Transcript Document

Agglomeration
assembly line
basic industry
break-of-bulk
brownfield
bulk-gaining industry
bulk-reducing industry
capital
cottage industry
de-industrialization
export processing zone
footloose industry
manufacturing region
“Fordism” (Post-Fordism)
mass production
Hotelling Model
nonbasic industry
industrial inertia
outsourcing
Industrial Revolution
primary industry
infrastructure
raw materials
economies of scale
site characteristics
labor-intensive
situation characteristics
least-cost theory
secondary industry
location theory
Alfred Weber
CHAPTER 11 INDUSTRY
WHERE IS INDUSTRY LOCATED?
WHY IS IT THERE?
HOW IS INDUSTRY DISTRIBUTED?
WHY DO DIFFERENT INDUSTRIES HAVE DIFFERENT DISTRIBUTIONS?
WHY DO INDUSTRIES FACE PROBLEMS?
Food is needed everywhere and the last chapter showed that food
production is widely dispersed.
Industry on the other hand is more highly clustered in space than
agriculture. Why?
50 years ago industry was highly clustered in only a few MDC’s. Now
we find it has diffused into LDC’s. (But its still highly clustered by being
mostly in LDC cities or special zones like Maquiladoras.) Transnational
corporations operate globally. Globalization has brought a huge
competition between countries trying to attract new industries and those
trying to retain them. (Have’s vs have nots.)
It all started with an event known today as the Industrial Revolution
3
The root of the Industrial Revolution (1700’s- early 1800’s) was
technology. Several inventions set the whole thing off. The steam engine,
the train, and electricity changed this world; but more than new industrial
changes occurred:
The world changed socially, economically and politically because of the
IR. You and I live with those changes, good or bad.
Prior to the IR, industry was widely dispersed. People made household
goods and equipment in their own homes or got them from someone in
their local village. Home-based manufacturing is known as a Cottage
Industry. One important Cottage Industry, before the IR, was the textile
industry where merchants hired “putters-out” to drop off wool for people to
use at home to create products they were paid by the piece to produce.
4
The IR was the collective invention of hundreds of mechanical
devices which made production faster. The most important
invention was the perfection of the steam engine by James Watt
in 1769.
Iron and textiles were the first industries to increase production
by using the steam engine.
Diffusion of this technology into all areas of production soon
followed. Britain became the first industrial country.
Coal mining, transportation (the train and steam boat), textiles,
chemicals, and food processing are all benefits of the IR.
5
Industrial Revolution Hearth.
The Industrial Revolution
originated in areas of northern
England. Factories often
clustered near coalfields.
Why near coalfields?
Coal was the first source of energy used to
drive the steam engines that powered the
birth of the IR.
Canals, and later railroads, were built to
connect the coal to the iron mining areas and
then on to the seaports. Internal migration
began. as people moved from the farms to
the new factory and mining jobs.
6
Diffusion of Railways:
The year 1826 saw the first railway
open. The chart shows the diffusion of
railways and the Industrial Revolution
from Britain.
The first successful steam train was
the Stephenson “Rocket” because it
could reach the amazing speed of 25
mph. Oooh, Aah…
But at a steady 25mph you can move
goods further and faster than ever
before.
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8
The Industrial Revolution radically changed the organization of work. In the new factories, a large
number of workers gathered together six or seven days a week to engage in tightly coordinated
tasks paced by machinery. This new organization of work implied a sharp distinction between
work and home. In earlier types of work, such as farming, trades, and cottage industries, work and
home were not necessarily separate spheres and child labor was not a public issue.
When the IR began, people sold their farms and moved to the cities thinking that earning money in
the new industries would give them a better life. Instead many of them found conditions they
didn’t expect.
Seven days a week with 12-16 hour work days were common in 1840. Once they had sold their
farm they couldn’t move back. They were misused by the factory system as there were no labor
laws; no unemployment, no vacations or health benefits.
Women and children were paid ½ the price of men and there were no laws protecting the workers.
Children working 12 hours per day had no time for school. The literacy rate in Europe was actually
lower in 1850 than it was in 1750. Factory owners became the first millionaires.
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Early farm tractor which could do much
more work than a horse or mule.
Child labor…children worked for ½ pay of an
adult and didn’t have the time to go to school.
Examples of the good and the bad of the IR
10
Though Britain would have loved to keep all this to themselves, ideas like this can’t
be kept from others. By the late 1800’s, most of Europe and the US were into the
mass production game. About 1900, Japan became the first major non-Western
country to undergo full industrialization. In the first third of the 1900’s, IR diffusion
spilled into Russia and Ukraine.
•Where is the industry distributed?
Manufacturing in North America is concentrated in NE U.S. and SE Canada. Though
only 5% of the land area these regions house 33% of the population and 66% of the
manufacturing output.
The two reasons for this are: 1. this is where most of our early population and immigrants
came to and 2. closeness to raw materials like coal and iron ore and good transportation;
railroads, highways, ports, rivers, and lakes.
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Industrial areas in the US:
A. New England
B. Middle Atlantic
C. Mohawk Valley
D. Pittsburg-Lake Erie
E. Western Great Lakes
F. St. Lawrence Valley-Ontario Peninsula
Changing Distribution of US. Manufacturing: In recent years, the total number of
manufacturing jobs in the US has stayed about the same (but the population has
grown) but where those jobs are has shifted to the south and the west. The NE
has lost 2 million manufacturing jobs in the last 30 years while the south and west
have grown by 1 million.
