Industrial locational pattern

Agglomeration

Case: industrial estates in HK

Industrial land useUse of land for industrial activities

Old industrial areasOld industrial areas

Industrial estatesIndustrial estates

Hong Kong Science Park

Tsuen Wan Lai Chi

KokKwun Tong

Yuen Long Industrial Estate

Tai Po Industrial Estate

Tseung Kwan O Industrial Estate

CyberportDo you know what are

the differences between old industrial areas and

industrial estates?

For example, industrial estates are more spacious, of lower density and more

well-planned.

Areas for high-technology industry

Areas for high-technology industry

The Exercise Key

HK industrial estates in Hong Kong & space cost curve analysis

The answer keya(i)

X – I (brewing of beer)

Y – B or H (concrete panels/

tempered glass)

Z – F (dairy products & soft drinks)

The answer keya(ii)

industries in the industrial estates:

- occupies large space / larger factory

buildings

- not produced in flatted factories

- modern capital – and technology-

intensive industries

The answer keyb

- lower land acquisition costs

- land converted from farm lands

- inland site – no need for reclamation

from the sea as in the case of the two

other estates

The answer keyb (con’t)

- cargo loading and storing facilities

(as at waterfront sites of Tseung Kwan

O) not required

- only road transport service provided

(no water transport)

The answer keyc

- industrial estates are located in

suburban areas

- cost curve of the industries declines

with distance from city centre – mainly

due to lower land price at suburban

locations

- as a result of less competition or

demand for space

The answer keyc (con’t)

- revenue curve of the industries

remains constant over space

- no spatial variation in the price of

product

- uniform price of the finished products

in the local market

The answer keyc (con’t)

- or no local spatial variation in price

element for export-oriented industries

- whilst the higher freight charges of

road transport to and from the port for

these suburban industries are

relatively insignificant

The answer keyd.- better planning provides more open

space and road network

- reduction of congestion problems

- sewage disposal facilities / sewage

treatment plant reduce water pollution

- strict control on types of industries /

emissions

- location distant from housing areas reduces environmental impact

Industrial agglomeration

What & why?

Industrial agglomeration? industries can obtain benefits from

clustering togetheras described as internal and external

economies

(refer to the discussion on the part Weber’s industrial model – the 2nd deviating factor)

Industrial agglomeration?Agglomeration emerges as a

phenomenon which demonstrates a spatial clustering or concentration of industrial activities in a relatively small region;

As a process, agglomeration triggers a snowball effect to further attracts manufacturing firms / plants to cluster in that relatively small area over time.

Industrial agglomeration?With given time, it results in the growth

of a large industrial areal pattern of industrial land use, characterized with the concentration of associated and inter-denpendent industries and plants in the surrounded areas.

There are different scales of industrial agglomeration.

Industrial agglomeration: scales (1) Industrial districts within cities e.g. HK – Lai Chi Kok, Tai Po Sydney – Rockdale, Paramatta

(2) Minor industrial centres / towns e.g.in Pearl River Delta / Zhujiang Delta

Dongguan (hard-disk drive, PC accessories), Foshan (light bulbs), Shunde (electrical appliances)

Industrial agglomeration: scales (3) Industrial cities (with specialization) e.g. Detroit (automobile), USA Nagoya (motor cars), Japan Shanghai, Shenzhen (textile), China (4) Industrial regions

e.g. the Honshu Industrial Belt in Japan Atlantic Seaboard, New England, US the Ruhr Valley of western Europe the Damordar Valley integrated plan,

India

Industrial agglomeration: scalesSpecialization: - IT industry of Silicon Valley in California,

USA - Shipbuilding surrounding the Inland Sea,

Japan - light fabricating industries, toys in the

Pearl River Delta, South China

Industrial agglomeration: scales (5) Science parks – regional clusters of

hi-tech innovative industries e.g. Silicon Valley, Route 128 (near Boston, New England (US), Tijuana Triangle (Mexico) Cambridge Science Park, along the M4 and M11 corridors, Hsinchu Science Park (Taiwan), Hong Kong Science Park (refer to T.B. for details)

Industrial agglomeration: scales (5) Science parks (con’t) e.g. Zhongguancun in Beijing, Multimedia- Super Corridor (Kuala Lumpur) in Malaysia Singapore Science Park, Bangalore in India, Tel-Aviv-Yafo in Israel

Lesson Preparation:

Think about it - What are the possible results of excess agglomeration?

