IND 1: Locational Factors - 1

MANUFACTURING INDUSTRIES
Locational Factors
A. Four sectors of industry (T7, Fig.2)

Sectors of Industry

____________ ____________ ____________ ____________

industry industry industry industry

Examples Examples Examples Examples

farming, fishing manufacturing commercial research, media

B. What is manufacturing industry?

Manufacturing industry or __secondary____ industry
1. is the processing of __raw materials______ into ___finished_____ products; and
2. in the process of manufacturing, __value_____ is added to the products.

C. Classification of manufacturing activities (T9, Table 2)

by weight and ___heavy______ ___light____
amount of raw manufacturing, manufacturing,
materials and e.g. __iron and steel__ e.g. _textile____ industry
products industry
by the type of __labour____-intensive __capital____-intensive _technology___-intensive
input manufacturing, manufacturing, manufacturing,
e.g. _electronic____ e.g. _iron and steel____ e.g. _IT___________
industry industry industry
by methods of __processing____ __fabricating____industry,
production industry, e.g. __iron e.g. __automobile____
and steel ____ industry industry
 IND 1: Locational Factors - 2

D. Manufacturing system (T8, Fig.3)

A factory can be regarded as a manufacturing system, with __inputs_____,
__processes____ and __outputs____.

MANUFACTURING
INPUTS
PROCESSES
Physical Inputs Cultural Inputs • processing
• land • labour • technology (simple / complex)
• relief • market • government
• climate • transport • entrepreneur • fabricating
• capital

CASH
OUTPUTS
MARKET • manufactured • industrial waste
products

E. Locational factors
When deciding whether they should set up factories in a particular place, industrialists
would choose the most __optimal____ location in order to minimize production
__cost____ and maximize __profits_____ by referring to the _locational____ factors
(inputs of the manufacturing system)
Locational
Importance of the factors Impact on industrial locations
factors
Raw • Some raw materials are: • locating the factories near source of raw
materials Ø __heavy_____ and ___bulky____, material, i.e. ___raw
e.g. saw mills; material______-oriented, can reduce
Ø __perishable______, __transport_____ cost.
e.g. food processing industry; • With _technological__ advance, we need
Ø __weight_____-losing during the ___less____ raw materials to make the
production processes, same product so the relative importance
e.g. copper refinery. of raw materials has __reduced_____.
Power • some industries requires a large amount • With improvement in transport &
resources of energy in production, e.g. __electricity____ transmission, power
__aluminium smelters______ are set up supply is ___less____ important as a
near to __HEP____ plants in Australia. locational factor.
Land • This is important for heavy industries • Industries are usually found in areas with
which are _space___-demanding. extensive ___reclaimed___ land, e.g.
• Light industries demand less coastal locations.
__space____ and can operate in
multi-storey __flatted____ factory
buildings.
 IND 1: Locational Factors - 3

Transport • It is necessary for • Industries are located in __accessible____

bringing in __raw materials______ and areas with easy, __sea____ &
distributing __products_______ to ___road_______/ rail____________ and
markets. ___air______ transport.
• ___ports____ are important industrial
regions as they can receive large ___bulk
carriers_____.
Labour • LABOUR COST: • Some industries are located in
An __abundant____ supply of __populated____ populated areas or
__cheap______ labour is important for __less______ developed countries which
labour-intensive industries, e.g. clothing provide abundant supply of _cheap____
industry. labour.
• LABOUR QUALITY: • Some industries are located in
High-technology industries demand __more_____ developed countries for the
__skilled___ labour. supply of high-skilled labour.
Market • products ___gaining_____ weight / bulk • Some industries are located near the large
after processing e.g. the making of __cities_____ with large
___soft drinks______. _population______ size and high
• manufactured goods are __perishable___ _purchasing_____ power.
or ___fragile_____, e.g. bakery &
glassware
• they require close contact with
__customers___ e.g. printing industries.
Capital • __financial_____ capital is important for • Some IT industries are located in
the setting up of industries. ___more_____ developed countries
• Factory buildings and _machines_____ (MDCs) as capital is easily available
are ____fixed____. They are reasons for there.
not relocating a factory.
Government • Government can provide • The government tries to develop
__incentives_____ e.g. __cheap____ __less____ prosperous regions with
land, build industrial __estates____, greater ___incentives______,
__low____ interest loans, develop e.g. ___Go West_____ Policy (China
___infrastructure____, ___tax____ Western Development) of the Chinese
benefits to industries. government.
• ___political____ stability attracts foreign • The government assigns particular areas
investment. for industrial development.
• Strict laws controlling __pollution_____ Ø Hong Kong:
and land use __planning_____ policies ___Science___ Park and Cyberport.
increase production costs of industries. Ø China:
• Government's influence in - __export____-processing Zones
___planned____ economies is important, (mainly for export-oriented
e.g. China before 1978. industries)
- Free ___Trade____ Zones
- Special __Economic____ Zones
 IND 1: Locational Factors - 4