Especially large loses have happened in the New York-Philadelphia Textile industry
and the Pittsburg-Cleveland steel production centers where ½ of their manufacturing
jobs are gone since 1970. This region spreading from Philadelphia, PA, to Cleveland,
Ohio has been nicknamed “The Rust Belt” due to the closing of so many factories.
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Although there are
other important
areas, these are the
six major industrial
regions of North
America; all
clustered in the
northeastern U.S.
and southeastern
Canada.
St. Lawrence
Valley region
Mohawk
Valley region
Western Great
Lakes
manufacturing
region
New
England
region
Pittsburgh
to Lake
Erie
region
Major
manufacturing
regions
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US manufacturing jobs in the south and west have
grown since the 1970’s.
Reasons why American Industry has moved south:
1. Right to work states (unions)
2. Climate
3. Close to oil-gas resources
4. If you need to modernize your factory, why not move
to a better climate?
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Changes in US manufacturing jobs.
The green states are the fastest at
gaining manufacturing jobs.
The dark grey states are either losing
or only slowly gaining manufacturing
jobs.
Manufacturing Job Gains Are Largest
in the west and midwest. Percentage
Change in Manufacturing Employment
by State, Dec. 2009-Mar.2013
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MANUFACTURING IN EUROPE:
THERE ARE 4 MAIN MANUFACTURING REGIONS IN WESTERN EUROPE.
•
1. RHINE-RUHR VALLEY 2. MID-RHINE 3. UNITED KINGDOM 4. N. ITALY
RHINE-RUHR IS EUROPE’S #1 MANUFACTURING REGION.
MID-RHINE IS #2 (CARS)
THE UK WAS THE FIRST INDUSTRIALIZED REGION AND STILL IS IMPORTANT.
N. ITALY’S PO RIVER VALLEY HAS 2/3’S OF ITALY’S INDUSTRY AND 1/5 OF THE
POPULATION.
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Europe’s productivity and GDP:
Productivity of workers
Average income per person
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The major manufacturing
regions of Europe:
1.
2.
3.
4.
5.
6.
7.
8.
9.
The United Kingdom
The Rhine-Ruhr River valley
The Mid-Rhine
Northern Italy
Silesia
St Petersburg area
Moscow and Central Russia
Eastern Ukraine
The Volga region
Further east (not shown on the map) are
the Ural mountain region and the
Kuznetsk region of far eastern Russia.
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Manufacturing in Eastern Europe: Eastern Europe contains seven key industrial areas: Six of
them belong to the former Soviet Union. Four of which became industrial centers in the 1800,s.
1. Central industrial district is Russia’s oldest industrial area and is centered around Moscow.
2. St. Petersburg industrial district, Russian’s key seaport.
3. Eastern Ukraine, this area has Europe’s largest coal deposits and that makes this area a key
to producing steel.
4. The Volga industrial district, was constructed during WW2 as a major production center and
uses the Volga river for transport to the Black Sea and the world.
5. The Urals industrial district, The Ural’s have excellent supplies of raw materials and this
makes them like our Pittsburg-Cleveland manufacturing area, a key area for steel production.
6. Kuznetsk industrial district, is the top Russian manufacturing area east of the Ural Mountains.
It contains Russia’s largest supply of coal.
7. Silesia includes southern Poland and the northern Czech Republic and is the key
manufacturing area of Eastern Europe outside of Russia and the Ukraine.
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The major
manufacturing areas of
East Asia:
Japan, China, S. Korea
and Taiwan make up the
key producers of E.
Asia. Of the list, only
China has vast
resources of its own.
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Manufacturing in East Asia: Japan, China, S. Korea and Taiwan make up the
key producers of East Asia. Of the list, only China has vast resources of its
own. Although industry is located elsewhere in the world, the 4 regions of
N. America, W. Europe, E. Europe, and E. Asia account for most of the
world’s industrial production.
•Why do industries have different distributions?
All industries want to make as much profit as possible. Every company
ordinarily faces 2 geographical costs:
1. Situation factors: the cost of transporting materials to and from your
factory. You want this cost to be as low as possible
2. Site factors: The cost of the land, labor and capital of running a business
in this location.
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INDUSTRIAL LOCATION…WEBER’S LEAST COST THEORY.
• ALFRED WEBER FORMULATED A THEORY OF INDUSTRIAL LOCATION IN WHICH AN INDUSTRY IS
LOCATED WHERE THE TRANSPORTATION COSTS OF RAW MATERIALS AND FINAL PRODUCT IS A
MINIMUM. (SOUNDS LIKE VON THUNEN???) THE COST OF YOUR SITUATION AND SITE WILL
DETERMINE THE BEST LOCATION FOR YOUR INDUSTRY.
•
•
SITUATION FACTORS
•
•
•
LOCATION NEAR INPUTS…BE NEAR YOUR RAW MATERIALS (STEEL MILLS)
LOCATION NEAR MARKETS…BE NEAR YOUR CUSTOMERS (COCA-COLA)
TRANSPORT CHOICES…BE NEAR EASY/CHEAP TRANSPORT SPOTS (SEA PORTS)
SITE FACTORS
•
•
•
LAND: THE COST OF THE LAND/RENT/ENERGY/CLIMATE (HEATING AND COOLING).
LABOR: THE COST OF WORKERS (UNIONS, RIGHT TO WORK, TRAINING).
CAPITAL: THE COSTS OF DOING BUSINESS IN THAT LOCATION (LOAN RATES, TAXES, GOVERNMENT
REGULATIONS).
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• THE #1 QUESTION FOR ANY NEW BUSINESS/INDUSTRY IS…DO I NEED
TO BE CLOSEST TO MY RAW MATERIALS OR TO MY CUSTOMERS?
