FACTORS FOR LOCATION Quiz

PDF page 230: Industrial location is a balance between capital, material, and labor and markets. The goal is overall lowest cost. Sometimes pushing down one category, like labor, can increase other costs, like transportation. Substitution is possible across categories. For example, additional capital can replace labor through automation. Earlier factories were built in cities in order to use the labor that was available there. Building in the middle of nowhere could have created an immediate labor shortage. Of course, labor will also migrate to places with available employment.

PDF page 230: Industrial location is a balance between capital, material, and labor and markets. The goal is overall lowest cost. Sometimes pushing down one category, like labor, can increase other costs, like transportation. Substitution is possible across categories. For example, additional capital can replace labor through automation. Earlier factories were built in cities in order to use the labor that was available there. Building in the middle of nowhere could have created an immediate labor shortage. Of course, labor will also migrate to places with available employment.

PDF page 230: Industrial location is a balance between capital, material, and labor and markets. The goal is overall lowest cost. Sometimes pushing down one category, like labor, can increase other costs, like transportation. Substitution is possible across categories. For example, additional capital can replace labor through automation. Earlier factories were built in cities in order to use the labor that was available there. Building in the middle of nowhere could have created an immediate labor shortage. Of course, labor will also migrate to places with available employment.

PDF page 231: Some industrial activities are determined by site, the physical characteristic of a location. If you want to have a coal mine, it is probably a good idea to locate in a place that has coal. This is the most extreme form of restriction, but bear in mind that many places have mineral wealth, but not all of them are extracting that wealth right now. Many places that would otherwise be candidates for resource extraction are not currently being used because the resources cannot be extracted and sold for a profit. If the resource cannot make money, it will not be used. Remember that government subsidies can make some resources more profitable than they normally would be. Other industrial locations are products of their situation. The maquiladoras that line the southern side of the Rio Grande (Rio Bravo in Mexico) border would not be there if the United States were not on the other side of the river. The proximity to the United States is the determining characteristic in the choice to locate there. Industries moved to Mexico because it appeared to make economic sense to do so. They were able to lower labor costs while remaining within the US/Canadian market. Transportations costs increased initially, but transportation costs overall have fallen due to more efficient methods of moving goods. Were the North American Free Trade Agreement (NAFTA) to be revoked the situation of Mexico would change, their access to the markets of the United States and Canada would diminish, and the factories that are there would have a much harder time selling their goods.

PDF page 231: Some industrial activities are determined by site, the physical characteristic of a location. If you want to have a coal mine, it is probably a good idea to locate in a place that has coal. This is the most extreme form of restriction, but bear in mind that many places have mineral wealth, but not all of them are extracting that wealth right now. Many places that would otherwise be candidates for resource extraction are not currently being used because the resources cannot be extracted and sold for a profit. If the resource cannot make money, it will not be used. Remember that government subsidies can make some resources more profitable than they normally would be. Other industrial locations are products of their situation. The maquiladoras that line the southern side of the Rio Grande (Rio Bravo in Mexico) border would not be there if the United States were not on the other side of the river. The proximity to the United States is the determining characteristic in the choice to locate there. Industries moved to Mexico because it appeared to make economic sense to do so. They were able to lower labor costs while remaining within the US/Canadian market. Transportations costs increased initially, but transportation costs overall have fallen due to more efficient methods of moving goods. Were the North American Free Trade Agreement (NAFTA) to be revoked the situation of Mexico would change, their access to the markets of the United States and Canada would diminish, and the factories that are there would have a much harder time selling their goods.

PDF page 231: Some industrial activities are determined by site, the physical characteristic of a location. If you want to have a coal mine, it is probably a good idea to locate in a place that has coal. This is the most extreme form of restriction, but bear in mind that many places have mineral wealth, but not all of them are extracting that wealth right now. Many places that would otherwise be candidates for resource extraction are not currently being used because the resources cannot be extracted and sold for a profit. If the resource cannot make money, it will not be used. Remember that government subsidies can make some resources more profitable than they normally would be. Other industrial locations are products of their situation. The maquiladoras that line the southern side of the Rio Grande (Rio Bravo in Mexico) border would not be there if the United States were not on the other side of the river. The proximity to the United States is the determining characteristic in the choice to locate there. Industries moved to Mexico because it appeared to make economic sense to do so. They were able to lower labor costs while remaining within the US/Canadian market. Transportations costs increased initially, but transportation costs overall have fallen due to more efficient methods of moving goods. Were the North American Free Trade Agreement (NAFTA) to be revoked the situation of Mexico would change, their access to the markets of the United States and Canada would diminish, and the factories that are there would have a much harder time selling their goods.

PDF page 231: Classic economics lumped raw materials and energy under the category of land. Few companies bother to buy the land that produces a particular material, nor do they generally invest in power generation, or their own oil fields. These inputs are subject to the same price pressures as everything other part of the manufacturing process. The land that a factory sits on has become less important over time. In earlier factories, most workers walked to work and factories were compelled to locate on expensive land in cities. That is no longer the case. Due to the widespread diffusion of the automobile, factories can be built in more suburban or even rural areas and workers will commute to the factory. This shifts part of the cost of securing labor onto the workers themselves. It lowers costs for the company. It is still necessary for the company to have access to the transport network, so new factories are usually built to take advantage of existing road networks, often next to interstates. Sourcing materials has become global. Commodified inputs like steel are bought wherever they are relatively cheap and are shipped to where they are needed. Whichever source provider has the lowest cost, including shipping, will likely be chosen by the company. If you have ever bough something online, generally you want to know which company has the product with the lowest overall price. Companies operate the same way.

