Industrial Location

Principles, Practice and Policy

James W. Harrington, Barney Warf

• Publisher: Routledge
• Year: 2002
• ISBN:
  9781134812523
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

Location is vital to the efficiency and profitability of industrial activity. Industrial Location presents a comprehensive introduction to and critical review of this field of growing academic and business interest.
In business, the right choices have to be made to produce profit. Industrial location is a fixed investment, crucial to the strategy and capital investment of any organization. Location also impacts upon non-investors, directly affecting employment, the environment, and economic activity in the locale.
Focusing chiefly on the United States, but drawing on an international range of cases, the authors explain the economic, social and political forces which have shaped comtemporary patterns of industrialization and examines the changing nature of production and systems.

1
WHAT IS INDUSTRIAL LOCATION?

Look around the city or town where you live. Think about the forces that structure your world and everyday life. What processes yielded the built environment? Why are companies and jobs located where they are? Why are skyscrapers, filled with banks and insurance companies, clustered downtown? Where did the steel or automobile factories go? Why is your shirt likely to be made in China? Go to the grocery store: where did all of these goods come from? What types of jobs do your parents have? How are they different from the ones their parents had? How will your job future resemble or differ from theirs? Why are you likely to work in the service sector? Do you know anyone who works for a foreign company? Why is it here? Why do television networks and newspapers give so much attention to matters like the European Union or the North American Free Trade Agreement (NAFTA)? How will these international communities affect you?

These are the sorts of questions that concern economic geographers, especially those interested in industrial location. To some, the word “industrial” connotes dirty smokestacks or boring lists of exports and imports. Yet, as we shall see, “industries” include service firms and office work, as well as many other types of jobs. You do, or will, work in an “industry.” How this industry is structured, how it came to be the way it is, the competitive and regulatory environment it faces, the various technologies it can adopt, and other factors that influence why it decided to locate where it did, all have an immense influence on your everyday life and future prospects. For those of you who hope to get a job in the business community, start your own firm, or are worried about your career prospects, industrial location is an essential topic. People who ignore the dynamics of industry do so at their peril. Obviously this doesn’t mean that reading this book will get you a job, but it does mean that you will have an appreciation of the context, forces, and issues that structure your future job opportunities. This sort of knowledge is particularly important given that we live in a world of constant, incessant, breathtaking change.

For most of you, change has become one of the few things upon which you can rely. Constant change characterizes your personal lives, careers and career prospects, and the look and feel of the world you see around you and in the news media. This book provides narrow, focused lenses on one important aspect of those changes. We are concerned with organizations’ decisions about the location of production. The following paragraphs describe the ways in which these decisions affect the direction of your personal prospects and world changes. This one aspect of change seems pretty narrow, but if you look at the range of offices, warehouses, and factories around you, and take note of the daily announcements of openings, closings, expansions, and layoffs, you get a sense of how big and unwieldy a topic it is.

We will use two lenses to address these topics, to make some sense of the daily announcements. One lens is fairly narrow and largely economic. The other lens is broader and more historical. We’ll use the economic lens to pull into focus location requirements, relate them to the varied nature of production activities, and understand changes in the requirements. We’ll focus on government influences on these activities and on the relevant characteristics of places. We’ll present ways in which the day-to-day production of commodities (goods and services) for sale changes the characteristics of the production process and of the places where production is carried out, yielding yet further change in the economic landscape. This same lens can help us to understand the way that organization managers decide where to expand, open, or close facilities, as well as the way that these changes affect those of us who are not organization managers. Thus, our view is useful to managers, workers, and planners.

This lens allows us to focus and thereby make sense of a seeming jumble of changes. However, any lens distorts other issues. We will present a view of the social causes and results of industrial change, but we will view these social characteristics through our economic lens, when we discuss the roles of people in production: employees or labor. We will then discuss these social changes from a historical perspective, still focusing on their economic nature. We will not explicitly focus on the political process through which governments create the rules that affect organizational behavior, though we will note some historical changes in political organization. We will not focus on the physical environmental results of production, and the effects those results have on our lives and on subsequent decisions by organizations. We will stick with our two lenses to yield a view that is partial, but clear and simple (simple, at least, compared to the full view from many different lenses).

After an introduction to what and why we are studying, this chapter presents some suggestions for how we can study industrial location or any other economic and social activity. Again, the purpose of a careful approach to how we study is to provide a clearer focus on our topic, to make sense of the jumble of casual observation.