Technology • Technology can improve the production • __reduce____ the locational pull of
method and reduce the importance of traditional factors e.g. raw materials
other locational factors. • Technology-__intensive____ industries
Ø With __efficient____ use of raw are usually found near to
materials, ___less____ raw materials __universities____ and research institutes
is needed so as to facilitate cooperation among
Ø ___substitutes____ can be used, e.g. them in the R&D,
replace pig iron with __scrap__ metal e.g. Science Park is near to the _CUHK_.
Ø Less workers are needed due to • IT industries are located in _more___
__mechanization____. developed countries where technological
• Technology also improves transport. level is high.
__Bulk carriers____ are developed to
transport large amount of raw materials.
This __reduces___ transport cost so
industries can be set far away from raw
materials.
Entrepreneur • Managerial personnel are important for • Headquarters of the IT industries are
those __large__-scale modern industries. located in the __more___ developed
countries.

F. Will a factory always stay in the present location?

1. It depends on whether the factory can earn a satisfactory __profits____or not.
2. Some firms relocate to lower ___production____ costs so they can be more
__competitive____.
3. Some firms decide to remain in the existing place though there is a _higher_____
production cost as the original advantages do not exist.
4. This is called industrial __inertia_____.
Reasons:
• __moving____ cost is high
• presence of __skilled_____ labour
• well-developed __infrastructure____
• existing _agglomeration___ economies e.g. linked industries set up nearby.
 IND 1: Locational Factors - 5

MANUFACTURING INDUSTRIES
Changing Location: Hong Kong

A. Industrial Development in Hong Kong: Stage 1, 1950s-1980s

1. Development of manufacturing industries in Hong Kong since 1950s (T12-13)
Describe the changes of the manufacturing industries in Hong Kong by referring to the
following figures.
Number of manufacturing firms

- The number of manufacturing firms

started to __increase___ __rapidly___
since the 1960s.
- The growth __slowed___ __down___ and
reached its __peak_____ of nearly 50,000
firms in _1990____
- Since then, it ___declined___
___rapidly____to only 20,000 in 2000 and
started to __decline___ __slowly____.
Number of manufacturing firms in Hong Kong
from 1960 to 2008
Share of total working population by
manufacturing workers

- The number of manufacturing workers

accounted for _40_% of the total number
of workers in 1961.
- After __1980__, the percentage of
workers employed in manufacturing
industries has __dropped__
__drastically____.
- In 2012, manufacturing workers only
Percentage share of total working population by
manufacturing workers from 1961 to 2008
accounted for _2.9_% of the total number
of workers.

Share of GDP by manufacturing industry

sector

- The share of GDP by the manufacturing

sector __grew__ in the 1960s.
- The number reached its peak at _31_% in
1970.
- However, the share _dropped____
__rapidly___ and reached 1.5% in 2012.

Share of GDP by manufacturing industry sector

from 1961 to 2007
 IND 1: Locational Factors - 6

2. Different stages of industrial development in Hong Kong since 1950s (T10-11, Table 3)

ŸL ŸK
ŸN
ŸH
ŸI
ŸJ
ŸF ŸG
ŸA ŸB
ŸC
ŸM
ŸD
ŸE

a. Identify industrial districts A-J in urban areas.

