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Essay on Industrial Location
Essay # 1. Introduction to Industrial Location:
Though location of industrialisation has been a serious problem for our economists since times past, yet strange enough classical economists have not contributed much on the subject. Carl Joachim Friednich is of the view that, “from Adam Smith to Pigou, no adequate deductive treatment of the causes determining the economic location has been attempted, in spite of the fact that such an analysis may be capable of aiding in further refining the theories of monopolies, transportation rates and international trade.”
In fact these thinkers always felt that it was a problem not serious enough to call for any serious explanation. Location of industries means the methods and desirability of concentrating industries in different areas or localities.
It is with the help of proper location that industrial efficiency becomes possible. Location of industry is a problem which is not only confined to new industries being set up, but is also concerned with the industries which are already in existence. It is, therefore, the responsibility of management of each industrial house to find out from time to time weather favourable conditions still continue for the location of an industry or that these have in any way changed to a great extent.
Location and Localisation:
Each industrialist will try to locate his industry at a place where he finds that the cost of production is lowest. It is called location of industries. On the other hand, when industries are concentrated in a particular area, that is called localisation of industries, which can be due to many reasons including physical location, availability of raw material etc.
Location and Planned Location:
The term planned location was first used by Lord Beveridge. According to him, planned location meant giving each industrial area a variety of industries. It also meant that no large industry should be localised but dispersed. In the words of Sivayya and Dass, “Planned location of industries precedes as a first step to develop the country on regional considerations in order to check expansion of industrial cities and areas only in certain regions.”
These days, problem of industrial location is assuming great significance. It is primarily because every State wants that there should be no regional imbalances. Not only this but every industrial management wants to ensure that industries are located at a place, where the cost of production is the lowest and men, money and material are available without much difficulty.
Essay # 2. Influential Factors of Industrial Location:
Proper location of an industry is assuming great importance and significance these days. It is primarily because concentration of industry creates regional imbalances, whereas un-economic locational factor can discourage setting up of new industries.
We have already seen that neither Weber’s nor Florence’s theory has come upto the mark nor that both the theories suffer from some serious defects. Today it is believed that there are many factors which influence the location resources, availability of raw material psychology of the people etc. All these count a lot.
The factors which influence location of an industry may be discussed as under:
1. Historical Factors:
A Beachman in ‘Economics of Industrial Organisation’ has perhaps rightly said that “When an industry is known to have concentrated in a particular area it is always easy to discover natural advantages attaching to the site” In many cases industries get located in an area because similar types of industries are already located there. Why these industries got located there, perhaps no reasonable explanation can be given for that and that it was either as a matter of chance, or due to certain peculiar circumstances, which existed at that time.
2. Assess to Markets:
This factor is always taken into consideration by the entrepreneurs. This becomes essential when the industry is producing perishable goods, which cannot wait till long distances are covered. Similarly the industry will be discouraged, if sending of finished goods to the markets is a very costly affair. Proximity to markets helps in lowering down the sales price because overhead charges are considerably reduced.
3. Availability of Raw Material:
Concentration of industries near the centre of raw material is quite common. Cotton industry in India e.g. is located in Bombay and Ahmedabad simply because of easy availability of raw material. Jute and iron industries in India are also concentrated in the areas where necessary raw material is available. In the words of Saviyya and Dass, in other words most of the agro-based and forest based industries are to be located in the vicinity of the sources of raw material supply.
4. Availability of Labour:
For smooth running of industry it is essential that supply of labour must be adequately available and if possible it should be cheap as well. An industry can tap other regional resources for labour supply, but these are sure to be both costly and undependable.
But Prof. Kuchhal is of the view that, “The importance of labour supply in influencing the location of industry is difficult to assess since non-availability of local labour is not likely to prevent a site which has great natural advantages for art industry.” Since each industry is required to give minimum wages to the workers, therefore, the industry does not much worry whether the labour is locally available or has come from a distance.
5. Transport Facilities:
Usually there are three modes of transport facilities namely road, water and rail. Each industry will try to locate itself where one of the modes of transportation is available. One finds that technical point of a mode of transport is usually centre of great activity.
In the words of Edgar, M. Hoorer, “For each combination of material sources and market there must be a point or points at which the total transportation costs involved in assembling materials and delivering the products to the markets are less than they would be anywhere else. In the absence of production cost differentials, the best location for the production process is at the point of minimum transport costs.”
In the past means of transportation were not very efficient as there are today with the result that choice in matters of location was very limited. Efficient means of transportation have however, made the choice very wide.
6. Power Resources:
Power is essentially needed for running an industry. This has become still more essential because transport cost of coal is very heavy. Obviously the industry will have tendency to localise itself at a place where power resources are easily available. Development of hydroelectricity has in our own times considerably changed locational distribution of industries. These days’ supply of power and electricity is considerably influencing dispersal and concentration of industries.
