Location factors: raw materials, labour, transport, markets - Geography - HKDSE

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Welcome! Let's Uncover the Secrets of Industrial Location

Hey everyone! Ever wondered why a car factory is in one place, and a computer chip company is somewhere completely different? It’s not random! Choosing a location for a factory is a huge decision, a bit like choosing the perfect spot to open a new bubble tea shop. You'd want to be where your customers are, where you can get your tea and pearls easily, and where the rent isn't too expensive, right?

In this chapter, we're going to become business detectives. We'll explore the major factors that influence industrial location – things like raw materials, labour, transport, and markets. We'll see how these factors create a unique recipe for success for different industries. Get ready to understand why our world's industrial map looks the way it does!

Part 1: The Building Blocks - Key Factors of Industrial Location

Imagine you're the CEO of a company. You need to build a new factory. What do you need to think about before you start building? Let's break down the most important "ingredients" in your decision-making recipe.

1. Raw Materials

This is the stuff you use to make your product. For a baker, it's flour and sugar. For a steel factory, it's iron ore and coal.

Weight-losing industries: These are industries where the raw materials are much heavier and bulkier than the final product. For example, making 1 tonne of steel requires several tonnes of iron ore and coal. To save on transport costs, it's cheaper to locate the factory near the source of the raw materials.
Weight-gaining industries: These are industries where the final product is heavier or bulkier than the raw materials. A classic example is a soft drink bottling plant. The main raw material (syrup) is light, but when you add water and bottle it, it becomes heavy. So, these factories are often located near the market (the customers) to reduce the cost of transporting the finished goods.

2. Labour

This means the workers! Labour can be considered in three ways:

Cost: How much you have to pay your workers. Some industries, like clothing manufacturing, need lots of workers for simple tasks (labour-intensive), so they often seek locations with low labour costs.
Quantity: The number of available workers. A large factory needs to be in a place with a large population to draw its workforce from.
Quality (Skills): The skill level of the workers. A high-tech industry, like building computer chips, needs highly educated and skilled labour. These industries will locate where they can find a well-educated workforce, often near universities.

3. Transport

This is all about moving things – getting raw materials to the factory and sending finished products to the customers. The goal is to keep transport costs low.

Think of it like the delivery network for your online shopping. A good location has efficient and cheap transport links, like ports, railway lines, or major highways. A place where different transport types meet (e.g., a port with a railway connection) is called a break-of-bulk point and is often an excellent location for a factory.

4. Markets

These are your customers! Being close to the market is crucial for certain industries:

Perishable goods: Things that go bad quickly, like fresh bread or newspapers, need to be made close to the people who will buy them.
Bulky or fragile goods: Things that are heavy or easily broken are expensive to transport, so it's better to produce them near the market.

Did you know?

The four factors we've just covered – Raw Materials, Labour, Transport, and Markets – are often considered the "classic" or traditional location factors. For many older industries, they were the most important things to consider.

5. Other Important Factors

In the modern world, other factors have become just as important!

Power (Energy): Some industries use a massive amount of electricity. For example, aluminium smelting requires so much power that factories are often built right next to huge hydroelectric dams to get cheap, reliable energy.
Land: Factories need space. The cost of land and its availability are key. A car factory needs a huge, flat area, which is usually cheaper on the edge of a city rather than in the city centre.
Government Policy: Governments can influence location decisions with "carrots and sticks". They might offer tax breaks (a carrot) to attract a company, or they might have strict environmental laws (a stick) that make a location less attractive. Sometimes, governments create Special Economic Zones (SEZs) with favourable policies to boost industrial growth.
Technology: Technology is a game-changer! The internet allows teams to work together from different countries. Better transport technology makes it cheaper to move goods over long distances. Technology has made many industries less tied to one specific place. They are called footloose industries.
Agglomeration Economies: Don't worry, this sounds more complicated than it is! It simply means the benefits that companies get by clustering together in the same area. Think of a big shopping mall's food court. All the restaurants are together, which attracts more customers for everyone. In industry, when similar companies cluster, they can share a skilled workforce, specialised suppliers, and infrastructure.

Key Takeaway for Part 1

Choosing an industrial location is a balancing act. A company weighs all these factors – raw materials, labour, transport, market, power, land, government policy, and agglomeration – to find the "sweet spot" that will make their business most successful and profitable.