MAKE THE WRONG DECISION HERE AND YOUR BUSINESS WILL FAIL.
THE 4 TYPES OF INDUSTRIES ARE :




BULK-GAINING
Your success in all
of them, depends
on your correct
choice of a location.
BULK-REDUCING
SINGLE MARKET
PERISHABLE
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Situation factors: Location near inputs (your raw materials).
The farther something is transported, the higher the cost. All industries want to
limit this cost as much as possible. Inputs are the costs of bringing raw
materials to your factory. Location near inputs is a good idea if it is possible. It all
depends on the situation of your product. Is it bulk-reducing or bulk-gaining?
Copper-is a heavy ore which when mined has very little pure copper and has to
have a lot of refining done to remove the impurities. A bulk-reducing industry is
one that takes a raw material and reduces it to a purer and smaller level. In the
copper industry, copper ore goes to a refinery (located near the mine to reduce
costs) where it is refined into several more concentrated forms; 1. 60% pure
copper, 2. 97% pure copper, 3. 99% pure copper. Once it is refined it is lighter
and can be shipped out to factories in other areas at a cheaper cost.
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Copper production…a bulk reducing industry:
Huge pit dug in mining millions of train
cars of copper ore
Hundreds or train cars of copper ore
heading to the nearby refinery.
1 ton of pure copper…$5,000 per ton.
Each train car holds 100 tons or ore. It
takes 3 train cars of ore to make 1 ton of
pure copper.
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In bulk reducing industries it is best to locate near the input (raw material)
Copper ore is dug and refined into pure copper here.
The copper refining industries are also here.
But…the leading industrial factory use of copper
is here, not very near the mines and refineries.
Why?...Because it is cheaper to ship the pure already refined copper long distance
than it is to ship the millions of tons of un-refined copper ore.
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Secondary Activities: Manufacturing
U.S. Steel mills
Steel, “minimill”
near Miami recycles
junk into new steel.
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Steel making is another bulk-reducing industry. The key components of steel are coal (coke)
and iron ore. New “minimills” have developed away from the coal-iron ore areas because they
use recycled scrap metal for their process. Miami has a minimill using scrap metal from all over
our state.
Location near markets: For many firms it is more important to be located near the market where
the product is sold than near the input. Here the 3 key types of industries are: bulk-gaining,
single-market, and perishable.
 Bulk-gaining: Makes something that gains volume in the process. Soft-drink bottling is a
good example. Here the two main inputs placed in the container are; syrup and water.
Syrup is concentrated and easy to ship while water is easily available. This makes it easier
and cheaper to locate the manufacturing near the consumer rather than manufacturing
centers.
Other examples are TV’s, refrigerators, and cars, where the individual parts are shipped to
locations to be assembled and you end up with a bulk-gaining product.
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+
Empty bottles
+
55 gallon drums of soft drink syrup
Thousands
of gallons of
H2O with
Co2 in it…
Equals??????
Which two of these is easier AND CHEAPER to
ship? The final product is bulk-gaining.
Coca-Cola manufacturing:
http://www.youtube.com/watch?v=dVfUo6NzTKE&feature=player_embedded#at=268
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Automobile production is a bulk-gaining industry.
Ford
GM
Top 15 US
auto
assembly
plants…
Toyota
Note that 6
of them are
not what we
consider to
be
“American”
Cars.
Honda
Hyundai
BMW
Nissan
Kia/
Hyundai
Parts are shipped from many locations to the assembly plants. The assembly
plants are located near the largest number of US customers to cut down on
shipping costs of the cars to the customers.
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Quiz yourself:
1.
Type of industry that gains volume as the product is made…A) bulk-reducing B) bulk C) recycling D) bulk-gaining
2.
Prior to the Industrial Revolution, industry was widely…A) clustered B) unknown C) organized D) dispersed
3.
T-F… When the IR began, people sold their farms and moved to the cities thinking that earning money in the new industries would give them a better
life.
4. Which of these is not one of the key industrial areas of W. Europe? A) Moscow B) Rhine-Ruhr Valley C) Mid-Rhine D) United
Kingdom E) N. Italy
5. __________ are the costs of bringing raw materials to your factory…A) outputs B) occupation costs C) inputs D) site costs
6. In recent years, the total number of manufacturing jobs in the US has…A) grown B) shrunk C) stayed about the same D) stayed
about the same but the population has grown E) none of these
7. T-F…Because of the Industrial Revolution the literacy rate in Europe was actually lower in 1850 than it was in 1750.
8. An industry which takes a raw material and reduces it to a purer and smaller level, is a…A) bulk-gaining B) bulk-reducing
C) recycling D) growth industry E) none of these
9. The ________________ theory says that the best location for an industry is one where the transportation costs of raw materials and final product is a
minimum. A) VonThunen B) Boserup C) Webber D) Industrial Hearth E) none of these
10. T-F…Despite the movement of US industrial jobs to the south and west, the key area of the US for industrial production remains the NE.
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Answer key:
1. D
2. D
3. T
4. A
5. Inputs
6. D
7. T
8. B
9. C
10. T
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Other important kinds of manufacturing:
. Single-market manufacturing: makes products sold primarily in one location. Example:
buyers for department stores come to New York City twice a year to see fashion shows
and to pick the products they will sell in the upcoming season. The clothing companies are
located near New York so they can produce the product easily and quickly. Since these
companies are located near New York, their suppliers (zippers, buttons, clasps, etc. are
also located near NY). Today auto parts manufacturing shops are located near the auto
assembly plants for quick delivery of the parts. Just-in-time delivery is important to save
costs. You get the parts just-in-time for your use and they don’t sit on a shelf.
