Industry

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Industry
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Manufacturing System of Iron Steel Industry
Inputs
Outputs
Process
Harmful
Useful
Market
Cash
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Inputs

• Raw materials
• Powers
• Land
• Labour
• Capital

• Technology
• Transport
• Government policy
• Entrepreneur

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Outputs

• Harmful outputs
• Pollutants
• Waste
• Hot water

• Useful outputs
• Steel rods
• Steel plates
• Steel pipes

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P. 4
The diagrams below show four different types of
industry and factors affecting their location.
The size of circles is proportional to the
relative importance of each factor for
competitive success in that industry.
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Weight gain industries are those with the weight
of product outputs greater than the weight of raw
material inputs. They tend to locate near
consumption markets. Conversely, weight loss
industries are those with the weight of raw
material inputs greater than the weight of
product outputs. They tend to locate near sources
of material inputs.
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1. a. Which of the above industries is an
example of a weight gain industry? _________
____________________________
Brewery/Shipbuilding industry
b. Study the graphs below. They show the
relationship between transport cost, weight
of freight and distance.
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Explain why breweries tend to locate near the
market. __________________________________________
__________________________________________________
__________________________________________________
__________________________ _______________________
___________________ ______________________________
____________
Water is added in the production of beer. It adds
a lot of weight to the finished product. Since
transport cost increases with increasing weight
and increasing distance, breweries are found near
consumption markets so that transport cost can be
reduced.
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2. Explain why both shipbuilding and aluminium
smelting industries prefer coastal
locations. _____________________________________
_____ __________________________________________
__________________________________________ __
________________________________________ _______
___________________________________ ____________
______________________________ _________________
_________________________ ______________________
____________________ ___________________________
_______________ ________________________________
__________
Ships are large and heavy. They are difficult to
move. Shipbuilding works are therefore found in
bays so that ships can enter the sea once they
are finished. Aluminium smelting requires coastal
locations so that raw material (crude oil), power
resources (coal or oil) and finished products
(aluminium products) can be transported by large
ocean freighters. This helps reduce transport
(production) cost.
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3. With reference to the location requirements
of the TV/Movie industry, what can governments
do to encourage its development? ____________
_____________________________ __________________
_______________________ ________________________
_________________ ______________________________
___________ ____________________________________
_____ _________________________________________
_________________________________________
The quality of labour is crucial to the
development of the TV/Movie industry. Better
education resources are essential. At the same
time, some creative industries such as
movie-production require huge capital input
provision of loans from governments also helps
such industries to thrive.
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Iron Steel centre before 1949

• Along eastern coast

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Iron Steel industry before 1949
Uneven distribution, Coastal location ,Eastern
part Anshan, northeast China
Near to iron ore e.g. Anshan and Maanshan
raw materials is heavy and
bulky
Near to coal mine such as Fushun and Huainan
save transport cost
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Iron Steel industry before 1949
Presence of flatland in coastal regions
Concentration of population and steel-using
industries along the east coast
High population density and better education
standard provide skilled labour
Dense railway network and convenient water
transport
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Iron Steel industry before 1949
Before 1949 there were treaty ports along the
east coast, therefore, technology and foreign
investment were available
infrastructure was also better
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Spatial distribution of Iron Steel Industry in
China
Before 1949
1950s
1970s
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Changes in distribution pattern

• There was decentralization of iron steel
  industry
• There was inland shift in the 1950s.
• Moved from the northeast to Baotou in North
  China.
• Moved from east coast to Wuhan in Central China.
• In the 60s, the industry shifted further inland
  to Urumqi in northwest China and Kunming in
  southwest China

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Reasons for change

• Government policy of industrial decentralization
• Safeguard the industry from foreign attack
• More balanced economic development in different
  regions of China
• Achieve a more even distribution of population

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Reasons for change

• Utilize raw materials and power resources in the
  interior
• e.g. iron ore in Fukang, coal in Shannxi
• Reduce transport cost
• Other advantages such as
• Improve economic situation of inland regions
• Bring technology to inland
• Reduce population pressure in coastal areas

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Inland development is it rational?