A. Hung Hom / Ma Tau Wai F. Kwai Chung
B. Kowloon Bay G. San Po Kong
C. Kwun Tong H. Shatin
D. Chai Wan I. Tsuen Wan
E. Wong Chuk Hang J. Tsing Yi
b. Identify industrial estates K-N in the New Territories.
K. Tai Po Industrial Estate M. Tseung Kwan O Industrial Estate
L. Yuen Long Industrial Estate N. the Science Park
c. Compare and contrast the characteristics of the industrial land uses A-J and K-M.
A-J Industrial zones in inner city K-M Industrial zones in suburb
Location & - Located ___near____ the CBD - Located at the __suburbs___
accessibility - Needs _higher__ accessibility near - Normally provided with good transportation
the CBD access, including roads and rails
Government - With __long__ history of - Recently well-__planned_____ by the
factor development, lack of town government
___planning____
Types of - Usually __light___ industry and - Some are __heavy____ or polluting
industries __wholesaling______________ industries, needs to be isolated and separated
dominant - Some are focusing on new _high__-__tech__
industries, such as biomedicine,
telecommunications and logistics
Scale of - _smaller___ in scale - __larger___ in scale, needs larger space for
operation expansion
Building - _higher_______ - __lower____
Density
Land rent - __higher______ - _lower_____
Infrastructure - usually __parking___ space is limited, - __sufficient___ infrastructure, like parking
always leads to traffic congestion space and public amentities
 IND 1: Locational Factors - 7

B. Industrial development in Hong Kong: Stage 2: 1980s to 2000s - Relocation of

manufacturing industries to ZDR
1. Name cities A to F of the Zhujiang Delta Region (ZDR)

A Shenzhen
B Zhongshan
C Foshan
D Guangzhou
E Dongguan
F Huizhou

2. The figure below shows the choice of location for different manufacturing activities.
Refer to the figure and fill in the table to show the type of manufacturing activities that
most firms prefer to locate in Hong Kong and Guangdong respectively.

Manufacturing activities that

most firms prefer to locate in
Hong Kong

- regional headquarters

- sales and marketing

- R&D

- IT management

Manufacturing activities that

most firms prefer to locate in
Guangdong

- production

- logistics
 IND 1: Locational Factors - 8

3. Reasons for the relocation of industries (T17-20)

____Push_____ factors ___Pull____ factors

of Hong Kong of the Zhujiang Delta Region
• Most of the manufacturing industries • ____________ labour costs in the Region greatly
are __labour_____-intensive, the reduces the production costs of labour-intensive
Labour

__high____ labour costs in Hong Kong industry. This helps increase the ____________
raises production costs and lowers of the firm.
revenue of the firm.
Land price
• __high___ land price (raises / reduces) • ___low____ land price (raises / reduces)
production costs production costs
Land availability
Land

• (Plenty / Shortage) of flat land forces • (Extensive / Limited) flat land with basic
firms to carry out production facilities and __infrastructure___ such as
operations in __flatted_____ factories. electricity, water supply, etc. attract industrialists
• This (hinders / favours) expansion and to set up factories here.
(raises / lowers) production efficiency.
• (Strict / Loose) environmental • Costs to comply with environmental protection
protection laws increases production laws only accounts for a __small____ proportion
Government

costs and lowers profit. of the production costs.

policies

• Local governments offer _incentives____ to

foreign investors, such as tax concession. This
helps (increase / reduce) production costs.

• It is easy for industrialists to monitor the

Proximity to Hong

production operations because factories are

(near to / far from) Hong Kong.
• Firms can make use of the advanced and
Kong

----- efficient __transport___ facilities in Hong Kong

to export their products and import raw
materials.

C. Industrial development in Hong Kong: Stage 3 (2000s to present) (T21-22)

1. Difficulties faced by HK industrialists in ZDR
- the ZDR has become less competitive in terms of rising __production___ costs (T21,
Fig.18)
- there is a ___shortage_____ of labour due to keen competition of labour with other
sectors of economy
- rising _land___ price also pushed industrialists to relocate factories to other
_inland___ provinces, e.g. __Hunan____ and __Sichuan____ Province.
- Lack of ____electricity____ supply causes factory production to come to a stop
- Change in government policy: _low__ value-added industries and __polluting___
industries are no longer welcomed.
 IND 1: Locational Factors - 9

2. Although many HK-owned factories are relocated to Zhujiang Deta Region, what are the
reasons for keeping company headquarters in Hong Kong? (T23)
- Presence of __skilled___ labour
- Political _stability_____
- Well-established __legal_____ / __finance______/ insurance services
- Well-established __telecommunication_____ and transport network
- Industrial _inertia_____ / high cost of ____moving________

3. In recent years, there has been an increasing trend for factories relocating to the Western
Regions in China.
Discuss the push and pull factors for this phenomenon.
Push factors Pull factors
- increase in production costs - cheaper labour cost in inner
- e.g. labour cost / land cost / RM cost provinces, e.g. Hunan, Hubei
- stricter pollution control policies in provinces
Guangdong - lower land rent
- change in government policy - tax benefits
- develop new markets
- improved infrastructure
- improved transport and
communication

Complete Unit Summary on T24-26.