. Perishable products: Daily newspapers, fresh food, pizza.
How to transport your product? Rail, truck, ship, or air? Strange as it may seem, in
general, the cost or transportation drops as the distance increases. This is because you
must pay for the product to be loaded and unloaded no matter what the distance is. Trucks
for short distance, trains and ships for long distances and air for speed.
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Cost to load and unload…$100
Distance traveled………… 5 miles
$20 per mile cost
$100
100 miles
$1 per mile
Transferring your product from one type of travel to another increases the cost; Loading
and unloading, storing the product for a period of time, all cost $$$$$.
A break-of-bulk point is a location where you can shift goods to various types of
transport…sea port with a railroad, great highway and airport is ideal (think about the
port of Tampa)
Situation factors are important. Location near markets or break-of bulk points have
become more important than location near raw materials for many industries in MDC’s.
This doesn’t explain how Japan can be such a manufacturing power as it is not located
near raw materials nor is it located near its key markets of the US and Europe. How
does Japan do it?
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All industries have to deal with two factors when deciding their location…situation and site.
Lets sum up situation factors:
Situation factors are the cost of transporting your inputs to your factory and/or transporting your product to the market
(customer).
You must know the situation of your business. Are you…
a Bulk-reducing industry?
a Bulk-gaining industry?
a Single market industry?
a Perishable industry?
Other situation factors to consider are:
Which kind of transportation to use
Break-of–bulk points
Just in time delivery
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Site factors- The other key geographical cost is the cost of doing business in that
location: Once you know your situation you can pick your exact best site. What is the cost of land?
What is the cost of labor? And what is the cost of capital also decides where you locate your
business.
Land: Any non-man-made items needed to produce your product (air, water, soil, rent paid).
Modern factories tend to be suburban or rural instead of near the city center because: 1. Factories
need land to spread out because it usually is more efficient to have a single story building for
factories. 2. Land is also cheaper in suburban or rural areas.
Prior to the IR factories located near water and forests for water power and wood. When coal
became the dominate power source, locating near the coal fields was important.
Since there are fewer coal fields, industry began to
congregate in fewer areas.
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Brownfield Land
A piece of property that
once was a working
factory or business
which is now
abandoned. Often this
property is
contaminated and
needs to be cleaned up
before it can ever be
used again.
Example of Brownfield land at a disused gasworks site after
excavation. The soil is contaminated from removed
underground storage tanks and the land can not be used
until an often expensive cleaning takes place.
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Today some other attractors for land in industry include: cheap utility rates,
climate, cost of living, personal taxes, available transportation, and recreation.
Places which offer these often attract industries to move to their area.
Labor: The cost of labor is the cost of providing workers to produce and transport
your product. A labor-intensive industry is one where the labor cost is a high
percentage of your expense. Labor costs are divided into highly skilled, high paid
workers or less skilled, inexpensive paid workers.
Textile and clothing industries are prime examples of a labor-intensive business.
There are 3 key steps to producing textiles:
1. Spinning of fibers to make yarn
2. Weaving the yarn into fabric…bleaching and dying.
3. Cutting and sewing the final product.
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The global distribution of spinning, weaving, and sewing is not the same because the type of
labor used is not the same. Producing the yarn is usually done near where the fibers originate
(Why? Bulk reducing?). China, India, Pakistan, Uzbekistan and the US grow over ½ of the
world’s cotton. Here is where you find most of the world’s cotton yarn produced. Synthetic fibers
like Nylon and Rayon have traditionally come from MDC’s but some LDC’s are becoming
producers of these fibers. LDC’s do make up over 75% of the spun yarn and 86% of the woven
cotton (making the cloth). Weaving is more likely to locate in LDC’s because of low production
costs which offset the shipping costs.
US Textile and clothing industries have relocated to be nearer the low-cost employees by moving
from the NE in the 1800’s to the south (GA, AL, NC).
Skilled labor industry: These are industries like medicine, electronics, and computers which
require a more skilled worker. Today you will often find them clustered in certain areas which are
often near universities.
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GM chose Spring Hill,
Tenn., as their Saturn auto
plant for several reasons:
1. Near many interstate
highways and railroads
for easy/cheaper
shipping.
GM’s Saturn plant
Spring Hill, Tenn.
2. Within the circle live
almost 40% of their
customers. Cities like
Chicago, Cleveland,
Indianapolis, Atlanta
and Washington are
easy to ship to from
this site.
3. Tennessee has
cheaper labor costs.
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The production of clothing…bulk gaining and very labor intensive.
Why are so many of our cotton clothes not produced in the USA???
Production of cotton yarn from fiber is clustered in major cotton growing countries, including the
U.S., China, India, Pakistan, and Russia. We produce the thread and yarn.
Production of woven cotton fabric is labor intensive and is likely to be located in LDCs. China
and India account for over 75% of world production. Much of our thread and yarn is shipped
out of the US to be made into the cloth that cotton clothing is made from.
Sewing cotton fabric into men’s and boys’ shirts is more likely to be located near customers in
MDCs, but much production now occurs in LDCs. Making a shirt is bulk-gaining. It is also a labor
intensive industry as it needs lots of workers.
CHEAP LABOR IS IMPORTANT.
It is cheaper to make the yarn and thread, ship that to cheaper labor sites, pay them to make the
clothing and then ship that final product to the US, than it is to make the entire product here.
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Fordist production is the technique of requiring a worker to perform only on task over and over (the assembly
line). Post-Fordist production is the new idea of allocating workers to teams which have several tasks to
perform.