Industrial Location as Commitment

This book is concerned with the location of firms dedicated to commodity production—activity which results in a product or service to be sold in a marketplace. The dedication of a facility for particular use such as a bank or a manufacturing operation represents a double commitment on the part of the operator of the facility. One commitment is to the operation itself—can the company provide banking services that clients will want and that clients will value at a price sufficient to cover costs? Can the manufacturing operation produce goods of a particular type that will find a sufficient price in some market? This operation also represents a second commitment: to a particular place and a particular form of provision of service or production of goods. For example, the bank branch can only obtain customers if it is conveniently located for the customers, and can only maintain a work force if its workers can conveniently get to and from the facility. The manufacturing plant represents a commitment to being able to obtain supplies and inputs of high quality and in good time; a commitment to ship these products to their market locations in reasonable time, good quality, and at a low cost; and a commitment to maintaining a work force that is productive and able to get to and from the workplace. These are very substantial commitments, and given the speed and unpredictability with which technology, markets, and people change in the late twentieth century, the commitment becomes very difficult to make.

The commitment or lack of commitment to particular places helps define the organization, helps distinguish it from other, similar organizations. One of the principal ways that retail customers select a bank company is to compare the locations of company’s branches and automated teller machines (ATMs) to the customers’ own daily travel patterns to and from work, school, and shopping. Let’s suppose that a particular bank owns no branches and no ATMs, but contracts with other banks to allow its customers to use the ATMs of all banks, at no charge to the customers. For customers, the bank is distinguished by its vast network of ATMs but also by the difficulty of getting to the bank’s only building. The bank will find that certain customers cost a great deal to service: the ones who withdraw five pounds or ten dollars every day from an ATM that the bank pays to be using. Eventually, the bank will work out a pricing scheme that encourages the kinds of retail and business customers it can serve best, based in part on its locational strategy.

Similarly, the mix of manufacturing and distributive locations developed by a manufacturer over the years influences the costs that it faces and the markets that it can serve. One competitor may be better suited to produce very low-cost products, and another competitor can design, produce, and deliver a new product more quickly to a particular market. Our first manufacturer must understand what its mix of locations, personnel, and equipment allow it to do better than its competitors. Perhaps its strength is the design, manufacture, and marketing of trademarked items for a large consumer market in the midwestern United States. After reaching that understanding, the company must predict how profitable that competitive advantage will be in the future. Decisions to modify that strength must include a plan to modify the locations in which the company operates facilities. These important investment decisions are based on analysis of current strengths and prediction of future conditions.

There are ways of reducing the commitment, of course. The space for the facility can be rented or leased rather than purchased. Workers can be hired on a specifically temporary basis. Production for a manufacturing firm can be contracted to some supplying firm, so that the original manufacturer finds itself in a much more flexible, less-committed position. Nonetheless, the provision of services and the manufacture of products do take place, and take place at particular locations. It is the study of these locations—no matter how flexible, no matter how temporary—that is the topic of this book.

The Study of Industrial Location

Given the increased level of complexity and of fluctuation in ownership and location of production and services, how can we study the location of these operations? Why should we care about their physical location, given the increasing transience of these locations? One answer is obvious: the people who make their living by working in these operations are raising families, buying houses, and establishing their lives in the expectation that they will continue to be able to make their living. People, in general, are not terribly mobile. Productive facilities are somewhat mobile, insofar as they can be constructed, sold, or purchased, but these operations must take place at some fixed point. Financial capital, the flow of credits and debits that help us keep track of economic activity, is extremely, nearly perfectly mobile. This book will be concerned primarily with the interplay between imperfectly mobile productive facilities on the one hand, and imperfectly mobile individuals and households, on the other hand.

There are other reasons for us to care about the location, however fleeting, of productive activity. These productive activities form the backdrop for our lives. Where are there jobs? Where are taxes paid? Where is there pollution from economic ac...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Preface and Acknowledgements
• 1: What is Industrial Location?
• 2: Locating to Minimize Costs
• 3: Locating to Maximize Revenues and Profits
• 4: Growth and Location of Service Activities
• 5: Comparative Advantage and Industrial Location
• 6: Technology and Locational Change
• 7: Industrial Location and Industrial Geography
• 8: How Companies Actually Make Location Decisions
• 9: The Role of Governments
• 10: Sector-Specific Case Studies
• 11: Connecting the Pieces