Chapter 9

break-of-bulk point

A location where goods are transferred from one type of carrier to another.

locational triangle

A simple graphic model in Weberian analysis to illustrate the derivation of the least-transport-cost location of an industrial establishment.

least-cost theory(Weberian Analysis)

Alfred Weber. Explains optimum location of manufacturing establishment based on minimizing transport costs, labor costs, agglomeration costs. The optimum location is where the costs of transporting raw materials to the factory and finished goods to the market are lowest. Assumptions: • Isotropic plain • Single product to a single market • Raw materials from two or more sources • Labor infinitely available but immobile • Transportation routes are not fixed (can be anywhere)

infrastructure

Basic structure of services needed to support industrial, agricultural, and other economic development(transportation and communication, water, power, utilities).

external economies

Benefits from outside factors.

transnational corporations(TNCs)

Businesses and industry are increasingly "stateless" • Private firms have established branch operations in nations foreign to their headquarters' country • Also known as multinational companies are private firms that have established branch operations in foreign nations. • Measured by value added (not total sales). • The total annual revenue of the world's largest TNCs rivals the gross domestic product of entire countries.

agglomeration economies

Certain places are associated with certain products. • Spatial concentration of people/activities for mutual benefit. • Clustering of activities may produce benefits for individual firms that they could not experience in isolation. • External economies. • Arise from linkages between firms and savings from shared transport facilities, worker training programs, social services, public utilities, communication facilities, and forms of industrial infrastructure. • Geographic clusters are centers of innovation as knowledge and new ideas are shared between related firms.

freight rates

Charge imposed by transporter for the loading/moving of goods.

locational interdependence

Circumstance under which the locational decision of a particular firm is influenced by the locations chosen by competitors.

High-Technology Manufacturing

Classic location theories are less effective in explaining the location of high-tech—research, development, and manufacturing activities. New patterns of locational orientation have emerged based on human talent rather than raw materials and transportation costs. High-tech activities are major factors in employment growth, manufacturing output, and the total gross value added (GVA). Relatively high wages in high-tech occupations reflects the level of specialization they require. There industries have tended to become regionally concentrated in innovation zones, frequently forming self-sustaining, highly-specialized agglomerations

multiplier effect

Consequences of change in an activity. 1) Industrial agglomerations: process by which a given change sets motion a sequence of further industrial employment. 2) Urban Geography: Addition of workers to a city's total employment.

tertiary activities

Consumer services: entertainment, restaurants, hotels, education, health care, and personal services. Producer(corporate) services: finance, insurance, accounting, and engineering consulting services. Wholesale and retail trade are categories of services that link producers and consumers. Transportation and communication services also serve both producers and consumers. Government and non-profit service providers are also important components of the service economy.

terminal costs

Cost charged for loading at destination points and for the paperwork involved. Cost charged each shipment for facility use and distance of movement.

line-haul costs

Costs involved in the actual physical movement of goods.

spatial margin of profitability

Define the larger area within which profitable operation is possible.

Price Sensitivity

Demands elasticity. Encourages dispersion.

ubiquitous industry

Establishments are distributed in direct proportion to the distribution of population.

footloose firm

Firm with manufacturing activities for which the cost of transporting activities or product is not important in determining location of production.

maquiladoras

Foreign owned factory located in Mexico for the low cost assembly of clothing, electronics, cars, etc.

brownfield

Former industrial site that is vacant where there is the potential for environmental contamination.

offshoring

Hiring foreign workers to take over and run particular business operations(such as call centers, accounting, billing, and nonproduction "back office" aspects of manufacturing). An increasingly standard cost-containment strategy, due to the steep decline in communication costs, faster Internet bandwidth, and the growing technical skills of foreign workers.

uniform isotropic plane

Hypothetical portion of earth's surface assumed to be a flat plain with unvarying distribution of population, transport costs, accessibility, etc.

Economic Rationality

Important to economic thinking. Wide range of human behaviors aren't the result of purely rational economic calculations. More applicable to the decisions made by companies rather than individuals.

Political Considerations

In a competitive economy, the costs of material, transportation, labor, and plant "should" control locational decisions. But isotropic planes and pure market economies don't exist. • Least cost locations rely upon governments to build the highways and regulate the interstate commerce that connects the raw materials, production facilities, and markets. • Land use and zoning controls, and environmental regulations also influence where industries locate. • Governments seek to attract industry to underdeveloped regions or encourage the full utilization of a region's resources by creating quasi-governmental corporations, building industrial parks, or investing in large development projects.

spatially variable costs

Input cost in manufacturing that changes significantly from place to place in its amount and its relative share of total costs. Locational decisions are influenced by such costs.

spatially fixed costs

Input cost in manufacturing that remains constant wherever production is located. Locational decisions are not influenced much by such costs.

Locational Decisions: Relevant Scales

International. Regional. Localized--> Assess the special production/marketing requirements of industries and the degree to which they will be met at different scales(State, community, individual).

foreign direct investment

Investment made by a foreign company in the economy of another country.

secondary activities

Involve transforming raw materials into usable products. Assembling multiple inputs and giving the output to markets in diverse locations. Applying power and labor to create finished products in factory settings(industrialization).

satisficing location

Location within the margin assures some profit and tolerates imperfect knowledge and personal considerations.

Fordism

Manufacturing system derived from assembly-line mass production and mass consumption of standardized goods.

consumer services

Portion of the services (tertiary) sector of the economy involved in providing services to individuals and households(hair salons, retailers).

comparative advantage

Principle that an area produces the items for which it has the greatest ratio of advantage or the least ratio of disadvantage in comparison to other areas.

Space Economy

Principles of human spatial behavior apply to economic behavior too. Conventional economic thinking is based on assumptions about the motivations guiding human economic behavior. Economists assume that people are economically rational. They make decisions in light of their perception of what is most cost-effective.

deglomeration

Process of deconcentration. Location of industrial away from established agglomerations in response to growing costs of competition and regulation.

producer service

Service sector activity performed for other businesses(accounting, advertising, etc).

commodity chain

Set of activities involved in the production of a single good or service. Encompasses the relationships between buyers and suppliers and the flows of materials, finance, and knowledge.

agglomeration

Spatial grouping of people for mutual benefit. The concentration of productive enterprises for collective use of infrastructure and sharing of labor resources and market access.

new industrial division of labor

Spatial shift of production in which developing countries capture more of the world's manufacturing activity while developed countries shift to services.

market equilibrium

Stable point of intersection of demand and supply curves of a given product. Market is cleared of commodity.

outsourcing

Subcontracting production and service sector work to outside, nonunion, domestic companies.

material orientation

Tendency of an economic activity to locate near its source of raw materials. Cost of transporting materials are high.

substitution principle

Tendency to substitute one factor of production for another in order to achieve optimum plant location.

deindustrialization

The declining relative share of manufacturing in a nation's economy. • Outsourcing and the new international division have shifted the spatial patterns of industrial production.

market orientation

The tendency of an economic activity to locate close to its market. Reflection of large and costs of finished products.

Contemporary Industrial Location Theory

Weber's classic theory is highly simplified. This theory no longer fully explains world/regional patterns of industrial localization or specialization. It does not account for locational behavior that is: - uncontrolled by objective "factors" - directed by national or regional economic development planning goals - influenced by new production technologies and corporate structures