Chapter 11Chapter 11

IndustryIndustry

Key IssuesKey Issues1. Where did industry originate?2. Where is industry distributed?3. Why do industries have different

distributions?4. Why do industries face problems?

The Industrial RevolutionThe Industrial Revolution

Beginning in the United Kingdom around 1750, the Industrial Revolution diffused to Europe and North America in the 19th century and to the rest of the world in the 20th century.

The Industrial Revolution resulted in new social, economic, and political changes, not just industrial ones.

Prior to the I.R., home-based manufacturing was known as the cottage industry system.

TransportationTransportation

The new engineering innovations made their biggest impact on transportation, especially canals and railways.

The canals soon were superseded by the invention of another transportation system, the railway, or “iron horse.”

Two separate but coordinated engineering improvements were required: the locomotive, and iron rails for it to run on.

The first public railway was opened in the north of England in 1825.

Diffusion of RailwaysDiffusion of Railways

Europeans developed many early inventions of the Industrial Revolution in the late 1700s.

The Belgians led the way in new coal-mining techniques, the French had the first coal- fired blast furnace for making iron, and the Germans made the first industrial textile mill.

Europe’s political problems slowed development of modern transportation systems, especially the railway.

Fig. 11-2: The year by which the first railway opened shows the diffusion of railways and the Industrial Revolution from Britain.

Diffusion from the Textile Diffusion from the Textile IndustryIndustry

The textile industry joined the iron industry early in adopting Watt’s steam engine.

From the clothing industry’s need for new bleaching techniques emerged another industry that is characteristic of the Industrial Revolution: chemicals.

Diffusion to the United Diffusion to the United StatesStates

Industry arrived a bit later in the United States than in Western Europe, but it spread much faster.

The first U.S. textile mill was built in Pawtucket, Rhode Island, in 1791, by Samuel Slater.

The textile industry grew rapidly after 1808, when the U.S. government imposed an embargo on European trade to avoid entanglement in the Napoleonic Wars.

World Industrial RegionsWorld Industrial RegionsNorth America

◦ Industrialized areas in North America◦ Changing distribution of U.S. manufacturing

Europe◦ Western Europe◦ Eastern Europe

East Asia

Manufacturing RegionsManufacturing Regions

Fig. 11-3: The world’s major manufacturing regions are found in North America, Europe, and East Asia. Other manufacturing centers are also found elsewhere.

North AmericaNorth America Manufacturing in North America is concentrated in the

northeastern quadrant of the United States and in southeastern Canada.

Only 5 percent of the land area of these countries contains one-third of the population and nearly two-thirds of the manufacturing output.

What factors allowed this region to develop industry first?

Manufacturing Value Manufacturing Value ChangeChange

Fig. 11-5: The value and growth of manufacturing in major metropolitan areas in the U.S. between 1972 and 1997.

Industrial LocationIndustrial LocationSituation factors

◦ Location near inputs◦ Location near markets◦ Transport choices

Site factors◦ Land◦ Labor◦ Capital

Obstacles to optimum location

Situation FactorsSituation Factors

A manufacturer tries to locate its factory as close as possible to both buyers and sellers.

If the cost of transporting the product exceeds the cost of transporting inputs, then optimal plant location is as close as possible to the customer.

If the weight and bulk of any one input is particularly great, the firm may locate near the source of that input to minimize transportation cost.

Bulk-gaining Industries Bulk-gaining Industries A bulk-gaining industry makes something that gains volume or weight

during production.

Companies like Coca-Cola and Pepsi-co manufacture syrups and ship them to bottlers in hundreds of communities.

bottlers can minimize costs by producing soft drinks near their consumers instead of shipping water (their heaviest input) long distances.

Location of Beer BreweriesLocation of Beer Breweries

Fig. 11-12: Beer brewing is a bulk-gaining industry that needs to be located near consumers. Breweries of the two largest brewers are located near major population centers.

Other Bulk-Gaining Other Bulk-Gaining Industries Industries More commonly, bulk-gaining industries manufacture products

that gain volume rather than weight.

Common fabricated products include televisions, refrigerators, and motor vehicles.

If the fabricated product occupies a much larger volume than its individual parts, then the cost of shipping the final product to consumers is likely to be a critical factor.

Single-Market Single-Market ManufacturersManufacturers

Single-market manufacturers make products sold primarily in one location, so they also cluster near their markets.

For example, several times a year, buyers come to New York from all over the United States to select high-style apparel.

