Locational%20Theories%20of%20Industry

1
Locational Theories of Industry
2
A. Beginning of the Industrial Revolution

• When where?
• Great Britain mid-1700s
• Why Great Britain?
• Flow of capital
• 2nd Agricultural Revolution
• Resources coal, iron, water

3
Ironbridge, England Worlds first bridge made
entirely of cast iron (late 1700s)
4
Textiles Liverpool and Manchester Iron
Production Birmingham Coal Mining Newcastle
5

• B. Types of Industrial Production
• Fordist Production assembly-line industrial
  production for mass consumption (post-WW I)
• Post-Fordist Flexible Production
  multi-national producers can move production
  sites through outsourcing
• (post-WW II)
• role of technology

6

• outsourcing to relocate from higher-cost
  locations to lower cost market locations
• international markets are brought closer
  together through outsourcing
• Check your clothing/backpack labelswhat are the
  production sites?

7

• C. Who outsources?
• multinational (or transnational) corporations
  businesses that conduct research, operate
  factories, sell products in more than one
  country
• Types of MNCs
• 1. telecommunication
• 2. financial
• 3. manufacturing

8
Wal-Mart

• Retail stores 10,400 stores in 27 countries.
• Total sales in 2012?
• 444 billion! Thats more than Austria. That
  makes it the 26th largest economy in the world,
  if it were a country.
• What are the economic benefits of Wal-Marts in
  Florida?
• spent 5.7 bill. in Florida in 2007
• over 200,000 jobs
• about 1 bill. in taxes
• Costs?

9
D. Location Theories

• Location Theories predicting where business
  will or should be located
• 1. Webers Model
• 2. Hotellings Model
• 3. Loschs Model
• Considerations
• variable costs
• friction of distance

10
Location Models
Webers Model Assumption Least Cost
Theory manufacturing plants locate where costs
are the least Costs Transportation, Labor,
Agglomeration
Hotellings Model Assumption Locational
interdependence location of an industry
understood in reference to other industries
Loschs Model Assumption Zone of
Profitability manufacturing chooses locations
to maximize profits
11
Law of Retail Gravitation

• Break Point (BP) is equal to the Distance (d)
  between two places, divided by the following
  Unity or Total (1) plus the Square Root of, the
  size of Place One (p1) divided by the size of
  Place Two (p2).
• Outlet Malls

12
Why Outsource?

• Webers Least-Cost Theory
• transport costs (optimum point of production)
• labor costs
• agglomeration costs

13

• Agglomeration economies clustering of firms
• Dalton, Georgia top 20 U.S. carpet makers
• Silicon Valley in California
• Bangalore, India (Bollywood)
• maquiladoras on the Mexican border (over 3,000
  plants 20 miles from U.S. border)
  http//www.npr.org/templates/story/story.php?story
  Id3141032

14
Some MNCs with Maquiladoras in Mexico
Honda Honeywell, Inc. Hughes Aircraft Hyundai
Precision America IBM JVC Matsushita Mattel
Maxell Corporation Mercedes Benz Mitsubishi
Electronics Corp. Motorola Nissan Philips
Pioneer Speakers Samsonite Corporation Samsung
Sanyo North America Sony Electronics Tiffany
Toshiba VW Xerox Zenith

• 3 Day Blinds
• 20th Century Plastics
• Acer Peripherals
• Bali Company, Inc.
• Bayer Corp.
• BMW
• Canon Business Machines
• Casio Manufacturing
• Chrysler
• Daewoo
• Eastman Kodak
• Eberhard-Faber
• Eli Lilly Corporation
• Ericsson
• Fisher Price
• Ford
• Foster Grant Corporation
• General Electric Company

15
E. Weaknesses of Webers theory

• Just-in-time delivery
• rather than keeping a large inventory, companies
  engage in short-term production ship quickly
• Footloose firms An industry that can be placed
  anywhere without repercussions due to transport.
  (Ex. Software)
• https//youtu.be/D3OfjYlXUCU
• Offshoring
• outsourced work or company headquarters that is
  located outside of the market country
• International division of labor
• corporations draw from labor around the globe

16
Locational Interdependence
17

• Time-Space Compression
• improvements in transportation communications
  technologies leading to more places being
  inter-connected

18
How has the economic structure of the U.S.
changed? Deindustrialization in the core
(loss of manufacturing) -- service jobs
(tertiary)
Rust Belt
19
F. A World of Rich Poor? Or Inter-dependency?

• core-periphery model a theory in which rich,
  industrialized countries (the Global North)
  dominate poorer, unindustrialized countries
  (the Global South)