• Harsh climatic environment and relief
• Poor infrastructure and transportation
• Far away from coastal ports and cities
• Difficult to export
• Sparsely populated
• Shortage of skilled labour
• Small local market
• Low quality of coal and iron ore

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Modernization and open door policy
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Change in spatial distribution in the 1980s

• From the interior/inland to the coastal region
• From raw materials-oriented to market and port
  locations along the east coast
• e.g. Baosteel (Baoshan) was established in 1985
  in Shanghai

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Causes of the change

• Change in government policy
• Economic reform emphasis on economic efficiency
• Open door policy encourage import of foreign
  technology and capital
• Change in technology
• Favour new large scale integrated plants
• Change in raw materials supply
• Import iron ore from overseas
• Use of scrap iron from coastal cities

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Causes of the change

• Other than local market large ports also
  facilitate export of steel products
• Rapid industrial and urban development in coastal
  areas provide large local market
• Labour supply and technology are also better in
  coastal cities
• Agglomeration benefit

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Old plants in Anshan and Wuhan were not closed
down because of industrial inertia

• Cost of relocation is high
• Established markets, infrastructure and
  experienced labour will be lost
• Loss of linkages
• High risk of relocation
• Serious economic and social problems caused by
  closing down old plants

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Product life cycle of Hi-tech industries

• Development stage
• Price is high
• Sale volume is small
• Professional workers are needed
• Huge capital and technology input are needed
• Near to universities and research centres in
  large cities(metropolies)
• In more developed countries

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Product life cycle of Hi-tech industries

• Matured stage
• Price decreases
• Sale volume increases
• Costs should be cut
• Extend the market to LDCs
• Seek locations with lower costs
• Start to decentralized production lines to LDCs

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Product life cycle of Hi-tech industries

• Standardization stage
• Price becomes very low
• Competition of similar products is keen
• Mass production with standardized production line
• Cheap land and semi-skilled labour are required
• Global market
• Ports in LDCs

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Trans-national IT Corporation
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Distribution Pattern

• globally dispersed pattern
• Headquarter in the USA / Silicon Valley / MDC
• Regional headquarters and research centres in
  MDCs
• Such as USA, Japan, Britain
• Manufacturing plants in LDCs
• Such as India, Taiwan, Malaysia and China

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Headquarter in Silicon Valley

• agglomeration of IT industry in Silicon Valley
• external economies of scale
• local infrastructure is well developed
• presence of related industries, ancillary
  industries and services
• presence of venture capital
• leading universities, namely Stanford University
  and University of California at Berkeley
• good working environment attracts skilled labour
  and experts
• historical factors

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Manufacturing plant in China

• the labour cost is lower in China
• the land rent is lower in China / lower
  production cost
• government encouragement
• such as concession rate and tax holiday
• there is no strong labour union / workers are
  more obedient / willing to have over-time work

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Manufacturing plant in China

• loose control in environment protection
• large potential market in China
• newly developed and improved infrastructure
• agglomeration of other industries

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Adverse effects on the USA

• unemployment of low-skilled labour / lay off of
  workers
• Increase social problems
• Such as crime, family abuse, alcoholism
• Greater income gap between the rich and the poor
• Out-flow of skilled labour / professional workers
• Out-flow of capital to LDCs

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Headquarters green field sites

• Suburban of large metropolis in MDCs
• Newly developed green field sites
• Good environment quality
• Low density with open space and green areas

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Why?

• Venture capital is available from investors in
  metropolises
• Linked with business centres and international
  airports
• Co-operation with nearby universities and
  research centres
• Plenty of professional and high quality labour
• Good infrastructure in metropolises
• Better living environment in suburb

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Why?

• Attractive to professional workers
• Self-contained modern office-plant-laboratory
  integrated buildings
• Local governments offer good incentives
• Agglomeration economies

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What does the label Made in Japan on hard disk
drives (HDDs) represent? As a matter of fact, the
production process of HDDs involves the assembly
of four parts (1) media, (2) head, (3) motor,
and (4) electronics. These parts are manufactured
in many different factories all over the world.
It is the final assembly of the HDDs which gives
the product a Made in (a specified country)
label.
P. 66
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Table 4.3 shows four indicators (as per cent of
all production) of the national origin of
production of HDDs. For example, 88.4 of worlds
HDDs have brand names of USA companies but of
these finished products, most of the final
assembly procedures are done in other parts of
the world such as SE Asia (64.2). While 44.1 of
the labourers in the HDD industry work in SE
Asia, they receive only 12.9 of the total wages
paid.
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• Where are most HDDs assembled?
  ________________________________________

SE Asia

• What is the main reason American HDD firms
  arrange final assembly outside USA?
• ________________________________________

