Localization of Industry

Week 2nd
Localization of Industry
• Localization of industries is also called the geographical or territorial
location of industry. This means that certain areas or towns come to
specialize in the production of certain commodities.
Factors of Localization of Industry
• One of the important problems in launching an industrial enterprise is
the choice of suitable location which will help in minimization of
production costs and maximization of profit. To select an optimum
location, the entrepreneur must carefully study the impact of the
following factors:
Factors Cont’d
• Availability of Raw Materials. The availability of the required quality and
quantity of raw materials at reasonable prices is an important factor for
determining the location of an industrial unit. In many industries, the cost of
raw material forms more than 50% of the total cost of their products. 
• Labor Supply. Every plant requires an adequate supply of labor with
appropriate skills. Weber deduced that an industrial unit will deviate format
eh point of minimum transpiration cost to the cheaper labor center if the
additional cost of transportation at the new center is more than compensated
by the savings in labor cost. but this hypothesis has lost its significance in the
recent years because of many reasons. Labor is easily mobile concern cannot
go. Moreover, certain industries are capital intensive and they require less
labor.
• Proximity to the Market. Industrial units using non-weight losing raw materials tend
to locate near the markets because of so many advantages. A manufacturer can
improve his customer relations and render raid services to his customers. Industries
producing perishable commodities and those producing for a local market are also
draw towards the market, because it would reduce the cost of transport in distributing
the finished products. The industrial units tend to disperse only if they find new
markets for their products.
• Transport and Communication Facilities. Transport services are required for
assembling of materials and distribution of products. Whole selecting the location, it
should be seen that transportation facilities are easily available at reasonable rates.
The junction points of waterways, roadways and railways have the tendency to
become industrial centers because of this reason only. It an industrial unit is directly
linked with the mans of transpiration, its transpiration costs are lower. Besides
transpiration, communication services also play an important role in the location of
industrial units. 
• Power and Fuel. An adequate supply of power and fuel is an
important factor for the uninterrupted operations of any enterprise.
in the initial days of industrial revolution, industrial units were located
near coal deposits because coal was the major source of power and
fuel and is of weight losing nature and quite bulky. 
• Supply of Capital. Finance is the life-blood of any industrial venture.
Availability of adequate funds at low rates of interest is an important
factor influencing industrial location. But these days, capital has
become a highly mobile factor of production. Despite this fact,
availability of funds at cheaper rates of interest is an important
consideration. For instance, there are State Financial Corporations in
various states which offer loans at a very low rate of interest if the
entrepreneurs start their projects in the notified backward areas.
• External Economies. Sometimes, industrial units are located in those
caters where other industrial units are already located. It is because of
the fact that transportation, warehousing, banking communication and
other services are easily available. Secondly, the raw materials may be
easily available at cheaper rates. For instance, by-product of one unit
may be the raw material for other distilleries are located near the sugar
factories because molasses which is a by-product of sugar industry is a
raw material for the distilleries.
• Personal Factors. Personal preference and prejudice of an entrepreneur
may also play an important role in the choice of location. For instance,
Mr. Ford started manufacturing motor cars in Detroit because it was his
home town, and Lord Nuffield selected Cowley because the school in
which has father was educated happened to be for sale. The success of
the entrepreneur in such a location depends upon his extra-personal
efforts.
• Government Policy. The government policy encourages entrepreneurs to
set up industrial units in backward areas by giving various tax incentives in
the form of remission of excise duty and sales tax. It also offers certain
non-tax incentives like loans at cheaper rates, factory sheds, etc. The
Government has also put restrictions on granting of licenses to certain
industries to be set up in metropolitan cities with a population of more
than 10 lac and urban areas with more than 5 lac population. 
• Legal Environment. Legal environment determined by various laws and
court decisions also put pressure on the business and managers. For
instance, in 1992, several tanneries in Pakistan were ordered to be closed
down by the Supreme Court as they were polluting the River. In August
1993, the Supreme Court passed an order for the closure of iron
foundries in Punjab because air pollution caused by them has an adverse
impact on the beauty of Surrounding.
• Miscellaneous Factors. Miscellaneous factors like historical incidents
and attitude of the community influence location of industries. In
Mughal days, cottage industries thrived near the courts of rulers due
to the patronage of state. Industrial relations atmosphere in the
region may also affect the location of certain industrial units.