7. Cheapness of Site and Services:
Quite a heavy sum of money is invested on the purchase of land for the construction of factory and providing other facilities needed for running the industry. Each entrepreneur will like to be tempted to set up a new industry at a place where site and services are very cheap.
In fact he will like to be tempted to a place where services already exist so that his contribution is very low. Not only this, but one finds that when industries are concentrated at one place providing such services as setting up of joint research laboratories, providing educational and training facilities and providing other services becomes economical and easy.
8. Availability of Financial Facilities:
No industry can run without availability of finances both for its existence and expansion. Finance is the only mobile factor of production. If a financier is not willing to invest in an industry unless that is located at a particular place, the industry may get discouraged or not even come up at all. For an industry capital can be raised both at national as well as international level.
9. Natural and Climatic Consideration:
No industrialist will ever like to set up an industry at a place where there are unhygienic conditions or where natural environments are unfavourable. An industrialist while setting up an industry will always take into consideration topography of a region, level of ground, drainage facilities available in the area, and facilities available for the disposal of waste products.
If an industry wants steady supply of water in manufacturing process, obviously it will need a location where nature has provided enough water. Topography always is taken into consideration, because it helps in lowering down the cost of transportation, which ultimately helps in bringing down the cost of production.
10. Strategical Considerations:
These days the targets of air attack e.g., are industries which are producing defence material. Obviously strategically these will have to be located at a place, where the changes of air attack are very remote. Moreover, strategically it is becoming important that industries of a type should not be concentrated at a particular place or in a particular area because at a difficult time when the nation is at war and if an area goes under the control of enemy other industries or nation as a whole may not suffer.
11. External Economies:
These include growth of subsidiary activities when a particular industry is localised at a particular centre, which might have transport or shipping facilities. If large numbers of industrial units are localised at a place, that may be an additional inducement for setting up such industries in that particular area.
12. Personal Factor:
An industrialist may have personal preferences and prejudices for a particular place. Such a consideration can be love for a home town or desire to develop a particular area and so on. Sometimes personal factors so much dominate that even many economic considerations are ignored all together.
Locational Factors in Actual Working:
In actual practice industries have been influenced either in one way or the other factors about its location. In so far as historical factor is concerned Barlow Commission in U.K. was of the view that cotton industry in U.K. grew and was located Lancashire simply because it was a historical incident that woollen industry was already located there. Similarly in India sugar and cotton industries are located in Bombay and Ahmedabad simply because raw material in huge quantity is available in these areas.
As regards labour, Sivayya and Dass are of the view that, “For instance, watch making and provision instrument manufacturing industries are concentrated prominently in Switzerland because of their traditional skills. Similarly location of iron and steel industry in Jamshedpur was primarily because of easy availability of labour in that area. Paper mills are concentrated in Calcutta and Raniganj simply because of their proximity to the markets. Similarly many Calcutta factories manufacture stationary simply because ready market is available. Availability of transport facilities played a considerable role in deciding Visakhapatnam as location for the proposed Visakhapatnam steel plant.”
In fact there are many instances which can be quoted to prove that one factor or the other and in many cases more than one factor has played an important role in the location of an industry. Pilani in India would not have been so important a centre of development had not Birlas personal liking of the area. Similarly copper complex, at Khetri would not have developed, held copper as raw material not been available in that area and so on.
Essay # 3. Dynamics of Industrial Location:
There are various factors which influence location of an industry, but none of these factors can continue to have its effectiveness for all times to come. A factor which might be very important today, might become less tomorrow or might even lose its usefulness altogether.
We find that till yesterday economic considerations very much influenced location of an industry, but today these are being subordinated to strategic conditions. Similarly a site which might be ideally suited for the setting up of an industry today might not be so tomorrow. Such a situation can arise because of technological changes and also changes in the means of production or changes in transportation facilities. Thus changes in different locational factors can bring a shift in the location of an industrial activity.
Though every state wants to have locational equilibrium in industrial development, yet usually that is not possible. Many a time locational changes do occur.
C.M. Hoover has classified basic causes of locational changes as follows:
i. Seasonal Changes:
Sometimes producers shift their location so as to meet changing seasonal needs and requirements. But the producer knows that in a particular season he will have to shift and as such he is quite prepared for that and can change location without much dislocation. Thus he is not taken unaware.
ii. Secular Changes:
A secular change is one which is not sudden but which involves a gradual alteration. Such a change continues for quite some time. It has also no tendency to reverse or repeat itself as it found in the case of seasonal or cyclical changes. A good example of this can be growth in population, which goes on bringing changes but gradually and slowly.
iii. Structural Changes:
Changes are also brought about because of development of new resources and techniques. Every major technological improvement is likely to bring about locational change. In the words of Prof. Kuchhal, “Modern technological innovations have made labour requirements less specialised and exacting. They also have involved decentralisation to new centres of production. Further, the vastly increased use of non-human industry in production has been offset by improved techniques that make energy cheaper and more transmissible and tend to equalise the advantages of various location in respect of energy cost.”