Transcript Services PP #2 - Loudoun County Public Schools

SERVICES PP #2
Why are consumer services distributed
in a regular pattern?


Consumer services and
business services do not
have the same distributions
Consumer services generally
follow a regular pattern
based on size of settlements

Larger settlements offer more
consumer services than smaller
settlements
Central Place Theory

Selecting the right location for
a new shop is probably the
most important factor in the
profitability of a consumer
service

Central Place theory helps
explain how the most
profitable location can be
identified

Central Place Theory

A Central place is a market
center for the exchange of
goods and services by people
attracted from the surrounding
area



Central Place Theory

1st proposed in 1930s by
German geographer Walter
Christaller


Theory applies most clearly in
regions that are neither heavily
industrialized nor interrupted by
major physical features such as
rivers or mountain ranges
Concept was further
developed in the United
States in 1950s

Centrally located to maximize
accessibility from surrounding
area
Central places compete
against each other to serve as
markets for goods and
services for the surrounding
region
This competition creates a
regular pattern of settlements
Market Area of A Service

The area surrounding a
service from which
customers are attracted is
the market area or
hinterland

A region with a core where the
characteristic is most intense
Consumers near the center of the
circle obtain services from local
establishments


To establish a market area, a
circle is drawn around a node
of service on a map

Customers prefer to get services
from nearest location

Market area is like a nodal
region



The entire United States can be
divided into market areas
based on the hinterland
surrounding the largest urban
settlements

The territory inside the circle is
the market area

The closer to the periphery of the
circle, the greater the % of
consumers who will choose to
obtain services from other nodes
About 171 functional regions
called “daily urban systems”
To represent central place
theory, geographers draw
hexagons around settlements

Used instead of circles b/c no
gaps
Designated Market Areas
Size of Market Area

The Market area of every service
varies

To determine the extent of a
market area need two pieces of
information about a service



Range is the radius of the circle drawn to
delineate a service’s market area
Expressed usually in travel time (minutes,
hours) than in distance
People are willing to go short
distances for everyday services, like
groceries

Willing to drive further distances for
other services, like a concert
Example:

Definition:

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
Maximum distance people are willing to
travel for use of a service



Definition:


Threshold of Service
Range and threshold
Range of Service


In a large urban settlement a fast-food
franchise has a range of roughly 3 miles
whereas a concert arena has a range of
roughly 60 miles
Once range is determined, provider
must determine where a location is
suitable by counting potential
customers



Minimum number of people needed to
support the service
Every business has a minimum number of
customers required to generate enough
sales to make a profit
Census data helps with determining
population
Example threshold for a supermarket is
about 30,000 people
How potential customers are counted
inside the range depends on the
product


Example: Movie theaters attract younger
people
Also wealth is taken into account
Market-Area Analysis

Profitability of a location

Is a good or service going to be
profitable in that location?

Compute range, threshold, and draw
a circle with a 15 mile radius and
count people within circle

Best location in non-linear
settlement

Geographers still apply the gravity
model to find the best location,
following these steps
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Optimal location within a
market

Next question after range and
threshold is where IN the market
area should the service be
located to maximize profitability?

Best location in linear settlement


Gravity model:
 predicts that the optimal
location of a service is directly
related to the number of
people in the area and
inversely related to the
distance people must travel to
access it
Customer patterns:


Greater # of people living in
a particular place = greater
potential customers
Farther people are from
particular service, less likely
are to use it



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
Identify a possible site for a new
service
Within the range of the service,
identify where every potential user
lives
Measure the distance from the
possible site of the new service to
every potential user
Divide each potential user by the
distance to the potential site for the
service
Sum all of the results of potential
users divided by distances
Select a possible location for the
new service, and repeat steps 2, 3,
4, and 5
Compare the results of step 5 for all
possible sites. The site with the
highest score has the highest
potential number of users, therefore
the optimal location for the service
Hierarchy of Services and Settlements

Small settlements are limited to
consumer services that have small
thresholds, short ranges, and small
market areas, because too few
people live in small settlements to
support many services