Manufacturers then receive large orders for certain garments to be delivered.

Consequently, high-style clothing manufacturers concentrate around New York.

Manufacturers in turn demand rapid delivery of specialized components, such as clasps, clips, pins, and zippers.

The specialized component manufacturers, therefore, also concentrate in New York.

Perishable ProductsPerishable Products To deliver their products to consumers as rapidly as possible,

perishable-product industries must be located near their markets.

The daily newspaper is an example of a product other than food that is highly perishable because it contains dated information.

Ship, Rail, Truck, or Air?Ship, Rail, Truck, or Air?

Firms seek the lowest-cost mode of transport, but the cheapest of the four alternatives changes with the distance that goods are being sent.

Trucks are most often used for short distance delivery and trains for longer distances.

Ship transport is attractive for very long distances.

Air is normally the most expensive alternative for all distances, but an increasing number of firms transport by air to ensure speedy delivery of small-bulk, high-value packages.

Break-of-Bulk PointsBreak-of-Bulk Points Regardless of transportation mode, cost rises each time that

inputs or products are transferred from one mode to another.

A break-of-bulk point is a location where transfer among transportation modes is possible.

Important break-of-bulk points include seaports and airports.

Site Factors: LandSite Factors: Land

Land is much cheaper in suburban or rural locations than near the center city.

Industries may be attracted to specific parcels of land that are accessible to energy sources.

Industry may also be attracted to a particular location because of amenities at the site.

LaborLabor A labor-intensive industry is one in which labor cost is a

high percentage of expense.

Some labor intensive industries require highly skilled labor to maximize profit, whereas others need less skilled, inexpensive labor.

U.S. Textile and Clothing U.S. Textile and Clothing IndustriesIndustries

U.S. textile weavers and clothing manufacturers have changed locations to be near sources of low-cost employees.

U.S. textile and clothing firms were concentrated in the Northeast during the nineteenth century employing European immigrants.

Workers began to demand better working conditions and higher wages around 1900.

Skilled Labor IndustriesSkilled Labor Industries Companies may

become more successful by paying higher wages for skilled labor than by producing an inferior product made by lower-paid, less skilled workers.

Computer manufacturers have concentrated in the highest-wage regions in the United States.

These regions have a large concentration of skilled workers because of proximity to major university centers.

CapitalCapital

Financial institutions in many LDCs are short of funds, so new industries must seek loans from banks in MDCs.

Local and national governments increasingly attempt to influence the location of industry by providing financial incentives.

These include grants, low-cost loans, and tax breaks.

Industrial ProblemsIndustrial ProblemsGlobal perspective

◦ Stagnant demand◦ Increased capacity

More developed countries◦ Trading blocs◦ Disparities within trading blocs

Less developed countries◦ Old problems for LDCs◦ New problems for LDCs

Stagnant DemandStagnant Demand

Demand for many manufactured goods has slowed in MDCs during the past quarter century.

More developed countries now have little, if any, population growth.

Wages have not risen as fast as prices during the past two decades.

Increased Capacity Increased Capacity WorldwideWorldwide While demand for products such as steel has stagnated during the

past quarter century, global capacity to produce them has increased.

Higher industrial capacity is primarily a result of two trends: the global diffusion of the Industrial Revolution and the desire by individual countries to maintain their production despite a global overcapacity.

Cooperation within Trading Cooperation within Trading BlocsBlocs

The three most important trading blocs are the Western Hemisphere, Western Europe, and East Asia.

The North American Free Trade Agreement (NAFTA) brought Mexico into the free trade zone with the United States and Canada.

The European Union has eliminated most barriers to trade through Western Europe.

Cooperation among countries is less formal in East Asia, in part because Japan’s neighbors have much lower levels of economic development and unpleasant memories of Japanese military aggression during the 1930s and 1940s.

Transnational CorporationsTransnational Corporations Initially, transnational (or multinational) corporations were primarily

American owned, but in recent years especially Japanese and Western European countries have been active as well.

Some transnational corporations locate factories in other countries to expand their markets.

Transnational corporations also open factories in countries with lower site factors to reduce their production cost. (labor)

Disparities Within the United Disparities Within the United StatesStates

The South, historically the poorest U.S. region, has had the most rapid growth since the 1930s, stimulated partly by government policy and partly by changing site factors.

The Northeast, traditionally the wealthiest and most industrialized region, claims that development in the South has been at the expense its of old industrialized communities.

2010 Census

Chapter 11Chapter 11

IndustryIndustryThe EndThe End