Capital: Human made goods needed to produce your product, plus the cost involved in borrowing money to
do business in that place. Capital includes, taxes, tools buildings, vehicles, and machinery. LDC’s have a real
problem in this area. Countries with an unstable government find it hard to buy machinery and to convince
banks in stable MDC’s to loan money to businesses in their country. Local and national governments will offer
special incentives to industries to locate there: grants, low-cost loans, tax breaks are a few of these
incentives.
So how do you find the perfect location for your business? This is not an easy question to answer. Many
industries today can be very “footloose” as the use of fax machines, and the internet allows them more
freedom to control products at a longer distance. When one company buys another they inherit the purchased
companies’ facilities and may continue operating there though it may be an inferior location. The preference
of the owner also decides many of the locations of businesses. A footloose industry doesn’t worry much
about its location. Footloose industries are hurting “brick and mortar” stores like shopping malls
because many shoppers are shopping online instead of in a store.
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Lets sum up site factors:
Site factors are the cost of doing business in THAT PARTICULAR LOCATION.
(Pinellas County or Hillsborough county? Florida or Oregon? New York or Chicago?)
Site factors include the cost of; Land, Labor, and Capital.
Land is anything not man made, needed to set up and operate the industry…raw
materials (inputs), rent, property you locate on.
Labor is the cost to hire, train, and keep workers. Is your business labor intensive?
Do you need highly skilled workers?
Capital is the cost of human things needed to do your business. Taxes, buildings,
machinery, tools, vehicles, electricity, etc.
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A “Footloose”
industry in
Lakeland
Florida.
Call centers, which handle thousands of help lines, phone and internet sales, will locate where
ever they can hire workers cheaper. India has been the world’s leader in call center jobs, but
other LDC’s are competing with India for these jobs. All you need is a phone and a computer.
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Industrial problems from a global perspective: The most basic problem on a
global scale is the gap between the world demand for products and the
world capacity to produce them. For some products the global capacity to
produce them has increased more than the demand for them. WHY?????? Can
it be bad to have too much stuff?
From the beginning of the Industrial Revolution up to about 1970 the demand for
goods in MDC’s increased along with the increase in population and wealth. The
growth formula was: More people with more wealth = more demand for goods.
This demand was met by building more factories which hired more workers who
became wealthier and demanded more goods. A upward spiral of jobs, demand
and production. This was good and many got wealthy…but…
45
HOWEVER…Since 1970 demand for goods in MDC’s has slowed…why??????
(Chapter on population)
•Population…in MDC’s the number of customers is dropping.
•Saturation of some goods (TV’s, cell phones) Now you know why cell phones
change so often. 
•Wages have not risen as fast as prices have.
•Increased quality has caused consumers to keep goods longer and not replace
them as soon.
•Changing technology has reduced the demand for some goods (steel).
•The diffusion of some industries has weakened the amount that the previously top
producers need to produce or can sell.
Less need for steel plus the fact that more countries now know how to produce
it= more steel factories not running full time. Jobs are cut.
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Steel is another industry which has seen a dramatic change in the last 40 years:
•
The U.S., Soviet Union, and Japan were the largest steel producers in 1973, and with the rest of Europe, accounted for
90% of global steel production.
•
Since the 1970’s, steel production has generally declined in MDCs and increased in LDCs, especially in China, India,
Brazil, and South Korea.
•
Though there is less demand for steel, many steel mills are kept going through government help because no country
wants to go out of an important business like steel and depend upon other nations for steel…nations that could cut them
off someday.
Industrial problems in MDC’s: Countries at all levels of development face the similar problem of making their industries
competitive in an increasingly integrated global economy. Although they share the same goal, each country faces the
problem in a different way with different circumstances. Industries in MDC’s must protect their markets from new competitors
while industries in LDC’s try to get more of the business and develop more markets. (The have’s vs. the have not’s again.)
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The impact of trading blocs: Today’s world trade competition isn’t really between
countries. It is more like a competition between trade blocs which are countries which
work together. Trade gangs!!!! The 3 big trade blocs today are: Western Europe,
Western Hemisphere and East Asia. Within each bloc they work together to compete
against the other blocs for business.
Western Hemisphere bloc: With NAFTA, (North American Free Trade Act) most trade
barriers between the US, Canada, and Mexico have been removed. Other countries
from the Western Hemisphere may join the union.
The European Union: has eliminated trade problems between most European
nations and they are acting more like one country to share production and to compete
world wide.
Japanese companies play the leading role in the economies of East Asian countries
(S. Korea and China) but hard feelings left over from WW2 still haunts some of the
trade and trust between China, S. Korea, and Japan.
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BRICS…the new up and coming
trade/business/banking world power.
Brazil, Russia, India, China, South Africa.
While they have not yet formed a trade bloc, they are setting up
their own version of the World Bank so they can loan money to
each other and help each other in business/trade. This could
soon become the 4th big trade bloc in the world and probably the
biggest as they have 43% of the world’s population, 18% of the
world’s GDP and 53% of the financial capital to do business
with.
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Competition among trading blocs: The 3 trading blocs have promoted internal cooperation, yet they have
erected trade barriers to restrict other regions from competing effectively. The EU slaps a tax on products
from non-EU members. Japan has a very difficult, slow, and costly permit system to keep foreign companies
from selling in Japan.
Transnational Corporations: The business, cooperation, and competition that take place between trading
blocs is done mostly by large transnational corporations (Multinational corporations). A Transnational
corporation operates factories in countries other than the one the headquarters is in. The original
transnational corporations were American but in recent years Germany, Japan, France and the UK have all
developed TN’s.
Why would one country or corporation locate industries in another country?