A large department store or
specialty store cannot survive in a
small settlement because it needs a
large population to support it
Larger settlements provide services
having larger thresholds, ranges,
and market areas

Services more diverse

We only travel further distances if
the price is much lower or
unavailable locally
Nesting of Services and Settlements

According to Central Place
Theory, market areas across an
MDC would be series of
hexagons of various sizes,
unless interrupted by physical
features


Christaller

Four different levels of market
area

Hamlet




Very small market area,
represented by the smallest
contiguous hexagons
Village
Town
City
Showed that distances between
settlements in southern
Germany followed a regular
pattern

MDCs have numerous small
settlements with small thresholds
and ranges, and far fewer
large settlements with large
thresholds and ranges
Nesting pattern is illustrated
with overlapping hexagons of
different size


Indentified 7 sizes
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market hamlet, township
center, county seat, district city,
small state capital, provincial
head capital, regional capital
city
In Germany, Hamlets had an
average population of 800
Principle of Nesting Market
Areas

Also works at the scale of
services within a city
Rank-Size Distribution of Settlements


Geographers observed in MDCs
that ranking settlements by size
(population) produces a regular
pattern or hierarchy

Rank-Size Rule


Country’s nth-largest settlement is
1/n the population of the largest
settlement

i.e. second largest city is ½ size of the
largest


Important because a country that
follows the Rank-size rule, like the
United States, tends to be a society
that is sufficiently wealthy to justify
the provision of goods and services
to consumers
Don’t always follow Rank-Size Rule

Primate City Rule


third largest city is 1/3 size of the
largest and so on…..
Should graph like a straight line

If it does not graph on a straight line,
then the country does not have a
rank-size distribution

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Largest settlement has more than
twice as many people as the secondranking settlement
Largest city is called primate city
 Example:
 Denmark- Copenhagen
 United Kingdom- London
 Romania- Bucharest
LDCs often follow primate rule
Indicates that there is not enough
wealth in society to pay for a full
variety of services
 Have to travel much further for
shops, hospitals, etc.
Periodic Markets

Services at the lower end of the
central place hierarchy may be
provided at a periodic market

Frequency varies by culture
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Definition:
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
collection of individual vendors
who come together to offer goods
and services in a location on
specified days
Typically set up in a street or
other public space
Provides goods to mainly
residents of LDCs or rural areas
of MDCs

Vendors often mobile, part-time,
provide small quantities

Muslim countries
Rural China
Korea
Africa
Why do Business Services Locate in
Large Settlements??

Every urban settlement
provides consumer
services to people in a
surrounding area

But not every settlement
of a given size has the
same number and types
of business services
Hierarchy of Business Services
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Services in World Cities

World cities are most closely
integrated into the global
economic system because they
are at the center of flow of
information and capital

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Business services concentrate
in disproportionately large
numbers in world cities
New forms of transportation
and communication services
were expected to reduce the
need for clustering of services
in large cities
 Example: the Railroad in
the 19th century or motor
vehicle in the 20th
century
 In some cases opposite
Hierarchy of Business Services
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Business services in world cities

Clustering of business services in
the modern world city is a product
of the Industrial Revolution

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World cities attract the
headquarters of banks, insurance
companies, and specialized
financial institutions
Shares of major corporations are
bought and sold on the stock
exchanges, which are located in
world cities
Lawyers, accountants, and other
professionals cluster in world
cities to provide advice to major
corporations
Advertising agencies, marketing
firms, and other services
concerned with fashion and style
also locate in world cities

Consumer services in world cities

Because of large size, world cities
have retail services with extensive
market areas

But they may have even more
retailers than large size alone
would predict
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A disproportionately large
number of wealthy people live in
world cities
Leisure services of national significance
cluster in world cities
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Example: concerts, plays,
professional sporting events
Contain largest libraries and
museums
Hierarchy of Business Services
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Public services in world cities
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World cities are centers of national
or international political power
Most are national capitals, often
contain:

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
Palaces, mansions for heads of
state
Imposing structures for national
legislature

Courts

Offices for government agencies
Also clustered in world cities are
offices for groups having business
with the government

Foreign embassies, labor unions,
etc.