 IND 1: Locational Factors - 10

MANUFACTURING INDUSTRIES
Changing Location: Iron & Steel Industry in China
Unit 3.3 How has the location of the iron and steel industry in China changed over
time?
A. Characteristics of iron and steel industry

1.2 tonnes of iron ore

0.5 tonnes of coke

An iron and steel plant 1 tonne of pig iron
Less than 0.2 tonnes
of limestone

Note: Coke is the charcoal made from coal.

Pig iron is the molten iron produced from the smelting of iron ore with coke and limestone in a
furnace. It is an important material for making steel.

1. (heavy / light) industry: heavy raw materials, i.e. __iron_____ ore, ____coal____ (coke)
& ___limestone____ are used to produce heavy products, ___steel_____.
2. (simple / complex) processing industry
3. (labour / capital / technology)-intensive industry
4. (raw material / labour / power / market)-oriented industry

B. How important is the iron and steel industry in China? (T45, Fig.3-4)
1. Refer to Fig.3 and Fig 4 on P.45, Describe the trend of crude steel production in China
from 1960 to 2013.
- China is the world’s ____top____ steel producer.
- Before the 1980s, the production of crude steel was growing very _slowly___.
- After 1980s, the growth has been __speeding__ up.
- Since the 2000s, the crude steel production increased from about _120__ million
tonnes to _750__ million tonnes in 2013.
 IND 1: Locational Factors - 11

2. Refer to the map below.

C
B

D A

a. On the map, identify major steel centres A-D.

A – Shanghai (Baosteel) C – Urumqi
B – Anshan D – Wuhan
b. Contrast the distribution patterns of major iron and steel plants and other iron and steel
plants in mainland China.
- major iron and steel plants are mostly located along the __coast___ but other iron and
steel plants occupy ___inland____ locations.
- Major iron and steel plants are ___concentrated____ in big cities in __east____ and
___northeastern____ part of China while other iron and steel plants are __scattered /
dispersed__ in different parts of China.
 IND 1: Locational Factors - 12

3. Refer to the figure below.

Crude steel production (million tonnes)
Year Shangdong Baosteel / Shanghai Urumqi / Xinjiang Guangdong
Province / Anshan Province
1990 No data 9.15 0.37 No data
2000 6.23 16.68 0.96 3.03
2010 50.82 20.32 6.40 11.26
2014 61.19 18.00 11.77 14.42
a. Draw a line graph to show the crude steel production of various regions from 1990 to
2014.

b. Contrast the growth trend of crude steel production of Shanghai and Xinjiang.
- the growth trends of the crude steel production of both regions in the period of 1990 to
2010 __increased____.
- Growth rate of Xinjiang was __higher_____ than that of Shanghai (_142_% in Shanghai
whereas _2132__% in Xinjiang)
- In between 1990 and 2000, the production of Xinjiang increased in a __faster___ rate
than that of Shanghai (_2.97__ times vs __1.94__ times)
- In between 2000 and 2014, production of Xinjiang __increased____ more __rapidly___
than that of Shanghai (_7.51__ times vs _1.25__ times)
 IND 1: Locational Factors - 13

- From 1990 to 2014, difference between the two regions has __reduced___.
C. Spatial and temporal changes in distribution of steel centres in China from 1949 to
present (T46-52)
Descriptions Explanations
• ____limited____ industrial RAW MATERIALS
development in China, especially • __abundant___ supply of raw materials: they are
heavy industries. __heavy___ & ___bulky___, so the best location of
• Steel industry was highly steel industry is to be near coalfields & iron ore fields to
BEFORE 1949

concentrated in _NE_ China and save __transport___ cost.