Locating your factories in other countries is done for several reasons:
•Because of lower site factors like labor/raw materials, taxes, or land;
•To overcome that countries restrictions on imports;
•To make up for the lack of growth in sales in the countries you are already in (mostly MDC’s);
•To create new markets for your goods as you have already saturated the market in the countries you are
already in; (Japan builds car parts and electronic factories in the US. BMW and Mercedes are in North
Carolina)
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Disparities within the trading blocs: Not everything and everyplace is equal WITHIN the trading
bloc…US/Canada/Mexico. The lack of a universal distribution of industry has caused trouble
within the individual countries. (Illegal immigrants to the US from Mexico.)
European disparities:
N. Italy has 3 times more wealth than S. Italy.
Paris is more modern and wealthy that the west & south of France.
Much more unemployment in northern England than in the south. Income in the south of
England is 25% higher than the north or west.
W. Germany is far more wealthy that the eastern part (40 years of Communism in the east
didn’t help).
The EU spends funds to try to improve the least productive area of its membership. The EU
helps Greece, Ireland, and Portugal.
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US disparities:
The south has traditionally been among our poorest region…it is now growing faster in
development that any other area. The north was once our richest area…it is now shrinking in
industry and jobs. Now that all MDC’s (including us) are in a period of shrinking economic growth,
it becomes hard to justify our government spending $ to try to develop one part of our country
when another part may suffer. Growth in all regions has stagnated (stopped).
Industrial problems in Less Developed countries: LDC’s are busy trying to do what made the
MDC’s powerful…develop mass production capabilities to supply jobs and business. But they face
problems:
1. Old problems: A. Distance to the markets in the MDC’s. B. Inadequate Infrastructure…do they
have up to date tools, transportation, machines, technology, education? How do they pay for
getting these items?
2. New Problems for LDC’s: A… MDC’s once could count on selling to LDC’s as the LDC’s didn’t
have its own production of goods and had to buy the MDC’s product(s). LDC’s can’t count on
selling their products to MDC’s as MDC’s produce their own. The LDC is stuck selling only to itself
and that is a very limited market. (Car factory in Bolivia or Haiti sells to who?)
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B… Remember that two key questions to creating a business are: access to raw materials
and site factors.
•Access to raw materials: Many of the raw material mines are already owned by a
transnational corporation from another country. How does the LDC get the raw material?
They may not be able to buy raw materials found in their own country.
•Site factors: LDC’s often have cheap labor but do they have the skilled labor and the
education to create hi tech goods?
MDC’s are willing to transfer the low paid non-skilled jobs to the LDC, but they keep the
highly paid skilled jobs in the MDC because those jobs pay more.
Today’s international division of labor…the MDC’s have mostly tertiary jobs while the
LDC’s have the lower paying primary and an increasing number of secondary jobs. The
“haves vs. the have not’s” again.
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So, exactly why would an American factory move out of the US?
Let’s say we are the Broyhill furniture manufacturing company. We have been making
fine wood furniture in N. Carolina for 100 years. Why would we consider moving our
factory out of the US or have our furniture manufactured for us in another country and
just shipped to us? Lets look at the costs to make one bedroom suite:
Wood needed to make our product:
1. American lumber producers have to pay :
A) $15+ an hour to labor
B) Fees to the EPA. Taxes
C) Replant trees cut down.
D) Costs to produce the finished wood.
E) Shipping costs to our factory.
F) Social Security, retirement, vacation and health
benefits for American workers.
Total cost, $250
Wood needed to make the Chinese product:
1. Chinese lumber producers have to pay:
A) $3+ an hour
B) Replant trees cut down (1/2 the price done in the
US)
C) Costs to produce the finished wood
D) Shipping cost to the factory.
Total cost. $100
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The cost to produce a bed room set:
A) Skilled wood worker gets $20+ an hour. 3
workers with 8 hours of work each to make the
set.
B) Loading and shipping the product.
C) Advertising.
D) Social Security, vacation, retirement, and health
benefits.
E) Utility and building costs of the factory.
F) Taxes both local and federal.
Total cost (including the cost of the wood) $900
The cost to produce the same bed room set in
China:
A) Skilled woodworker in China gets $3+ an
hour. 3 workers with 8 hours of work each to
make the set.
B) Loading and shipping to the US.
C) Advertising.
D) Utility and building costs of the factory.
Total cost (including the cost of wood and
shipping to the US) $550
In the furniture store the Broyhill set will sell for $1800 while the Chinese set will sell
for $$1100…Which one will most consumers buy? Broyhill could just close their
American factories and hire the Chinese factories to make furniture with the Broyhill
name and still make a profit.
Many American companies do.
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Chapter 11 Test.
These questions come from a combination of our slides, your text book, and common knowledge you should have discussed in your AP
classroom. They are very typical of what you will see on the National Exam.
1) The Industrial Revolution originated in Great Britain in approximately… A) 1950
B)1650. C) 1750. D) 1850.
2) The cottage industry system involved manufacturing… A) in the home. B) of steam engines. C) in small factories. D) of hand-made luxury goods.
3) Eastern North America is the continent's manufacturing center in part because it has access to the continents… A) best-maintained transportation systems
B) largest markets. C) most extensive sources of essential raw materials D) all of the above
4) Demand for many industrial goods in more developed countries has been stagnant in recent years, in part because of…A) substantial salary increases
B) low prices for many goods C) market saturation D) rapid population growth
5) In contrast to Fordist production, Post-Fordist production is more likely to…A) dominate transnational corporations B) introduce more flexible work rules.
C) place more importance on site factors. D) assign each worker one task.
6) A company which uses more than one mode of transport will often locate near…A) suburbs. B) break-of-bulk points. C) consumers. D) raw materials.