Exception!!!

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New York City is unlike other
world cities, it is not the nation’s
capital
Home to the world’s major
international organizations, the
United Nations, it attracts
thousands of diplomats and
bureaucrats
Hierarchy of Business Services
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Four Levels of Business services

World Cities

Dominant
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London, NYC, Tokyo
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Specialized Producer-service centers
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Offer more narrow and highly specialized
variety of services
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One group specializes in management and R&D
activities related to specific industries
Each is largest city in one of three
main regions in developed world
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Major
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Chicago, L.A., D.C., Brussels, Frankfurt, Paris,
Zurich, Sao Paulo, Singapore
Secondary

Houston, Miami, San Fran, Toronto

Bangkok, Bombay, Hong Kong, Manila,
Osaka, Seoul, Taipei

Berlin, Madrid, Milan, Rotterdam, Vienna

Buenos Aires, Caracas, Mexico City, Rio de
Janerio
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Johannesburg, Sydney
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Contain headquarters of large corps, well
developed banking facilities, etc.

Two divisions: regional, subregional
Second group specializes as centers of
government and education

Notably state capitals that also have a major
university

Example: Albany, NY; Raleigh-Durham, NC;
Columbia, SC
Dependent centers

These provide relatively unskilled jobs and
depend for their economic health on decisions
made in world cities, regional command and
control centers, and specialized producer-service
centers
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Four sub-types in United States
Command and Control centers
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Example: motor vehicles- Detroit, SteelPittsburgh, semi-conductors- San Jose, CA
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Resort, Retirement, and Residential Centers
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Manufacturing centers, Military centers
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Mining centers
Business Services in LDCs

In the global economy, LDCs
specialize in two distinctive types of
business services:
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Offshore financial services
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Provide two important functions

Taxes

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Taxes on income, profits, and
capital gains are typically low
or non-existent
Corporations have
incorporated in an off-shore
center also have tax-free
exemption regardless of
nationality of owners
U.S. loses an estimated $70
billion in tax revenue each
year

Privacy
 Secrecy laws can help
evade disclosure in home
countries
 Can protect assets from
malpractice suits or divorce
 Can hide illegal activities
 Example: Cayman Islands
Back-office functions

Known as business-processing
outsourcing (BPO)
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Include processing insurance
claims, payroll management,
transcription work, etc.
Also includes centers for
responding to billing or technical
inquires
LDCs attract BPO because:
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Low wages
Ability to speak English
Economic Base of Settlements

A settlement’s distinctive
economic structure derives
from its basic industries
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Basic Industry
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export outside of settlement
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Can be identified by computing
the % of community’s workers
employed in different types of
businesses
The % of workers employed in
a particular industry in a
community is then compared to
the % of all workers in the
country in that industry
If % is much higher in the local
community, then that type of
business is a basic economic
activity
Non-basic Industry

customers live in same
community
Economic base

unique collection of basic
industries defines its base

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Important because exporting
by the basic industries brings
money into the local economy
Stimulates the provision for
more non-basic consumer
services for the settlement


That attracts new workers,
who bring more families
That brings more consumer
services to meet new needs
Economic Base of Settlements

Specialization of Cities in
Different Services
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Examples:
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Settlements in the U.S. can be
classified by their type of basic
activity

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
Each type of basic activity has
a different spatial distribution
Concept of basic industries
used to be referred to as
manufacturing
In post-industrial America,
increasingly the basic economic
activities are in business,
consumer, or public services

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Business Services

General business : large metro areas
such as L.A., NYC, and Chicago

Computing and data processing: Boston
and San Jose

High-tech: Austin, Orlando, RaleighDurham

Management-consulting: D.C.
Consumer Services

Entertainment and Recreation: Atlantic
City, Las Vegas, Reno

Medical Services: Rochester, Minnesota
Public Services

State capitals

Large Universities

Military bases
Economic Base of Settlements

Distribution of Talent
Individuals possessing
special talents are not
distributed uniformly
among cities
 Some cities have a higher
% of talented individuals
than others


Correlation found between
the distribution of talent and
the distribution of diversity in
the largest U.S. cities