High labour costs and land value in USA.
3. Why would HDD producers hire people in other
areas (e.g. Australia) when there is in fact no
manufacturing there? _________________________
________________ _________________________________
________ _______________________________________
__ _________________________________________
Large multi-national corporations need to hire
people for sales and marketing in all key markets
because their products (HDD) are sold worldwide.
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4. Complete the table below and list some
possible reasons for this phenomenon.
In SE Asia a large number of factory workers are
hired but they receive relatively low wages. In
contrast, experts in research and design,
marketing and management are hired in Japan.
Although their number is comparatively small,
they receive much higher wages.
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P. 74
Study the following news extracts about Fushun
and Fuxin of Liaoning province. These two cities
were first-generation coal production centres in
China and they once supplied coal for many other
industries in the Dongbei region.
Info-sheet 2 Among the 780 000 people living in
Fuxin, 156 000 are unemployed. By 2005, the
number is expected to rise to 176 000. Within the
city, people in 29 000 households are living in
15 200 buildings that are susceptible to tumbling.
Info-sheet 1 The normal depth of excavation is
about 430 m but now the tunnels of coal fields
reach as deep as 800 m. said an old coal miner
who has worked in Fushun for 30 years.
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• What problem is revealed in Info-sheet 1?
• ________________________________________

Exhaustion of natural resources
2. Estimate the percentage of unemployed to the
total population in Fuxin in 2005. ______________
__________________________
176 000/780 000?100 22.6
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3. Complete the diagram below by drawing
arrows to show how decline of the coal
industry can generate a vicious cycle of urban
decay.
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improved
increases
Purchasing power increases
Population increases
grows
increase
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Reasons for industrial relocation

• Government policy
• Inland shift of industries in 1950-1980 in China
• Coastal shift of industries under Open Door
  Policy since 1980

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Reasons for industrial relocation

• Push and pull factors
• High land and labour cost in MDCs push industries
  away.
• Government incentives and loose environmental
  control in mainland China pull industries to PRD.

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Reasons for industrial relocation

• Loss of locational advantages
• Local coal field s are exhausted in north part of
  Japan.
• Owing to the technology improvements, the amount
  of coal and iron ore used for producing steel
  drops.

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Reasons for industrial relocation

• Loss of locational advantages
• Local coal fields are exhausted in north part of
  Japan.
• Owing to the technology improvements, the amount
  of coal and iron ore used for producing steel
  drops.

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Reasons for industrial relocation

• New locational requirements brought by
  technological improvement
• New steel plants shift from iron ore fields to
  large cities where scrap is available.
• Baosteel imports iron ore from Australia and
  South America because advancement in modes of
  transport

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Reasons for industrial relocation

• Environmental protection
• Shougang is planning to move its most polluting
  plants to Shandong Province by 2010.

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Reasons for industrial relocation

• Changes in production mode
• In China, state-owned enterprises used outdated
  technology and iron rice bowl system in the
  past. However, reform of state-owned enterprises
  targets at pushing up competitive power and
  labour productivity. As a result, many out-dated
  steel works were closed down and workers were
  laid off .

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Reasons for industrial relocation

• Changes in production mode
• In the USA, IT firms have to lower the production
  cost and extend global market. They start to have
  multi-point or transnational production. Their
  headquarters and research centres will remain in
  more developed countries but their standardized
  production lines will be moved to less developed
  countries.

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Effects of industrial relocation and changes in
modes of production.

• Flow of labour
• City / local scale

Metropolitan area
suburbs
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Effects of industrial relocation and changes in
modes of production.

• Flow of labour
• Regional scale

Laid off workers and farmers flow from inland
regions to coastal industrial areas such as PRD
and Changjiang Delta.
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Effects of industrial relocation and changes in
modes of production.

• Flow of labour
• international scale

• Managerial staff, trainers and specialists from
  MDCs are sent to work and live in LDCs.
• High quality workers in less developed countries
  are sent for training in the USA.

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Effects of industrial relocation and changes in
modes of production.

• Economic problems in depressed areas
• Decline in industries starts a vicious cycle
• Close of factories leads to unemployment
• This brings further decline of tertiary and
  subsidiary business
• Decrease in tax income speed up infrastructure
  and urban decay.
• Poor living and business environment make more
  people and industries leave

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Effects of industrial relocation and changes in
modes of production.

• Social problems in depressed areas
• Crime rate and drug addition increase.
• Family abuse, drunkenness and violence become
  serious.
• Government fails to cope with the rising demand
  for social welfare

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Effects of industrial relocation and changes in
modes of production.

• Urban decay
• Areas near to old industrial areas suffer most
• Shabby and vacant industrial buildings
• Decay of infrastructure and public service
• Unfavourable business environment
• Poor living environment
• e.g. Yau Tong and San Po Kong