the largest steelwork was found • Thus steel industry was __raw material_____ -oriented.
in __Anshan_____. Other steel
centres were
____Shenyang_____.
• Steel industry was also set up in
the eastern coastal region, e.g.
__Shanghai_____ &
__Tianjin____.
• The number of steel centres GOVERNMENT POLICY
___increased____ greatly. • Government policies are for rapid
• There was (more / less) even ___industrialization____ & industrial
distribution of steel industry than ___decentralization___ / ___inland____ dispersion.
that before 1949. Steel industry • New industrial centres were set up in central, _NW_ and
was set up in the __interior_____ _SW_ China.
part of China. • Reasons:
• In the mid-1950s, steel industry Ø for __strategic___ reason (POLITICAL)
was set up in __Baotou______, - to make industries less easily attacked by enemies
Ø for __economic__ reason
EARLY 1950s TO 1978

__Wuhan____, ___Lanzhou____.
• In the late 1950s, steel industry - to develop the coal and iron ore resources found in
was set up in __Urumqi___ (NW) the __interior____
and _Kunming___ (SW). - to develop ___local____ resources for local
industrial development so as to __save____
transport cost (RM)
- to have ___balanced____ regional economic
development with regional self-__sufficiency___
- to create _job___ opportunities and improve the
standard of living in the interior (MARKET)
Ø for ___political____ reason
- to integrate minority races
Ø __population___ redistribution (LABOUR)
- migrating people from the East to the West to
___reduce____ population pressure on the densely
populated areas in the East
- provide __skilled___ labour supply for industries in
the West
 IND 1: Locational Factors - 14

• Development of steel industry in GOVERNMENT POLICY

the interior slowed down. • China adopted the “__Reform___ and _Opening Up__”
• There is a general shift of steel policy. Foreigners were encouraged to invest in
centres to the __coastal___ ___coastal___ regions.
regions, • Since 1980s, the central government has adopted the
Examples policy of “having some regions __developed____ first”.
Baosteel in ___Shanghai___ Development of steel industry in the old established
Shougang in ___Beijing___ coastal region was again encouraged.
• new steel centres are developed, • setting up of ___Special____ ____Economic____ zones
e.g. Zhanjiang in in Guangdong province also encouraged more steel
__Guangdong___ Province plants to be set up in South China
FROM 1978 TO THE PRESENT

• there was an __increase___ in the • change in trade policy, e.g. relaxing restrictions on trade
number of steel centres ___barriers_____, attracts foreign __investment___
• regrouping of state-owned • Steel centres along the coast also enjoy locational
enterprises to become large advantages: (T52, Fig.13)
enterprises. The top-five steel - water for ___cooling_____
bases are _Hebei___, Anshan, - efficient _river___ / __sea__ transport for import
Baosteel, __Wuhan__ and of raw materials and export of steel products
Shougang Groups. (T55, Fig.16) - near coastal cities with large __population____
• distribution tends to be more which supply abundant __labour____, large
___even_____. __market__ for steel products (from industries and
construction) and raw materials, e.g. _scrap___
iron
- extensive __lowland___ and coastal land for
further ___expansion____ by reclamation
- enjoy ___agglomeration______ economies with
the presence of other steel-using industries, e.g.
____automobile___ and _ship_-building
industries
• improvement in __technology____ enables the use of
__scrap____ iron, __bulk__ carriers and large-scale
__integrated____ steel plants
 IND 1: Locational Factors - 15

D. Locational advantages and disadvantages of steel centres

Study the photographs below and explain the locational advantages and disadvantages of
two steel centres, X and Y, in mainland China.

1. Match steel plants X and Y with two cities, Urumqi and Shanghai.
Plant X is ____Shanghai_____ while Plant Y is ____Urumqi______.
 IND 1: Locational Factors - 16

2. Citing photograph evidence, explain the locational advantages of steel centre X and
locational disadvantages of steel centre Y.
Locational advantages of X Photograph / map evidence
- coastal location / water for cooling - located at the estuary of Chang Jiang
- port facilities to import RM and export - port facilities along the river, e.g. piers
finished products
- extensive flat land - land obtained by reclamation /
straightened coastline
- large labour supply / market / scrap - nearby settlements / cities
metal

Locational disadvantages of Y Photograph / map evidence

- remote - inland China / land interior
- low accessibility - rugged relief
- lack of water supply - absence of large rivers
- shortage of labour - lower population density in Urumqi / only
one large city in Xinjiang

