CHANGING FACTORS
IN INDUSTRIAL LOCATION
CHANGING
LOCATIONS
REMEMBER:
SITE FACTORS
SITUATION FACTORS
Refers to specific qualities about an actual place a
business will locate.
Refers to the location of a place a business will locate
in reference to other places on the map.
Changing site factors are especially
significant in stimulating the growth
of new industrial regions and the
movement of industry to them.
Changing situation factors tend to
cause industries to remain in their
traditional locations.
CHANGING
SITE
FACTORS
LABOR
The presence of low-cost labor is a site factor.
Many manufacturers relocate to places where labor is the lest expensive.
In MDCs
In general, industry is shifting from its traditional locations.
In the US, from the northeast to the west and south.
In Europe, from the northwest to the European periphery (S, E).
Interregional Shifts in the US
Between 1950 and 2009, the northeast lost 6 million jobs
(clothing, textile, steel, fabricated metals) (esp. NY, PA).
At the same time, the South and West gained 2 million jobs
(especially CA and TX).
The South had been overlooked due to a lack of infrastructure,
after the civil war, but states have amended that since the 30s.
Attractive to industry are lower wage rates in general, and
RIGHT TO WORK LAWS which requires businesses to keep an
“open shop” (union membership not required) as opposed to a
“closed shop” (union membership required).
Steel, textiles, tobacco and furniture industries have been
particularly attracted to the South.
The Gulf Coast has become particularly attractive to oil, natural
gas, food processing and aerospace industries.
CHANGING
SITE
FACTORS
RIGHT TO WORK LAWS
“Right to Work Laws” require businesses to
keep an “open shop” (union membership not
required) as opposed to a “closed shop” (union
membership required).
As a result, industry has been pushed from
traditional locations in the northeast and
pulled to locations in the Southeast, midwest
and southwest.
Other pull factors include low-skilled workers
due to a poor education system, improved
infrastructure and cheaper land in rural
locations.
LABOR
CHANGING
SITE
FACTORS
INTERREGIONAL SHIFTS IN EUROPE
In Europe, industries have shifted to the the south and east.
The EU provides assistance (and thus incentive) to two regions:
Convergence regions (Easter and Southern
areas where income lags behind EU average)
Competitive and Employment regions
(Western core industry areas which have
sustained large recent job losses)
In Western Europe, Spain has grown rapidly
since entering the EU in 1986, in central
Europe, Poland, the Czech Republic and
Hungary have grown since the communist fall.
Central Europe has cheap labor and market
proximity.
Labor is less skilled/expensive than Western
Europe, but more skilled/expensive than
Asian laborers.
LABOR
CHANGING
SITE
FACTORS
LABOR
INTERNATIONAL SHIFTS IN INDUSTRY
In 1970, ½ of world industry was in Europe; 1/3 was in the US.
In 2010, ¼ in Europe, ¼ in US, and ½ in other regions.
The most significant emerging regions are:
EAST ASIA
It is now a top 3 industrial region, and China will soon be #1.
Key areas are China, Japan and increasingly South Korea (cars,
container ships, steel , fabricated metal products)
SOUTH ASIA
Region is led by India with major textile industries and growing
car manufacturing.
India is a leading location for business service industries.
LATIN AMERICA
It is the closest low wage region to the US, and it’s cheaper to
ship from there than from other LDCs.
MAQUILADORAs are companies which import inputs duty free,
assemble them and then re-export them for sale. Most are
located in Northern Mexico near the US border.
Brazil is the leading industrial country in the region.
CHANGING
SITE
FACTORS
INTERNATIONAL SHIFTS IN INDUSTRY
In 1980, 80% of steel was
produced in MDCs, 20%
in LDCs.
In 2008, 40% of steel was
produced in MDCs, 60%
in LDCs.
China accounts for 38%
of world steel output
(as much as all MDCs
combined).
Labor intensive
industries have been
especially attracted to
LDCs.
Apparel workers have
decreased by 75% in
the US since 1900.
LABOR
The Steel and Clothing industries demonstrate the industrial shift to LDCs.
CHANGING
SITE
FACTORS
OUTSOURCING
LABOR
VERTICAL INTEGRATION refers to the traditional form of mass
production whereby a single company tightly controls all phases of a
complex production process.
Outsourcing and the NIDOL contrast with vertical integration.
For example, most carmakers pay other companies to make their
parts.
Now, each step of a production process is scrutinized to determine the
optimal location for that step/part.
For example, car makers outsource seats. Most seat parts are made in
other countries, but the seats are assembled in the US at a factory
close to the auto plant.
OUTSOURCING means to turn over the responsibility for
production of various products/parts to independent suppliers.