PDF page 231: Classic economics lumped raw materials and energy under the category of land. Few companies bother to buy the land that produces a particular material, nor do they generally invest in power generation, or their own oil fields. These inputs are subject to the same price pressures as everything other part of the manufacturing process. The land that a factory sits on has become less important over time. In earlier factories, most workers walked to work and factories were compelled to locate on expensive land in cities. That is no longer the case. Due to the widespread diffusion of the automobile, factories can be built in more suburban or even rural areas and workers will commute to the factory. This shifts part of the cost of securing labor onto the workers themselves. It lowers costs for the company. It is still necessary for the company to have access to the transport network, so new factories are usually built to take advantage of existing road networks, often next to interstates. Sourcing materials has become global. Commodified inputs like steel are bought wherever they are relatively cheap and are shipped to where they are needed. Whichever source provider has the lowest cost, including shipping, will likely be chosen by the company. If you have ever bough something online, generally you want to know which company has the product with the lowest overall price. Companies operate the same way.

PDF page 232: There are differences in energy costs across space. For energy intensive industrial activities, cheap energy is essential. China rose from producing very little steel a few decades ago to leading the world today. It this by leveraging low labor costs and a very cheap energy source- vast supplies of (highly-polluting) coal.

PDF page 232: Labor costs can be reduced in a number of ways. One way is simply to pay the workers that you have less money. Workers, however do not like having their pay cut. Sending the work to a place with lower wages has been a common response to higher wages. A large portion of industrial labor requires minimal education. A company can choose to hire high school graduates in wealthy countries for a high wage or equivalently educated workers in poorer countries for far less. The labor pool has thus become globalized. Instead of competing for jobs with the other workers in a particular city, today’s workers are competing for jobs with much of the human population. Labor-intensive industries are particularly sensitive to labor costs. Clothing production has shifted to places with cheap labor as wages in developed countries have increased. Besides the option of simply shipping jobs offshore, there is also the option of replacing workers outright. Most of the industrial jobs that have been lost in the United States in the last 30 years have not been to overseas production, they have been due to automation. Replacing people with machines is as old as industry itself. The difference now is that machines are much more capable than they were in the past and they are much cheaper. Referencing the earlier example of clothing manufacture, production of athletic shirts in the United States got a large boost with the introduction of a factory in Little Rock, Arkansas that relies on a robot called Sewbot. The factory will produce millions of shirts at very low costs ($.33 in labor per shirt). This low cost of labor renders in nearly negligible in importance compared to other factors, such as transporting the materials to the factory and transporting the finished clothes to market. The factory was built by a Chinese company in the center of the United States to minimize transport costs. More factories will likely migrate nearer their markets as the cost of labor becomes less important. Developed countries are already seeing an expansion of manufacturing, but not an expansion of manufacturing employment, due to the influence of automation.

PDF page 232: Labor costs can be reduced in a number of ways. One way is simply to pay the workers that you have less money. Workers, however do not like having their pay cut. Sending the work to a place with lower wages has been a common response to higher wages. A large portion of industrial labor requires minimal education. A company can choose to hire high school graduates in wealthy countries for a high wage or equivalently educated workers in poorer countries for far less. The labor pool has thus become globalized. Instead of competing for jobs with the other workers in a particular city, today’s workers are competing for jobs with much of the human population. Labor-intensive industries are particularly sensitive to labor costs. Clothing production has shifted to places with cheap labor as wages in developed countries have increased. Besides the option of simply shipping jobs offshore, there is also the option of replacing workers outright. Most of the industrial jobs that have been lost in the United States in the last 30 years have not been to overseas production, they have been due to automation. Replacing people with machines is as old as industry itself. The difference now is that machines are much more capable than they were in the past and they are much cheaper. Referencing the earlier example of clothing manufacture, production of athletic shirts in the United States got a large boost with the introduction of a factory in Little Rock, Arkansas that relies on a robot called Sewbot. The factory will produce millions of shirts at very low costs ($.33 in labor per shirt). This low cost of labor renders in nearly negligible in importance compared to other factors, such as transporting the materials to the factory and transporting the finished clothes to market. The factory was built by a Chinese company in the center of the United States to minimize transport costs. More factories will likely migrate nearer their markets as the cost of labor becomes less important. Developed countries are already seeing an expansion of manufacturing, but not an expansion of manufacturing employment, due to the influence of automation.

PDF page 232: An important contributor to geographic thinking regarding industrial locations was Alfred Weber (1868-1958). Weber took the concept of using lowest overall cost for the locations of industry and expanded it. He developed models that held many inputs to manufacturing constant in order to demonstrate the importance of transportation in determining least cost. Weber believed that transportation costs were the most relevant factor in determining the location of an industry. The best way to minimize the cost of