E. Changes in the importance of different location factors (T54-60)

1. Government
• Government control on industrial polices and planning has been (increased / reduced) in
recent years. The influence of ___economic market_____ has become more important.
• Local governments have tried to attract iron and steel works to set up in their regions by
providing __incentives____ to attract iron and steel enterprises.
2. Local sources of raw materials and power
• Local iron ore is of a __low____ grade.
• China’s dependence on ___imported____ iron ore and coal has increased rapidly.
3. Transport
• The development of the railway network is (faster / slower) than the development of the
iron and steel industry. The low railway capacity has delayed the delivery of imported
iron ore.
• All the five major iron and steel centres are located _north___ of the Chang Jiang. The
economic development south of the Chang Jiang is very __fast___. Transporting iron
and steel products from the north to the south requires ___high____ transport costs.
4. Market
 IND 1: Locational Factors - 17

• The former market was mainly in the East.

• When the economic development in the Central and West increases, demand for iron and
steel products also (increases / decreases).
5. Special consideration (The case of Shougang)
• new location at Caofeidian
• a relocation to an area (near to /
further away from) populous city
• to reduce harmful effects of
____pollution___ as the iron and steel
industry is the most serious source of
__air____, ___water____ and
___land_____ / solid waste pollution
• burning coal in the production of iron
and steel releases carbon dioxides,
sulphur dioxide, and nitrogen oxides
• these pollutants will lead to
___smog_____, which reduces
visibility, ____acid____ rain and
intensify the __greenhouse__ effect.

F. Industrial inertia (The case of Angang of Liaoning, NE China) (T61)

1. It was developed before 1949 and its importance has been kept even in the period of
industrial decentralization.
2. It is still very important today and the plant has been redeveloped into a _modernized__
plant to be competitive.
3. Reasons:
• Building a steel plant is _costly___.
• __Moving___ cost is high as factory buildings and machinery are _immobile___. It is
difficult and __uneconomical_____ to move.
• It has well-developed ___infrastructure____.
• It has __skilled_____ labour.
• There is __agglomeration___ economies, i.e. steel-using industries are set up nearby
provide local ___market____. This can reduce _transport___ costs. Service industries
e.g. warehouses are also found and they can enjoy better services.

Complete Unit Summary on T62-63.

 IND 1: Locational Factors - 18

MANUFACTURING INDUSTRIES
Changing Location: IT Industry of USA
Unit 3.4 What are the locational factors of the information technology industry?
A. What is IT industry?
1. It is a high-__technology____ industry, using __research_____ and __development____
(R&D) to create new products of an advanced scientific & engineering character.
2. Examples: manufacture of __computers___(hardware), __electronic____ &
__communication____ equipment, the development of computer __software___,
pharmaceuticals, __biotechnology___, aerospace.
B. Location and distribution of IT industry in the USA
1. Distribution pattern (T67, Fig.5)

- Transnational and multi-point production

- With __headquarters____ and ___R&D____of the industry ___concentrated____ in
(more/less) developed countries, e.g. __USA____, Western __Europe_____, Japan.
- ___production____ plants of IT industry are mainly in (more/less) developed
countries in Asia and South America, e.g. __Indonesia____ and ___Vietnam____.
- Usually located in __suburbs___ of large metropolises
- Most IT firms tend to locate near one another, forming industrial _clusters_____ or
industrial __agglomeration____.
- In USA, the most famous IT industrial agglomeration is ___Silicon Valley___ in
California and ____Route 128____ of Boston in Massachusetts.
 IND 1: Locational Factors - 19

2. Characteristics of IT industry & locational factors (T76-77, Table 4)

Inputs Production Outputs Market

CHARACTERISTICS EXPLANATIONS & LOCATIONAL PATTERNS

• ___research__ & • __large__ sum of money is invested in research & development on
_development_____ __designing___ & _improving___ a product
-intensive industry • needs highly ___skilled____ labour, e.g. ___scientists__, engineers
• __human_____ • the industry is usually found near __universities___ and
resources are __research___ centres
INPUTS

important

• not tied to other • easy to move

traditional locational • ___foot___-loose industry
factors like raw
materials and power
resources
• Transnational and • ___Transnational Corporations____ (TNCs) are very __large____
__multi___-point / firms with a number of plants in more than one country.
offshore production • They have 3 different organization levels: _headquarters___,
MODE OF PRODUCTION

(T68, Fig.6) __R&D__ and __production____ plants.

