Factors Influencing Industrial Location: Raw Materials, Market, and More
Factors Influencing Industrial Location
The optimal location for a business depends on various factors. For short distances, trucks are often used, while trains and ships are preferred for longer hauls. The cost of transportation varies depending on the type of load.
1.3 Raw Materials (MP)
Many companies locate near their raw materials to reduce costs. This is especially true for materials that are difficult to transport. For example, copper wire manufacturers often locate near copper mines. Similarly, steel companies are often found near iron ore sources. Perishable raw materials, like sugar beets, require processing near their source to prevent spoilage.
1.4 The Market
Proximity to the market is crucial for many businesses. This includes:
- Companies producing daily consumer goods, such as bakeries.
- Prestigious brands that prefer city locations, like haute couture and perfume companies.
- Furniture and clothing factories that need a large consumer base.
- Companies that supply other businesses, which tend to locate near their clients.
Energy
Historically, energy was a major factor in industrial location. For example, coal-powered industries were located near coal mines. However, today, energy is less of a determining factor.
Labor Costs
Labor costs are a significant factor. Factories requiring many workers often locate near cities. In developed countries, labor costs are high due to worker protection laws. This has led many companies to move to developing countries where labor is cheaper.
Personal Factors
Personal preferences, traditions, and the owner’s decisions can also influence where a company is located.
Tax Benefits
Governments often create zones with tax benefits to promote industry. These areas offer reduced or no taxes to attract businesses.
Environmental Factors
Pollution regulations in developed countries can be costly. This has led some companies to relocate to countries with less stringent environmental laws. Conversely, some companies, particularly those in technology, choose environmentally friendly locations for marketing purposes.
2. General Trends in Industrial Location
2.1. Industrial Agglomeration or Concentration
There are two main trends: concentration and dispersion. Concentration occurs when industries cluster in specific areas, attracting more related businesses. This is known as the ‘attraction’ phenomenon.
2.2. Industrializing Industries
As an industrial area grows, it requires more infrastructure and services. This attracts more companies, leading to further industrialization. Sometimes, industries remain in an area even after the initial reason for their location has disappeared.
2.3. Industrial Dispersion
Dispersion occurs when traditional industrial areas become saturated. Noise complaints and other issues lead factories to move outside of cities, often to industrial parks.