Part 2: Case Study - Iron & Steel in China (The 'Old School' Giant)

Let's see these factors in action by looking at a huge, traditional industry: iron and steel production in China. This industry is a perfect example of a weight-losing industry.

How has its location changed over time?

The location of China's iron and steel industry has not stayed the same. It has changed significantly, which tells us that the importance of different location factors can change too!

Phase 1: In the Past (e.g., Anshan in the Northeast)

Main Location Factor: Raw Materials. Early steel plants were built in the interior, right next to massive deposits of iron ore and coal.
Why? It was extremely expensive to transport tonnes and tonnes of raw materials. It was much cheaper to make the steel right there and then transport the lighter, finished product. Government policy also focused on developing the interior of the country.

Phase 2: In the Present (e.g., Baoshan in Shanghai, on the coast)

Main Location Factors: Markets and Transport (for imported raw materials). Many new, modern steel plants are now located on the coast.
Why the change?
1. Technology: New steel-making technology requires less coal.
2. Transport Costs: It has become cheaper to import high-quality iron ore by sea from countries like Australia and Brazil.
3. Markets: The biggest customers for steel (car manufacturers, shipbuilders, construction companies) are located in the booming economic cities on China's coast. It makes sense to be close to them!

What is Industrial Inertia? (Why some old factories just won't move!)

You might ask, "If the coast is a better location now, why do some old steel plants in the interior still exist?" This is due to a concept called industrial inertia.

Industrial inertia is the tendency for an industry to remain in its original location, even when the original advantages (like being near raw materials) are no longer important.

Analogy: It’s like continuing to visit your old, small neighbourhood convenience store even after a giant, cheaper supermarket opens across town. You stay because you know the owner, it's a habit, and it feels familiar.

Reasons for industrial inertia:

High cost of moving: It's incredibly expensive to shut down a huge factory and build a new one elsewhere.
Established infrastructure: The area already has roads, railways, and power lines built specifically for the factory.
Skilled local workforce: Generations of families may have worked at the plant, creating a skilled labour pool that doesn't want to move.

Key Takeaway for Part 2

The iron and steel industry in China shows how the dominant location factors can change over time due to technology, transport costs, and markets. The concept of industrial inertia explains why these changes don't happen overnight.

Part 3: Case Study - IT Industry in the USA (The 'New School' Genius)

Now let's switch gears to a modern, high-tech industry. The Information Technology (IT) industry is very different from iron and steel. It's a "footloose" industry because its main raw material isn't heavy ore—it's brainpower!

Key Location Factors for the US IT Industry (e.g., Silicon Valley)

Why did places like Silicon Valley in California become world-famous tech hubs? It wasn't about coal or iron!

Labour Quality: This is the #1 factor. IT companies need a constant supply of highly educated and creative engineers, programmers, and designers. They locate where they can find this talent.
Research and Development (R&D): They need to be near centres of innovation. Proximity to top universities like Stanford and UC Berkeley in California provides new ideas, research, and a stream of talented graduates.
Agglomeration Economies: This is the "Silicon Valley effect". When tech companies cluster together, they create a powerful ecosystem. They can easily share ideas, attract investment capital (money), and find specialised legal and marketing services. This attracts even more companies, creating a cycle of growth.

Quick Review: Comparing the Giants

Let's contrast the main factors for our two case studies:

Iron & Steel Industry (Old School)

Key Input: Bulky raw materials (iron ore, coal)
Main Factors: Raw materials, transport, market
Production Style: Single-point (everything made in one giant factory)

IT Industry (New School)

Key Input: Human capital (skilled labour, ideas)
Main Factors: Labour quality, R&D, agglomeration
Production Style: Multi-point (different stages happen in different places)

Globalisation and the IT Industry: Multi-point Production

The IT industry perfectly illustrates the effect of globalisation. Thanks to the internet and easy transport, a single product can be a global effort. This is called multi-point or transnational production.

Example: The iPhone.
- Designed in California, USA (access to top designers).
- Key components made in Japan, South Korea, and Germany (access to specialised technology).
- Assembled in China (access to a large, efficient workforce).
- Software developed by teams in the USA, Europe, and India.

This happens because a company can locate each part of its business in the place that is best and most cost-effective for that specific task.

Key Takeaway for Part 3

Modern industries like IT are not tied down by traditional factors. Their location is determined by access to knowledge, talent, and the benefits of clustering with other innovative firms. Globalisation allows them to spread their production process across the world.