Excessive Agglomeration?Diseconomies may set in to offset any

advantages of industrial clustering

resulting in industrial decentralization / dispersion / deglomeration

Industrial Deglomeration / Decentralization / Dispersion

Industrial decentralization:why Physical factors Economic Social Political Environmental Institutional Marketing others

ID – Physical factorsShortage of land for further expansion

& overcrowding Insufficient raw materialsLack of storing facilitiesTraffic congestion

What are the results of the above?

ID – Economic factors Higher land rents - strong competition among

land users bid up the land price and rent /

Higher land taxes due to shortage of land Higher production costs (cost of inputs) Lack of auxiliary facilities & services resulting

in rising costs Traffic congestion results in delay in supplies

and delivery, incurring higher costs & loss of good will

ID – other factors 1. Production disturbance caused by labour union 2. Waste disposal 3. Environmental degradation/ pollution 4. Policy of urban land use zoning 5. Availability of labour 6. Better utilization of raw materials located in widely dispersed sources 7. Capturing of wider potential markets (DL-RD) 8. Enjoying benefits from incentives by govt. in the less developed industrial areas

ID – other factors 9. Government policy/international agreements (a) stick / discouragement due to:

- overconcentration of industrial activities- overcrowding in the city centres / inner

city- by stricter pollution control, heavy tax,

etc.- by dispersing / decentralizing economic

activities; encouraging population decentralization to less prosperous regions - e.g. the industrial relocation in China in the 1950s- late 1970s

ID – other factors 9. Government policy/international agreements (b) carrot / encouragement / incentives / due to:

- financial assistance e.g. grants & loans, subsidies, tax holiday & allowance, provision of ind. land, contract preference, lower power price

- improvement & investment in infrastructure

e.g. transport & public facilities (supply of water, electricity, waste disposal), housing, education)

ID – other factors 9. Government policy/international agreements (b) carrot / encouragement / incentives / due to:

- direct investiment in industries e.g. national enterprise / factories

- protect local, dispersed industries with trade restrictions imposed on foreign enterprises

e.g. tariffs, quotas, embargo

ID – motives behind govt policy (a) Economic considerations

- utilization of resources (factors of production) in

the dispersed areas - regional balance of national economic development

- diseconomies of excess agglomeration

ID – motives behind govt policy (b) Social considerations

- tackling regional inequalities that result in social conflicts / instability / problems

- regional unemployment / underemployment - drop in income levels / tax income - large scale migration from the less

prosperous to the more prosperous regions - alleviating the problems occurring in the regions with excess agglomeration - environmental degradation, crime, distress, competitive nature of social & econ. structure

ID – motives behind govt policy (c) Political considerations

- reducing regional disparities and maintaining national cohesion - withholding the chance of wining the re-election

of the ruling parties in the government (d) Strategic considerations

- ensuring security by decentralizing industrial development in times of war / becoming less vulnerable to attack

ID – Scales & Resulting patterns Short-distance (city level) (1) outward shift to the suburban areas

e.g. Hong Kong (old vs new),

Sydney & Melbourne, New York Long-distance (regional / national level) (2) Dispersal to new regions (with movt with

populuation, esp. market-oriented ind.)

