wage rates and output) • Unit cost play a bigger role in spite of high wage rate
  147. 147. Labor • Productivity and quality pushes up wage rate • In this case unit cost may drop, thus causing industries to move to areas where productivity is lower but wage rates higher • Skills become concentrated in areas: Sectorial Spatial Division of Labor • This leads to greater reputation – attracting firms to the area
  148. 148. Labor • Global disparity in wage rates between LEDCs and MEDCs are high • The lower wage rates attract transnational investments • Filter-down economy
  149. 149. Labor • There are also non-wage labor costs • Employer socials security, payroll taxes, holiday pay, sick leave + other benefits • Labor availability usually indicated by unemployment • This is a less important factor
  150. 150. Labor • Despite high availability • Areas with high unemployment do no thve good reputation • Lack skills for modern industries • Physical dereliction discourage investment • Social problems discourage investment and reduce social capital
  151. 151. Labor • Labor availability is not sustainable • Due to high push factors of migration • Problems with attracting skilled labors • Problems with lack of infrastructures • Labor availability may still have impact in sparsely populated areas
  152. 152. Labor • Sparsely populated areas may be avoided • Difficulty of finding workers • Even areas with ageing population and low workforce proportions • They are usually ruled out from the beginning
  153. 153. Geographical Mobility of Labor • Spatial disparity of unemployment indicates limited geographical mobility of labor • Geographical mobility is the ability for workforces to move between places • This is influence by cost of housing and economic development
  154. 154. Geographical Mobility of Labor • Geographical mobility of labors increase with skills and qualifications • The financially secure people will be more mobile in both social and geographical terms
  155. 155. Occupational Mobility • The ability for people to move between jobs • Changes in social demand/ skills demanded
  156. 156. Reputation • Reputation of labor force play huge parts in influencing investment • Militant trade unions may drive away investors • However trade unions have reduced due to governmental actions
  157. 157. Internal Economies of Scale • An increase in production leads to lowering of unit cost (in this case refers to cost of production) • Reduced cost of production can be passed on to customers • Thus allowing firms to increase market • Thus increasing profits
  158. 158. Bulk-buying economies • Growth of businesses • Means increase in bargaining power with suppliers increase • Allowing more supplies to be bought at lower prices
  159. 159. Technical Economies • Larger businesses use more advanced machinery • Or use existing machineries more efficiently • More R&D research • More ICT can regulate productions
  160. 160. Financial Economies • Large firms  easier to find potential lenders/ shareholders • Raise money at lower interest rate
  161. 161. Marketing Economies • Spread cost of marketing over a wide range of products type • Cutting average marketing cost per unit
  162. 162. Managerial Economies • Company grows • More potential for managers to specialize • Tasks become more efficient
  163. 163. Diseconomies of Scale • With increase in output and lowering of unit costs • A firm may reach a point where unit costs increase • Large firms experience poor communication, poor morale
  164. 164. External Economies of Scale • Agglomeration economy • Firms locate themselves close to each to share benefits
  165. 165. Urbanization Economies • Cost saving due to urban location • Labor availability • Transport infrastructures • Investment
  166. 166. Localized Economy • Firm locates close to suppliers (backward linkages) • Firms locate close to firms it supplies (Forward linkages) • Reduce transport costs • High level personal communication and faster delivery
  167. 167. Urbanization Diseconomies • Traffic congestion increase transport cost • Intense competition for land increase land rent • Increase in wages as demand for labor increases supply • Thus firms are also moving away from urban areas • E.g. Santa Clara’s Silicon Valley
  168. 168. Rapid Growth • Expansion of land use • Intrusion of agricultural lands • Precludes residential/ housing Developments • This has 3 effects
  169. 169. 1. Huge increase in industrial Traffic • This increases pressure on transport infrastructures • Thus leads to extension of commuting/ highway systems • Reduction in local environment quality • This will in turn lead to the 2nd impact of rapid gowth
  170. 170. 2. Space • Lack of available space for further expansion • Disallow further economy of scale and limit sizes of production • Recruitment faces problems as residential housings are not provided • Transport can be congested, unattractive to skilled labors
  171. 171. 3. Housing • The 3rd impact of rapid growth is the increase in demand for housing • This outstrips supply • Leads to rapid rises in housing prices • This will drive employees to seek houses in peripheral location • This functions in correlation with the improvement of highway and commuting system discussed in the 1st impact
  172. 172. (2)  Saturation Point • Residential areas reach saturation point • Population density too high • Not enough areas to expand • Residential businesses look for business in other regions
  173. 173.  Improvement leads to more rapid growth • High technology R&D • Skilled pool of labor • High perceived quality of life • Attracts migrants • This lead to rapid growth but also increases in housing demand (3)