7) Significant site factors include all but which of the following? A) transportation B) capital C) labor D) land
8) The lowest-cost form of transporting goods very long distances is…A) airplane B) truck. C) train. D) boat.
9) A copper concentration mill tends to locate near a copper mine because it is a…A) site factor
D) specialized manufacturer.
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B) bulk-reducing industry. C) perishable industry
10) Copper concentration is a bulk-reducing industry, because…A) copper ore is low-grade B) the mills are near the mines. C) the final product has a much
higher value per weight. D) refineries import most material from other countries.
11) The first industries to increase production through extensive use of the steam engine were…A) iron and chemical. B) mining and textile. C) textile and iron.
D) transport and steel.
12) Approximately three-fourths of the world's industrial production is concentrated in four regions. Which of the following is not one of these four regions?
A) Eastern North America B) eastern Europe C) eastern Russia D) Japan
13) Europe's principal industrial areas include all but which of the following? A) northwestern Germany and southern Netherlands B) northern England and
southern Scotland C) southwestern France and northeastern Spain D) west-central Germany and northeastern France
14) Today, the most significant industrial asset of the Western Great Lakes region is its… A) access to the nation's transportation network. B) large market area.
C) proximity to essential raw materials. D) skilled labor force.
15) The main impact of the growth of regional trading blocs is…A) increased cooperation among countries within trading blocs. B) increased cooperation
between trading blocs. C) increased competition among countries within trading blocs. D) all of the above
16) The biggest industrial challenge for more developed countries is… A) lack of access to markets. B) lack of raw materials. C) unequal distribution of industry.
D) unmet consumer demand.
17) By subsidizing industries such as steel and textile, governments contribute to the global problem of…A) higher prices. B) job loss. C) lower consumer
demand. D) oversupply.
18) Which production is most likely to be located in less developed countries? A) yarn B) textile C) shirts D) All are equally likely.
19) Which of these industries is most dependent on low-cost labor?
A) automotive B) electronics C) steel D) textile
20) Soft drink bottling is an example of a …A) perishable industry. B) specialized industry. C) bulk-gaining industry. D) communications-oriented industry.
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21)The location of a Maquiladora plant is a good example of the importance of… A) situation factors. B) site factors. C) Post-Fordist production. D) break-of-bulk
points.
22) Situation costs are critical to a firm which wishes to…A) avoid labor unions. B) minimize production costs inside the plant. C) minimize transport costs.
D) identify unique characteristics of a particular location.
23)In order to become a major industrial power, Japan has had to overcome which of the following problems? A) high labor costs B) abundant energy sources
C) distance from consumers D) all of the above
24)Proximity to Russian consumers is the most significant industrial asset of which region?
A) Central B) Kuznetsk C) Urals D) Volga
25)Compared to other industries, aluminum manufacturers are more likely to locate near sources of…A) low-cost labor. B) low-cost land. C) low-cost energy.
D) Aluminum oxide.
26)The growth of manufacturing was retarded in the United States during the nineteenth century primarily because of…A) abundant raw materials. B) distance
from markets. C) labor surpluses. D) all of the above
27)Prior to the Industrial Revolution, the distribution of industry was… A) clustered. B) concentrated. C) dispersed. D) randomly distributed.
28)The Industrial Revolution began in… A) Great Britain. B) Japan. C) the Soviet Union. D) the United States.
29)The Industrial Revolution in Europe diffused… A) from east to west. B) from west to east. C) from north to south. D) from south to north.
30)Russian manufacturers were more likely than American manufacturers to locate near… A) consumers. B) raw materials. C) transportation. D) all of the above
The following questions are written at the high school level. You will find some questions from part one often rewritten here. This is all designed to
help you transition to the college/AP style of written questions.
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*** Questions following the 3 stars are questions which have been on previous National Tests exactly as it is written here.
31. *** An example of an important physical site characteristic is a…A) major airport B) grid street pattern C) major central park D) natural harbor E) public sports
facility
32. Europe's principal industrial areas include all but which of the following? A) northwestern Germany and southern Netherlands B) northern England and southern
Scotland C) southwestern France and northeastern Spain D) west-central Germany and northeastern France .
33. Eastern North America is the continent's manufacturing center in part because it has access to the continent’s…A) largest markets. B) most extensive sources of
essential raw materials. C) best-maintained transportation systems. D) all of the above
34. In order to become a major industrial power, Japan has had to overcome which of the following problems? A) high labor costs B) abundant energy sources
C) distance from consumers D) all of the above
35. *** Which of the following has contributed most to the de-industrialization of regions like the English midlands and the North American Manufacturing Belt? A) The
increased percentage of women in the labor force B) competition from foreign markets C) environmental legislation D) the formation of free-trade associations
E) the decline of labor unions
36. A copper concentration mill tends to locate near a copper mine because it is a…A) bulk-reducing industry. B) perishable industry. C) site factor. D) specialized
manufacturer.
37. Situation costs are critical to a firm which wishes to…A) avoid labor unions. B) minimize production costs inside the plant. C) minimize transport costs. D) identify
unique characteristics of a particular location.
38. *** A clustering of doctor’s offices and pharmacies near hospitals is BEST explained by the benefits of… A) decentralization B) agglomeration C) intervening
opportunity D) Von Thunen’s model E) enfranchisement
39. Minimills are more likely than integrated steel mills to select locations because of access to A) government subsidies. B) labor. C) markets. D) raw materials.
E) agglomeration
40. The location of a Maquiladora plant is a good example of the importance of …A) situation factors. B) site factors. C) Post-Fordist production. D) break-of-bulk
points.
