Chapter 11

Chapter 11

Key Issue 2: Why Do Industries Have Different Distributions? Maximize profits by minimizing production costs! Industrial Location Goal of industry is to maximize profit and minimize production costs!

The two main factors that industry considers are: Situation factors: transport of materials to and from a factory Location near inputs (materials) Location near markets Transport choices Site factors: unique characteristics of a location

Land Labor Capital Situation Factors Involves the transporting of materials to and from a factory. An industry seeks a location that minimizes the cost of transporting inputs (materials

needed) to the factory and finished goods to the consumers The further something is transportedthe higher the costtime and distance is $$$!!! Where should the pencil industry locate their factory? Bulk-gaining/ Bulk-reducing

demonstration Bulk-gaining becomes Bulk-reducing becomes If cost of transporting finished product

is more expensive than the cost of transporting the materials needed to make it, the optimal plant location is near consumer Materials Product factory

Consumer If cost of transporting materials is more than the cost of transporting the final product, the optimal plant location is near materials Materials

Consumer Product factory Proximity to Inputs: Bulk-Reducing Industry Final product weights less than the inputs Copper Steelmini-mills use scrap metal = easier Main copper production in U.S.

Proximity to Market: Bulk-Gaining Industry Something gains volume or weight during production. Soft drink bottling: bottle is lightweight, add liquid is gets heavierliquid is expensive to transport production is near consumer (market) Fabricated products: tvs, refrigerators, AC, and

AUTOMOBILES! Proximity to Market: Bulk-Gaining Industry Perishable Products: Milkshed: refrigerated trucks Can you think of some items that perish, or are time sensitive that are not food???

Transportation: the further it goes, the higher the cost Water: cheapest if available and the product is traveling a long distance. Rail: cheapest by land, if available and traveling long distances. Truck: easy to load and unload, so useful if shorter distances.

Air: most expensive, but used sometimes if time is of the essence. Break-of-Bulk Points Cost rises each time inputs or products are transferred from on more of transportation to

another, but. Companies that use multiple transport modes locate a break-of-bulk point Transfer from a ship to a train is possible because it will save money.

Site Factors Result from the unique characteristics of a location Land, labor, and capital are the 3 traditional production factors that may vary among locations Webers Law of Industrial Location Also known as Webers Least Cost Theory Read handout as a class and answer the following

questions: Does this remind you of another model? What four factors determine location of industry?

What is a footloose industry? Give an example. What is agglomeration? Give an example. When is agglomeration a negative? What happens then (vocab word)? If C is the market and K is factory, which diagram shows: A bulk gaining industry? A bulk reducing industry?

A possible footloose industry? Copper Industry in North America Copper mining, concentration, smelting, and refining are examples of bulk-reducing industries. Many are located near the copper mines in Arizona. Integrated Steel Mills

Integrated steel mills in the U.S. are clustered near the southern Great Lakes, which helped minimize transport costs of heavy raw materials.

Steel Minimills Minimills produce steel from scrap metal, and they are distributed around the country near local markets. These are the two largest minimill operators. Change in Steel Production, 19732002

Steel production has generally declined in MDCs and increased in LDCs, especially in China, India, Brazil, and South Korea. The increase has been especially dramatic in CHINA.

Location of Beer Breweries 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. Chevrolet Assembly Plants, 1955

In 1955, GM assembled identical Chevrolets at ten final assembly plants located near major population centers. Chevrolet Assembly Plants, 2003 In 2003, GM was producing a wider variety of vehicles, and production of

various models was spread through the middle of the country. Motor Vehicle Parts Plants U.S.-owned parts plants are clustered near the main final assembly

plants. Foreignowned plants tend to be located further south, where labor unions are weaker. Car Plant Location activity and reading. Electronic Computer Industry

Computer and parts manufacturing requires highly skilled workers and capital. It is clustered in the Northeast and the West Coast. Places like Silicon Valley in Northern California.

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