Transcript Industrial agglomeration

Industrial agglomeration
Outline
What is industrial agglomeration?
 What are the characteristics of industrial
agglomeration?
 How does industrial agglomeration occur?
 Why does industrial agglomeration occur?
 Is industrial agglomeration good?
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What is industrial agglomeration?
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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 as a phenomenon: it
refers to the spatial clustering or
concentration of industrial activities in a
relatively small area.
 Agglomeration as a process: it refers to
the snowballing process whereby more
and more manufacturing firms cluster or
areally concentrate in a relatively small
area.
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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.
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Spatial effects of Ind. Aggl.
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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 interdependent 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
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Minor industrial centres/towns
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PRD - Foshan, Dongguang, Shunda
Industrial cities
Shanghai (textile)
 Nagoya/Toyota (car-making)
 Detroit (car-making)
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Industrial regions
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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
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How is industrial
agglomeration developed?
A case of Quarry Bay
Tai Koo Properties
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Tai Koo Sugar Refinery (1883 – 1972)
Tai Koo Dockyard (1900 – 1972)
Tai Koo Coco-cola Bottling Factory (19521980s)
Quarry Bay
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Tai Koo Sugar Refinery
was established in 1883
With growing trade in raw
cane sugar from Java,
the Philippines and North
Queensland, and ready
markets in China and
Japan, Taikoo Sugar ran
the world's largest sugar
plant in its day, and
owned small fleet of
sugar carrying ships.
What were the original factors and
attraction for the sugar factory?
Available of land
 Coastal location
 Sheltered location
 Availability of labour
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The problem
More than 3,000 workers were needed but
the population of Shaukeiwan was only
3,274
 Hostels were provided and so workers
from other places were attracted
 More jobs mean more income. It in turns
increased the purchasing power of people
 Other related facilities were provided, e.g.
clinic, school
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Tai Koo Dockyard
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in 1900, on land
adjacent to the
sugar refinery,
construction work
began on Taikoo
Dockyard.
Industrial agglomeration
Taikoo Dockyard launched its first
riverboat in 1910, soon began to produce
coasters for the company.
 The dockyard was to become one of Hong
Kong's biggest, and also one of its most
progressive employers, providing its own
housing, hospital and school.
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Snowballing effects
More jobs  more income  higher
purchasing power  development of
entertainment (麗池夜總會)
 More jobs  more settlements  growth
of urban population in Quarry Bay
 More population  more services = more
public utilities
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Snowballing effects
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Quarry Bay was still an important industrial
district in 1970s and 1980s
Factories included soft-drinks factory (7-up),
Printing (Kodak), car repair centre (大昌行),
various electronics ind.
The growing population supported the industries
which become more profitable and enjoyed the
benefits from agglomeration
The whole process is cumulative and growth
becomes self-sustaining.
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.
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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).
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Myrdal’s Model of Cumulative
Causation Process
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 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.
Reasons for industrial
agglomeration
What benefits can be obtained
from industrial agglomeration?
Initial factors and attraction
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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.
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Benefits from vertical linkages
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lower cost of transporting goods from
factory to factory, e.g. integrated plants of
I&S ind. (transfer economies)
Localization economies
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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
a pool of skilled labour and managerial
expertise
 infrastructure savings
 snowballing effect
 research & development
 attracting investment
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Diseconomies of scale
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Physical
shortage of land for expansion
 shortage of labour
 traffic congestion
 urban decay
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Economic
rising rent
 rising labour cost
 high tax
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Social
pollution / environmental problems
 high crime rate
 pressure from labour union
 pressure from green groups
 government policy
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Solution to industrial agglomeration
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Industrial degglomeration/decentralization
(to be discussed in the next lesson)