• IT industry has the characteristics of __secondary__, __tertiary____
and quaternary industries.
• Different manufacturing processes of IT industry are carried out in
different places. Refer to Fig.6, for IT firms like Dell,
Ø headquarters and R & D are located in the (more/less)
developed countries, e.g. __USA / Japan___
Ø production (branch plants) are dispersed in the (more/less)
developed countries, e.g. _Thailand_____ and __China__
Ø some production plants remain in the (more/less developed
countries) to produce some _high__-end components
• __Lower___ transport costs enable IT industry to have
__multi____-point production.
• high _value_____ • Computer products are quite ___expensive____, but costs of raw
OUTPUTS / NATURE
OF THE PRODUCTS

-added industry materials and power resources are __little_____.

• Much value is generated in the __manufacturing____ process by
using ___R&D_____, advanced __technology____ and highly
__skilled___ labour.

• ___short____ life • IT products go through 4 stages of development: _development_,

cycle of IT products _growth , _maturity and __ decline .
e.g. mobile phones • Many IT products become _outdated___ within a few years.
(T71, Fig.11)
• Serve the • as ___more____ money is spent on R&D, the industry serve
MARKETS

__global____ market customers all over the world to bring more _profits____.
 IND 1: Locational Factors - 20

C. Factors affecting the location of IT industry in Silicon Valley in USA

Location factors Development stage Maturity stage
(R&D Centre / Headquarters in MDCs) (Production plants in LDCs), e.g.
e.g. __Silicon____ Valley in California ___China___ and __Thailand__ in SE
(T73, Fig.13) Asia
GOVERNMENT - provides __financial____ support for - preferential ____treatments_____ are
R&D given to attract overseas investment,
- help maintain a favourable business e.g. _tax__ concession
__climate______ and an innovative - provide good ___infrastructure_____
culture within the community and amenities, e.g. better _transport___
and _telecommunication___ network
- e.g. “Great __Western__ Development”
programme implemented by the
Chinese government attracts the
establishment of production bases in
central or western China
CAPITAL - easily available at large ___cities____ - large amounts of capital in the form of
- to support innovation and new __foreign direct investment____(FDI)
products to set up factories overseas
TECHNOLOGY + - proximity to famous - regions ready to receive transferred
INNOVATION __univerisities____ and research technology from MDCs
centres, such as ___Stanford____ - due to improved __technology___
University and R&D laboratories for
good access to high levels of
technology
- provide sufficient highly-_skilled__
labour and professional
- facilitate ___generation___ of ideas
of new innovation
AGGLOMERATION - enjoy ___agglomeration_______ economies by
- sharing infrastructure and social facilities
- inducing _innovation_____
- facilitating exchange of market and __technical___ information
- provide technical, __financial____ and networking services
- establishing business _contacts____
- creating a distict innovative culture and business _climate_____
LABOUR - good access to researchers, - ___abundant_____ supply of
___scientists___ or technicians due to _unskilled___ and semi-skilled labour
proximity to universities / research is needed in mass production to carry
institute out ____standardized____ production
- _high__-wage labour are employed - therefore, it is usually located in
densely-___populated____ regions
 IND 1: Locational Factors - 21

MARKET - large ___global___ market through - open new __local__ market in some
globalization of products regions
- to compensate for the high capital - greater demand for IT production due to
__investment____ rising _income____ level and higher
__living____ standard
SITE AND - located in ___suburban___ area in a - located in __cheap___ land site in an
LOCATION metropolis with good amenities industrial __park__ with good
- ___pleasant___ living and working infrastructure
environment which is important for
attracting professional labour
- __green___ field sites of industrial
parks provide attractive working
environment. The industrial areas
have __low-rise____, modern,
__dispersed__ office-plant-laboratory
buildings with many __green___
areas. (different from traditional
industrial landscape)
TRANSPORT - well-developed __telecommunication_____ and convenient transport
- proximity to __San Francisco____ (city) and __airport______ with good
__domestic____ and __international____ passengers and air ___cargo____ activities

D. What are the recent changes in the location of the IT industry in the USA? (T80-81)
1. Growing importance of software development in India
a. Situation
- some US IT firms start to ____outsource_____ software development to India
- set up their __back___ office on software development and other related activities
- According to the table below, India’s exports of the outsourced software product
rose by __62.4_% while the number of employment increased by _22.5_%,
resulting in a rise of GDP share by _37.9__%.