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41. A company which uses more than one mode of transport will often locate near… A) break-of-bulk points. B) consumers. C) raw materials. D) suburbs.
E) capital
42. Significant site factors include all but which of the following? A) capital B) labor C) land D) transportation
43. Pepsi bottling is an example of a…A) perishable industry. B) specialized industry. C) bulk-gaining industry. D) communications-oriented industry.
E) agglomeration
44. Which of these industries is most dependent on low-cost labor? A) automotive B) electronics C) steel D) textile E) health care
45. *** The internet is reshaping traditional economic arrangements by…A) reinforcing the dominance of the central business district for retail sales B) expanding
the importance of express package delivery systems C) increasing the importance of rail transportation as compared to truck transportation D) bringing
consumers and producers into face to face contact E) creating more enclosed shopping malls
46. A manufacturer of women's and children's underwear is more likely than a manufacturer of electronic computing equipment to locate in what region of the
United States? A) Midwest
B) northeast C) southeast D) west
47. Which production is most likely to be located in less developed countries? A) Yarn B) textiles C) shirts D) All are equally likely. E) none are very likely
48. Demand for many industrial goods in more developed countries has been stagnant in recent years, in part because of
B) market saturation. C) rapid population growth. D) substantial salary increases. E) guest workers
A) low prices for many goods.
49. The biggest industrial challenge for less developed countries is…A) lack of access to markets. B) lack of raw materials. C) stagnant population in their
country. D) overproduction E) cheap labor
50. Which of these is not a problem for MDC factory production? A) Stagnant demand
population in MDC’s
B) lack of workers C) high quality of the produce
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D) stagnant
51-55. You are planning to open a factory to produce cooling fans for a new all electric car. This is the only product you plan at this time to
produce. The all electric car will be produced in only one plant which is located near Nashville Tennessee. With this information answer
the following questions about how you decide where to locate your fan factory.
51. The situation of your factory is…A) bulk-gaining B) bulk-reducing C) perishable D) land E) single-market-manufacturing
52. This situation tells you to locate near…A) the site
cost
B) the raw materials C) the market D) the cheapest labor E) the lowest capital
53. After figuring your situation you now figure your…A) site B) market C) labor cost D) shipping cost E) next product to produce
54. The key part of your site decision comes from…A) labor costs B) land costs C) capital costs D) all of these
55. Which of your site factors involves you’re cost for taxes, loans, and tools? A) land B) bulk-gaining C) bulk-reducing D) labor
E) none of these
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Free Response question #1:
This photo shows a new
phone/telemarketing center in downtown
Clearwater, Florida. This center takes
orders from all over the world for 5 major
US companies whose factories are in New
York.
A. Explain 2 reasons why these
northeastern factories would locate their
call centers in Clearwater.
B. Explain why Clearwater should not plan
on the call centers as part of their long
range plans for the city.
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FR #2:
According to Alfred Webber’s Least Cost
Theory, three factors determine the location of
a manufacturing plant; location of raw
materials, location of the market and transport
costs.
Using the map and Weberian theory, explain
the location of ethanol plants in the US.
(Ethanol is made from corn.)
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Answer Key:
1. C
14. A
27. C
40. B
53. A
2. A
15. A
28. A
41. A
54. D
3. D
16. C
29. B
42. D
55. E
4. C
17. D
30. B
43. C
5. B
18. C
31. D
44. D
6. B
19. D
32. C
45. B
7. A
20. C
33. D
46. C
8. D
21. B
34. C
47. C
9. B
22. C
35. B
48. B
10. C
23. C
36. A
49. A
11. C
24. A
37. C
50. B
12. C
25. C
38. B
51. E
13. C
26. B
39. C
52. C
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Free response answers:
FR#1: This is worth a total of 35 pts. Your answers should be something like the following:
A. 1. One reason would be that Florida, like most other southern states, is a “right to work” state which means that unions are not strong in this area and southern
workers will accept lower pay. Call center workers in NY/NJ expect higher pay than workers in Florida. The businesses save money by having their call center in
Clearwater, Florida. ( 10 pts.)
2. A second reason is that the call center is a “footloose job,” meaning that it doesn’t need to be located near the actual factories as all they do is take the orders
over the phone or internet. Locating for cheaper labor make a great deal of sense in this kind of industry. (10 pts.)
B. Because this call center is “footloose” they could re-locate to another cheaper location at any time. All they have to move is computers and phones. Clearwater
should not plan great things or spend large amounts of money to help this business. (No new roads or special buildings for this business) (15 pts.)
FR#2: This is worth 20 total points.
The map shows the location of ethanol plants and areas of heavy corn production. A huge amount of corn is used to make smaller amounts of ethanol. This is a
bulk-reducing industry. The ethanol plants need to locate near the corn in order to save on transportation costs of shipping large amounts of corn, as it is cheaper to
ship the smaller amounts of ethanol.
Those plants which are not near the corn (California, Seattle) are located where they are, due to very high populations of customers. In those cases, shipping in the
corn is cheaper than shipping the ethanol.
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Calculating your grade on test #11.
Add how many you got correct on the multiple choice part (55 possible) to how many
points you scored on the FR portion (55 possible)…110 total.
The following scale will show the approximate score if this test were the real AP exam. Remember that this is an
approximation. While 65-74% is normally the range for a 3 on the test, it is not definite. Over the years I have
seen scores as low as 60% be the low portion of a 3 score.
Out of 110 possible points:
72-83 is most likely a 3
84-94 is most likely a 4
95-110 is most likely a 5
Before moving on to topic/chapter 12, let’s take a practice test on chapters 1-11.
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