Chapter 9 Economic Geography: Manufacturing and Services

9.1 Components of the Space Economy

  • In the economic sphere recognize:
      * Regions of industrial concentration
      * Areas of employment and functional specialization
      * Specific factory sites
      * Store locations
      * Tourist destinations
  • Basic Economic Concepts
      * Intensity of spatial interaction decreases with increasing the separation of places
      * Observed importance of complementarity and transferability in the assessment of resource value and trade potential

9.2 Secondary Activities: Manufacturing

  • Secondary Activities are transforming raw materials into products that can be used to pour iron and steel to produce plastic toys, assembling computer components, or sewing jeans
  • Principles of location
      * Spatially fixed costs
        * They are relatively unaffected no matter where the industry is located within a regional or national setting
      * Spatially variable costs
        * They show significant differences from place to place
  • Locational Decisions in Manufacturing
      * Require multiple spatial scales of analysis
        * International
        * Regional
        * Local/Specific to individual enterprises
      * Power Supply
        * Power supplies with low transferability may serve to attract energy-intensive activities
      * Raw materials
        * All manufactured goods have their origins in the processing of raw materials
      * Labor
        * Labor costs are highly variable across space, increasingly affecting location decisions and industrial development
        * There are 3 important considerations for labor:
          * Price
          * Skill
          * Amount
      * Transportation modes
        * Essential factor of industrial location that it is difficult to isolate its separate role
      * Market
        * Everything is produced to supply a market demand
  • Transportation and location
      * Freight rates
        * Charges made for loading, transporting, and unloading of goods
      * Terminal Costs
        * The charges for paperwork, loading, packing, and unloading of a shipment
      * Break-of-bulk points
        * Sites where goods have to be transferred or transshipped from one carrier to another
  • Industrialization Location Theory
      * Industrial locational decisions are based not on a single factor, but on the interplay of a number of considerations
      * Each type or branch of industry has its own specific set of significant plant siting conditions
  • Contemporary Industrial Location Considerations
      * The behavior of individual firms seeking production sites under competitive market conditions
      * It does not account for the locational behaviors that are uncontrolled by “factors,” directed by national or regional economic development planning goals or influenced by new production technologies and corporate structures
      * Political Considerations
        * Political factors affect the location decision process
      * Agglomeration Economies
        * Are benefits that firms enjoy due to factors outside the firm
      * Just-in-Time and Flexible Production
      * Comparative Advantage, Offshoring, and the New International Division of Labor
        * The capitalist division of labor from individual workers to the economies of entire regions and countries
  • Transnational Corporations (TNCs)
  • Businesses are increasingly stateless and economies borderless as giant transnational corporations (TNCs)
  • There are 3 ways high-tech industries impact the patterns of economic geography
      * High-tech activities are major factors in employment growth, manufacturing output, and the total gross value added (GVA)1 for many individual countries
      * High-tech industries have tended to become regionally concentrated in centers of innovation, frequently forming self-sustaining, highly specialized agglomerations
      * The offshoring of less-skilled production and assembly tasks has spurred the economic development of newly industrializing countries

9.3 High-Technology Manufacturing

  • The old fashion location theories are less effective for explaining the location of high-technology research, development, and manufacturing activities

9.4 World Manufacturing Patterns and Trends

  • Mexico, Brazil, China, and others of the developing world have created industrial regions of international significance
  • Deindustrialization
      * Declining relative share of manufacturing in a nation’s economy
      * Got worse during the past two decades

9.5 Tertiary Activities

  • Tertiary activities consist of business and labor specialties that provide services to the primary and secondary sectors, to the general community, and to individuals
  • Types of Service Activities
      * Tertiary and service are broad and imprecise terms that are not limited to the number of activities
      * Whoever purchases the services, we distinguish between consumer services and producer services
  • Locational Interdependence Theory for Services
      * The locational controls for tertiary enterprises are simpler than those for the manufacturing sector
  • Consumer Services
      * Supply of consumer services must match the spatial distribution of effective demand
      * Tourism
        * The growth of tourism is part of a broader shift
        * The tourism industry has experienced a post-Fordist transition
      * Gambling
        * Fast-growing industry that draws large numbers of tourists and in the process remakes places and local economies
  • Producer Services
      * Specialized activities performed for other businesses

9.6 Services in World Trade

  • Service activities have been major engines of national economic growth
  • They become an increasing factor in international trade flows and economic interdependence