A number of transnational corporations have identified steps in
their process or parts in their products that can be produced by
low-wage, low-skill workers in LDCs.
Processes or parts that require highly-skilled labor remain in
MDCs.
The NEW INTERNATIONAL DIVISION OF LABOR refers to the
transfer of certain steps to LDCs while others remainin MDCs.
CHANGING
SITE
FACTORS
NAFTA
LABOR
BRICS
In 1994, the US initiated the North American Free Trade Alliance (NAFTA)
which eliminated trade barriers between the US, Mexico and Canada.
Much of the world’s manufacturing growth is expected to come from
outside traditional areas.
Since that time, manufacturing has been exploding in Mexico as it attracts
labor-intensive US industries who wish to take advantage of Mexico’s lowcost labor but who also want relative proximity to the US market.
In 2006, and investment banking term coined the term “BRIC” to refer to
Brazil, Russia, India and China– the countries many expect to dominate
global manufacturing in the 21st century. In 2010, South Africa was added
to the list, and the acronym became BRICS.
Maquiladoras are manufacturing and assembly plants near the US/Mexico
border. Many companies ship their inputs to Mexico, have them assembled
there, and then ship their products back to the US for sale.
Recently, Mexico has been facing steep competition from China whose
labor wages are even lower than Mexico and whose industrial infrastructure
is finaly coming on line.
Currently China is expected to become the world’s largest economy in 2020
(the US is currently 1st. India is expected to overtake the US around 2035.
By 2050, Russia and Brazil are expected to be #6 and #7.
China and India have massive, low-cost labor forces.
Russia and Brazil are loaded with inputs and raw materials
CHANGING
SITE
FACTORS
LABOR
FEATURES
--Economic Interdependence
--Space-time compression
--Comparative advantage
--Outsourcing and offshoring
--Trade Agreements
--Foreign Management
--Cost Reduction
Impact on Foreign (LDC) Economies
INTERNATIONAL DIVISION OF LABOR
(The Global Assembly Line)
The NEW INTERNATIONAL DIVISION OF LABOR
is the reorganization/relocation of economic
activities from a national to a global scale
--Job Opportunities
--Gender Equity
--Child Labor
--Wage gap
--Migration
--Environment
--Regional Growth
--Culture Change
Impact on US Economy
--Rising unemployment
--Deindustrialization
--Degglomeration
--Interregional migration of workers
--De-unionization
--Increased consumerism
--Increased corporate profit
CHANGING
SITE
FACTORS
LABOR
DEGLOMERATION is the
process when companies
that were formerly clustered
together move to new
locations because the
economic incentives for
them doing so have
disappeared.
An ECONOMIC
BACKAWATER is an area that
has lost all of its primary
industries to deglomeration,
outsourcing or other forms
of industrial relocation.
NPR story on reviving
an economic backwater
CHANGING
SITE
FACTORS
LABOR
The need for skilled labor is a site factor that has attracted industries BACK to traditional locations.
COMPUTER MANUFACTURING
Computer manufacturing has clustered in high
wage areas of the US.
CLOTHES MANUFACTURING
High-end clothing also still concentrates in highwage areas of the US due to need for skilled labor.
FORDISM AND POST-FORDISM
In Henry Ford’s era of (FORDIST) mass production, a single low-skill worker was assigned a single task to perform repeatedly on an assembly line.
Most industries now follow LEAN or FLEXIBLE PRODUCTION (POST-FORDIST) production approaches:
TEAMS
Workers are placed in autonomous teams
PROBLEM SOLVING
Co-worker problems solved through
consensus/ consultation
LEVELING
Workers are treated equally and
managers and veterans do not get special
treatment
CHANGING
SITUATION
FACTORS
PROXIMITY
TO
MARKETS
Proximity to markets has increased in importance with just-in-time delivery.
Just-in-time delivery is especially important for delivery of inputs to manufacturers of fabricated products.
Parts suppliers must locate near their buyers.
JIT Delivery reduces the need for stock or storage space for manufacturers, but it also leads to two potential disruptions:
LABOR UNREST
ACTS OF GOD
CHANGING
SITE AND
SITUATION
FACTORS
In some cases, companies change location due to changes in both site and situation factors.
Two auto industry changes are that more foreign manufacturers are locating in the US, and that more manufacturers, (both foreign and
domestic) are locating in the South.
Possible Site Considerations
-- Low Cost Labor
--Deindustrialization in the Northern US
--Favorable/unfavorable Government Policies
--Cheap Land
--Cheap Energy
--Available Infrastructure
Possible Situation Considerations
--Proximity to US Market