Location of industry

Definition of industry
An industry is made up of a number of firms producing broadly similar item or items that are
connected with each other. For the last few weeks, we have been discussing industries of
different types. We have looked at cottage and linkage industries.
One of the most important decisions an entrepreneur has to make when setting up an industry is
where to locate. To consider location of an industry means to decide on its site. The factors
which influence the setting up of an industry can be considered under two broad headings: the
economic influences, i.e., those factors which directly affect average costs of production, and the
non-economic influences, i.e, those factors which do not directly affect average costs of
production.
Economic influences:
1. Nearness to the source of raw materials
This is especially important if the raw materials are heavy or bulky and, therefore, expensive to
transport, e.g., bauxite firms are located close to where bauxite is mined in order to save on
transportation costs.
Where raw materials have to be imported, closeness to the port where the raw materials enter the
country may influence the choice of site.
2. Nearness to market
The finished products may be bulky, heavy, fragile or perishable. In such instances, it might suit
the industry to be close to its market or its potential customers as it can be quite costly to
transport such goods over long distances. For example, eggs are very fragile and much damage
could result from transporting them over many miles. Despite refrigerated transport, fruits and
vegetables are highly perishable and should not take a long time to get to the market. Closeness
to markets in this case will minimise spoilage.
3. Nearness to the source of power
If the power required is only available in a particular area, then efforts will be made to cut costs
by locating close to that source of power. For example, after the Industrial Revolution in
England, the main source of power was coal which was heavy and costly to transport. Many
industries that relied on coal for power were located near to the coal fields.
This influence on the location of industry has become less important in recent times as many
industries rely on electricity, which is readily available and can be transported at affordable
costs.
4. Nearness to suitable labour
Labour is reluctant to travel long distances, so industries tend to locate where the labour they
require exists. Availability of suitable labour in the area of location is influenced by the degree of
social amenities that exist in the area, such as housing and medical facilities. If sufficient,
suitable labour is not available in the area of location, it can be very expensive to transport the
labour to where the industry is located. Highly technological industries are sited where highly
skilled labour is available.
5. Land
Land in cities and towns is expensive to rent or buy. Therefore, the industry has to weigh the
importance of being located in these areas with the cost of land. If it is not very important to be
in the town or city then the industry can locate further out where the cost of land to rent or buy is
cheaper, thus cutting down on average cost of production.
6. Access to transport
Most industries concentrate near to major highways to have easy access to raw materials and
markets. In the case of industries that export, closeness to rail, sea and air transport are important
factors in low cost of production.
7. Infrastructure
Industries require roads that are in good condition, efficient telephone services, and reliable
supplies of electricity and water. Where these are lacking, the result is loss of production and
increased costs.
8. Linkage industries
Whether the linkages are backward or forward, an industry may choose to locate near to other
industries on which they depend in order to save on transportation costs. For example, suppliers
of drilling equipment will locate near oil or gas fields.
Non-economic influences
1. Climatic conditions
This is important to some industries, particularly those involved in agricultural products. The
cotton industry for instance is located near to soft water, necessary for washing the cotton. Rice
and bananas require heavy rainfall while coffee requires a cool climate, e.g., slopes of the Blue
Mountains, in Jamaica.
2. Government influence
Through various incentives, governments can encourage or motivate the location and/or
relocation of industries. They may do this to help develop depressed areas with high
unemployment. For example, they may offer industries duty-free concessions on raw materials if
they are willing to locate their industries in rural rather than urban parts of a country.
3. Nature of activities
If industries are producing items that are environmentally unfriendly, government may place
restrictions on where they can be located. Often, industrial estates or special zones are reserved
for location of such industries.
4. Industrial inertia
Many industries locate in an area and remain there even though the original reason for siting in
that area no longer exists.
5. Political stability
Industries require areas that are politically stable as political warfare can seriously affect the
operations of the industry and this will ultimately affect production and cause average costs to
rise.
Industries will weigh the factors influencing location against each other in deciding where to set
up.
However, despite all these factors, location may depend on accident or tradition.