ID – Scales & Resulting patterns Long-distance (international level)

(3) Cross-border from the more prosperous to the less e.g. China, Brazil

- from MDCs to LDCs (lower production cost & potential markets)- from MDCs to MDCs

(expanding overseas markets)- from LDCs to MDCs

(expanding overseas markets)

ID – Hindering factors Barriers to be the pioneer movers, e.g.1. General preference vs financial incentives2. Government’s objectives vs individual

industrialist3. Very strong initiatives are required to offset

industrial inertia4. Home town effect5. Risks and uncertainties6. Imperfect knowledge7. Existing ind. linkages, prestiage vs relocation e.g. ind. Inertia & agglomeration continue in New England (USA)

Industrial inertia

The case of iron & steel industry in Japan

Globalization – Transnational & Multi-point production

IT industry in Silicon Valley

Transnational corporations TNS The ones that operate in many different

countries regardless of national boundaries. The headquarters and main factory are

usually located in an economically more developed countries.

Although, at first, many branch factories were in economically less developed countries (usu. more than 1 country), there has been an increasingly global shift to the more affluent markets of Europe, North America and Japan.

Details (T.B. p.573-574)

Examples of TNCs TNCs based in MDCs:e.g. Automobiles: Honda, Toyota, Nissan IT industries: IBM, HP, Microsoft

Electronics: Sony, Panasonic, Epson Sportswear: Nike, Adidas, Puma Fast food: McDonald’s, Wendy’s, Coca Cola, KFC Superstore: Walmart, World Superstores branch factories & offices in MDCs &LDCse.g. Toyota (Japan) – MDCs : US, CN, AU, EU LDCs: China, Brazil, India, S.E. Asia

Examples of TNCs TNCs based in LDCs

- esp. those more developed LDCs / NICs (newly industrialized countries)e.g. Samsung (electronic firm based in S Korea) - MDCs : EU, N Am, Japan - LDCs* :the Far East, SE Asia, S America

TNCs: The trend of the recent decades headquarters still in the MDCs Many production bases (plants) and sales

outlets (marketing offices) in other countries Demonstrating the trend of diverting overseas

investments through setting up multi-point production towards globalization.

Establishment of global specialization / light manufacturing / labour-intensive / footloose

Think about it: the textile industry?

Globalization – why? why is there the rapid growth of trade

relationship between the MDCs & LDCs?

(1) improvement in transport & comm tech

- improved efficiency of moving raw

materials and finished products

- efficient global communication

e.g. fax machines, email, tele- / video-

conferencing

Globalization – why?

(2) for reducing cost of production- higher production cost in the MDCs

e.g. higher wage cost due to higher skills, education background & productivity, low birth rate and labour shortage; higher land price due to keen

competition of ind. land & limited

room for further expansion

Globalization – why?

(3) linkage with market- to establish direct contact with clients

e.g. adapt to changing market demands and customers’ needs potential market expansion more business opportunities even in the LDCs

Globalization – why?

(4) technological transfer - adaptation & sharing of technology and managerial skills

e.g. Toyota / Honda spirit

Globalization – why?

(5) government / institutional policies In LDCs:

- financial incentives to attract FID e.g. preferential terms, lower tax, tariff

- stable political & sound legal system e.g. Singapore, India vs African nations In MDCs:

- strict law on controlling pollution - higher production cost vs Mexico bi-lateral / multi-lateral trade agreements

Globalization – impacts in LDCs

(1) socio-economic impacts- profit-drained- economic instability due to withdrawal

of investment at any given time - multiplier effect to stimulate growth - provision of job opportunities - rise in income level & living standard - increase in GDP & tax income - improved infrastructure with FID - entrance to foreign markets

Globalization – impacts in LDCs(1) socio-economic impacts (con’t)- measures to attract further FDI: e.g. education & training programs to offer qualified / eligible workers - increased links between the industry & local R&D institutes - setting up liberal trade policies, inter- national transportation facilities & marketing networks - joining global / regional trading

organizations

Globalization – impacts in LDCs(2) environmental impacts- environmental degradation:why?

- limited awareness to env. conservation

- low level of technology- lack of scientific knowledge- heavy indebtedness

Globalization – impacts in MDCs

Refer to the case study of the IT industryin Silicon Valley