  174. 174. Government Policies • In centrally planned economy (former Soviet Union and China), industries are regulated to an absolute degree • Nowadays there are varying degrees of public ownership • Regional restrictions and incentives
  175. 175. Government Policies • Governments do influence location of industries • A great deal of competition between LEDCs to attract FDI (Foreign Direct Investment)
  176. 176. Technology • Influence type of industries a country can impact based upon level of infrastructures and human skills in operating technologies • Technological advances may attract industries to different countries where R&D and innovations are at the forefront e.g. Japan • Biotechnology has stimulated clusters of industries • There are stages to technological development
  177. 177. Basic Production • Train workers in basic/ essential production/ technical skills • Plant design implemented/ performance levels checked • Products and processes planned and configured • Quality management present • Institute supervisors, procurement/ inventory management present • In-bound/ Out-bound logistics
  178. 178. Significant Adaptation • Every section of management adapted for new technologies for local import and export market needs • Maybe based upon in-house management • In-house R&D • Interactions with other firms
  179. 179. Technology improvement/ Monitoring • Improve products, processes, skills to improve productivity through implementation of technologies • In-house R&D • Licensing • Initiate interactions with firms and educational institutions
  180. 180. Frontier Innovation • Create new technologies
  181. 181. Industrial Inertia • When the importance affecting location of industries diminish over time • Profit of location reduces • Cost of moving too high// traditional reasons demand the industry remains in the same location • E.g. industries that develop near coalfields • Investment in hard/ soft engineering might improve the areas from urban decay
  182. 182. Industrial Agglomeration • Clustering together and association of economic activities in close proximity to one another • Benefits of external economies of scale • Lowering the firms cost due to external factors • Grouping encourage governments to invest in infrastructures and provide incentives • Costs can be shared: catering, security
  183. 183. Linkages • The contacts and flows of information between companies locate in close proximity • Backward: linking to supplier • Forward: Linking to the firm being supplied • Horizontal: Same type of firm sharing costs
  184. 184. Linkages • Vertical: Raw material goes through successive processes • Horizontal: An industry relies on several other industries to provide its component parts • Diagonal: An industry makes one component that can be used by many other industries • Technological linkages: product from one industry used as raw material in another
  185. 185. Industrial Estates • An area zoned and planned for the purpose of industrial development • Can be found in inner cities and rural areas • Smaller in inner city  important to local employment
  186. 186. Industrial estates benefits • Concentrating dedicated infrastructures – reduce expenses • Attracting businesses by providing opportunities of integration and sharing of infrastructures • Reduce externality by separating from residential areas and protecting environment • Localized control of production and environment • Regional economic development policies
  187. 187. Industrial Estate Disadvantage • Urban Diseconomy of scales • Environmental problems in given areas • Businesses may establish political power influencing government decisions  cluster of unethical business activities • Attract migrations causing unequal distribution of justice • Residential segregation
  188. 188. Export Processing Zone • Industrial zones with special incentives set up to attract foreign investors, in which some imported materials undergo some degrees of processing before being re-exported. • Can include just data • High tech science park, finance zones, logistic centres, tourist resorts
  189. 189. Types • Free port: development of trading centres, diversification of economic bases • Special economic zone: deregulation allowing private sector investment • EPZ: Development of exports • Enterprise zone: Development of SMEs in depressed areas • Information processing zone: Information processing • Financial Service zones: Offshore banking, insurances, securities hub • Commercial free zone: Facilitation of trades/ imports
  190. 190. The Formal Employment • Government department knows about such jobs – can be taxed • Generally better pay • Much greater security • Include public/ private sectors
  191. 191. The Informal Employment • Part of the economy operating outside official recognition from government • Outside tax system • Low job security • Absence of fringe benefits • High in LEDCs • May include illegal activities
  192. 192. Role of Informal sectors • Coping strategies: casual/ temporary jobs for unemployed • Non paid jobs for survival • Multiple jobs holdings
  193. 193. Unofficial Earnings • Illegalities in business • Tax evasion • Avoidance of labor regulations • Crimes/ corruption
  194. 194. Advantage • Provides jobs and reduce unemployment • Alleviates poverty • Bolsters entrepreneurial activities • Community cohesion/ solidarity
  195. 195. Obstacles • Little access to credits for small entrepreneurs – microcredit being used in many countries • Increase in size during economic downturns causing problems • May become grounds for illegal activities – gender based discrimination – highlights the size of gender based problems in prostitutions etc.
  196. 196. Informal sectors • Concentrated around CBD • Potential demand for services high • In inner cities for MEDCs • Key tourist locations • May offer foods and services to workers in industrial areas