1. C L U S T E R I N G O F I N D U S T R I A L A C T I V I T I E S I N A P A R T I C U L A R A R E A
INDUSTRIAL
AGGLOMERATION
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2. FORMS OF INDUSTRIAL
AGGLOMERATION
•Enlargement of an industrial plant
•clustering of same/related
industries
•clustering of unrelated industries
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3. ENLARGEMENT OF INDUSTRIAL
PLANT
ironsmelting steel making steel rolling
ironansteel plant
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4. INTERNAL ECONOMIES OF SCALE
• Greater possibility of specialization
• mass production
• bulk purchasing
• special transport rates
• more efficient use of machines and labour
• lower production cost
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5. CLUSTERING OF RELATED
INDUSTRIES
engineering ship-building car making
ironandsteel plant
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6. EXTERNAL ECONOMIES OF SCALE
• Inter-plant transport saving
• access to common pool of skilled labour
• presence of special training institutions
• presence of ancillary services
• research and development of collective facilities
• sharing cost of certain operation
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7. CLUSTERING OF UNRELATED
INDUSTRIES
engineering ship-building metal fabricating car making
ironandsteel plant
Chemical plant Textile industry Electronics
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8. ADVANTAGES OF CLUSTERING
• Enjoy an already well-developed infra-structure
• enjoy a common pool of skilled labour and
expertise
• enjoy cheaper supplies of material inputs and
ancillary services
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9. An industry set up in an area
Same industries move in Related industries move in
A number of unrelated industries move in
An industrial district consisting different types of factories forms
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10. AGGLOMERATION
Types of Linkage
Material Linkages (Tangible)
• Process Links
• Sub-contract Links
• Service Links
• Marketing Links
Information Linkages (Non-tangible)
• Banks, stock-brokers, telephone and face to face contact
between firms
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11. AGGLOMERATION
Forms of Linkages I
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12. AGGLOMERATION
Forms of Linkages II
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13. AGGLOMERATION
Reasons for agglomeration
(External Economies of Scale)
• Transport savings
• Access to skilled labour
• Presence of ancillary services.
• Possibility of internal economies
• Infrastructure savings
• Attract investment
• Research and development
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14. AGGLOMERATION
Industrial Inertia / Geographical Inertia
Once a factory has been built on a
particular site, it will tend to remain there
even though the original factors no
longer exist.
It is a very important factor for
hindering the movement of
industries.
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15. AGGLOMERATION
• Reasons for industrial inertia
• Costs of moving
• Presence of a pool of labour
• Costly to move a skilled labour
• Costly to train unskilled labour
• Presence of associated industries
• Infrastructure might not be a available in the new area
• Reputation
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16. AGGLOMERATION
Decentralization (Suburbanization of
industries)
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17. AGGLOMERATION
Factors affecting decentralization
• Expansion of firm
• Redevelopment of inner cities
• Inner city problems which hinder firms
development
• Demand for office space in the central
city
• Suburbanization (population & market)
• Nature of industry
• Government Encouragement
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18. AGGLOMERATION ECONOMIES
• Savings an individual enterprise derived from
locational association with a cluster of other similar
economic activities…
• Multiplier Effect: The cumulative processes by
which a given change sets in motion a sequence of
further industrial employment and infrastructure
growth.
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19. AGGLOMERATION ECONOMIES
• Work to minimize transaction costs (“Hidden costs”)
• Agglomerations caused by:
Localization Economies
• Needs sufficient demand to justify or allow support
networks to emerge.
• Presence of skilled labor - attracts skilled labor to migrate
• Technological spillovers - “being in the loop.” Ex. Silicon V.
Urbanization Economies - Larger cities offer larger markets
and offer business services
• Others - Just-in-Time Manufacturing/Delivery
• Allows producers to shift quickly and easily to differing levels
of output (due to demand).
• Eliminates need for large warehouses to store parts
• Causes clustering of related industries
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20. LEAN PRODUCTION / JUST IN TIME
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