Transcript Industrial agglomeration

C3: Industrial Landscapes
Industrial agglomeration
Discussion questions
• Give a definition of agglomeration of industries.
• Explain the possible processes leading to the
agglomeration of industries.
• Suggest reasons why industries tend to
agglomerate.
What is industrial agglomeration?
• It refers to high concentration of industrial
activities in an area because industries may
enjoy both internal and external economies
when they cluster together (agglomerate).
Is it a phenomenon or process?
• Agglomeration is a phenomenon: it refers to
the spatial clustering or concentration of
industrial activities in a relatively small area.
• Agglomeration is a process: it refers to the
snowballing process whereby more and more
manufacturing firms cluster or areally
concentrate in a relatively small area.
2 forms of agglomeration
• Concentration of related or well-linked
factories together and form a specialized
industrial region.
• Concentration of various kinds of factories in
the industrial zones in urban area.
Spatial effects of Ind. Aggl.
• Over time, industrial agglomeration results in
the growth of large industrial
concentrations, producing different areal
patterns of industrial land use. They have large
numbers of associated and inter-dependent
factories, surrounded and served by residential
and commercial areas.
Industrial districts
• Hong Kong - Kwun Tong, Tai Kok Tsui, Tai Po
Industrial Estate
• Sydney - Paramatta, Alexandria, etc
Minor industrial centres/towns
• PRD - Foshan, Dongguang, Shunda
Industrial cities
• Shanghai (textile)
• Nagoya/Toyota (car-making)
• Detroit (car-making)
Industrial regions
• Silicon Valley in
California (electronics)
• around Inland Sea of
Japan (shipbuilding)
• PRD in South China
(toy)
Characteristics of an ind. aggl.
• Clustering of industrial activities
• Functional linkages  production linkages +
service linkages
• When materials move from one firm to another
(production linkages)
• As the firms share the specialized services and
facilities (service linkages)
• Economies of scale
Myrdal’s Model of Cumulative
Causation Process
• A new industrial plant set up
•  extra employment/more jobs
•  income and the purchasing power ↑as the size
of the population grows
•  increases the demand for consumer goods,
houses, schools and services
•  more employment opportunities in other
industries, e.g. in commerce, construction,
service, etc.
Myrdal’s Model of Cumulative
Causation Process
• The new industry itself demands local goods and
services.
• It may attract linked industries which supply it
with raw materials (called supplier-industries)
or use its products (called user-industries).
Myrdal’s Model of Cumulative
Causation Process
•  further increases employment and expanding
services, public utilities and construction.
•  attract even more economic activities which
become more profitable (enjoying the benefits
from agglomeration economies)
• the expanding city (increase in city scale)
reaches the threshold level for various services.
• Thus, the whole process is cumulative and
growth becomes self-sustaining.
Measurement of industrial cluster
• Location quotient
• It is a statistical technique to identify the degree
of concentration of a particular industry in a
given place.
Location quotient
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ei = No. of workers in industry i in area X
e = total no. of local employment in area X
Ei = no. of workers in industry I in the whole country
E = no. of workers in the whole country
If LQ < 1, Area X has a smaller share of industry I than national
average
• If LQ = 1, Area X has the same share of industry I as the national
average
• If LQ > 1, a concentration of industry A in Area X, compared to the
nation as a whole.
Location Quotient
Employment in
computer
manufacturing
Total employment
Area X
2,000
40,000
Country P
200,000
20,000,000
• The location quotient is 5.
• This means that the concentration of computer manufacturing in
Area X is five times more than the national average.
• Computer manufacturing is highly concentrated in Area X.
Reasons for industrial
agglomeration
What benefits can be obtained
from industrial agglomeration?
Initial factors and attraction
• They refer to the original factors that attract the
location of early industries at a certain site.
• These factors can be natural or man-made. They
start the cumulative process of industrial
agglomeration and create the snowballing effects
on industrial development and agglomeration.
• The area with initial growing factors is known as
the growth pole.
Linkages
Subcontract
links
Information
links
Service
links
Production unit
Marketing
links
Subcontract
links
Vertical linkages
Garment Factory
Cloth
Textile Factory
Synthesis fiber
Chemical factory
Horizontal Linkages
Iron & Steel
Factory
Engine
Factory
Glass-making Tyre-making
Factory
Factory
Motor car
assembly factory
Diagonal Linkages
Fruit
canning
bottling
Sugar
refinery
Sugar mill
Ice cream
Jammaking
Glass bottle
factory
3 types of Industrial linkages
• vertical (one-to-one) linkage - forward and
backward linkage
• horizontal (many-to-one) linkage
• diagonal (one-to-many) linkage
• Industries with simple vertical linkages have a
very strong production relationship. They can
obtain the greatest economic advantages, once
they are grouped or agglomerated together in a
small area.
Benefits from vertical linkages
• lower cost of transporting goods from factory to
factory, e.g. integrated plants of I&S ind.
(transfer economies)
Localization economies
• energy savings, e.g. I&S ind.
• waste products or final products from one industry can
be the raw materials of another ∴  specialization in
production.
•  economies of division of labour + mechanization
• discounts can be obtained when several firms buying
similar inputs in bulk.
• Advertising cost ↓∵ good reputation.
• presence of ancillary services
• saving of storage
• close relationships among factories makes it easy to
solve the problems of similar nature and to maintain
higher level of production skills.
Urbanization economies
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a pool of skilled labour and managerial expertise
infrastructure savings
snowballing effect
research & development
attracting investment
Diseconomies of scale
• Physical
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shortage of land for expansion
shortage of labour
traffic congestion
urban decay
• Economic
▫ rising rent
▫ rising labour cost
▫ high tax
• Social
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pollution / environmental problems
high crime rate
pressure from labour union
pressure from green groups
government policy
Solution to industrial agglomeration
• Industrial degglomeration/decentralization
(to be discussed in the next lesson)