2008-09 2012-13
% of GDP share 5.8% 8.0%
Total revenue (bil. $US) 59.9 95.7
Export revenue (bil. $US) 47.1 76.5
Domestic revenue (bil. $US) 12.8 19.2
No. of employment (million) 10.2 12.5
 IND 1: Locational Factors - 22

b. Favourable locational factors for setting up of IT firms in India

Quoting information from the table below as evidence, explain why India has been chosen to
develop information technology industry.
USA India
Greenwich Mean Time (GMT) GMT -5 (New York State) GMT +5.5
Major language(s) English Hindi and English
Population (2007) 302,200,000 1,131,900,000
GDP per capita (2007) USD 45,819 USD 965
Economic growth rate (2007) 2.2% 8.7%
Tax holiday for R&D firms absence 10 years
Tax concession for R&D absence 150% deduction
Location of IT industry in suburbs of large metropolises In specialized IT industrial parks
and special economic zones

Locational factors Explanation Evidence

SITE - mutual supplement in global production and - about 10-hour difference in time zones
service support between USA and India
LANGUAGE - common language for communication between - English is one of major languages in
staff in India and headquarters in the USA
India
LABOUR - abundant supply of labour - large population in India

- relatively lower labour cost - lower GDP per capita in India ($USD
965)
MARKET - large local market - large population in India / higher
economic growth rate in India (8.7%)
GOVERNMENT - government support in promoting research and - presence of tax holiday / concession
development
2. Moving production operations back to the USA
Reasons for moving some production operations from China to the USA
PUSH factors in China PULL factors in the USA
- rising ___labour___ costs as the Chinese - moving production back to the USA can protect their
government has imposed more laws to protect its technological ___innovations___
workforce - can ensure the high __quality___ of the products
- rising ___transport____ costs due to rising crude - government welcomes the return of production back
oil prices to the USA as it can ease the ___unemployment_____
- rising _land___ price due to rapid urbanization and stimulate the economy.
- copyright ____infringement____ is serious in - Established ___infrastructure_____
mainland China - A large pool of __skilled____ labour
- all these increase the ___production__ cost
 IND 1: Locational Factors - 23

E. Globalization and location of IT industry (T83-85)

1. Definition
- Increasing ___integration_____ of economies and societies around the world
- The free flow of capital is made possible by _e_-___commerce____
- The free flow of technology and idea is made possible by efficient
____telecommunication______ networks
- The free flow of people and goods is made possible by improvement in transport and
___logistics____
- It gives rise to the merging of firms to form large __transnational___/ multi-national
corporations (TNCs / MNCs), e.g. Apple and Dell computers.
2. Forms of globalization
Forms Characteristics
Globalization in - market expansion by:
__marketing__ o manufacturing a product in __home__ country and selling it in
__foreign___ market
o granting a __license__ to a producer to manufacture the product
in the foreign market
o establishing a plant in the foreign market as _foreign direct
investment______ (FDI) and selling the products there
Globalization in - _multi___-point production:
__production_____ o ___headquarters__ and __R&D___ departments in home
countries
o ___production_____ processes that can be standardized are
outsourced
Globalization in - to establish a global supply __chain___ to obtain cheap raw materials
__sourcing___ inputs and components / parts from different parts of the world
- in order to __reduce___ cost of raw materials
 IND 1: Locational Factors - 24

MANUFACTURING INDUSTRIES
Unit 3.5 What is the impact of changes in industrial location and modes of production?

A. Impact of industrial relocation & appearance of new production mode

1. Factories may move out of an area and relocate to other places or new production mode may be

adopted as the production costs can be ___reduced_____.

2. There will be positive and negative impacts in different aspects.

flow of labour
Socio-economic impacts
• intra-urban
• inter-region
Relocation of industries • international
and appearance of new
production modes • unemployment

Environmental impacts • economic restructuring

• urban decay

B. Socio-economic impact
1. Flow of labour
a. __intra____-urban flow of labour
- Some industrial regions attract __migrant____ workers as they provide large number of jobs.
e.g. industrial regions in Zhujiang Delta Region attracted large number of ___migrant___
workers from __Guizhou___, Henan, Hubei and _Sichuan__ in the 1980s.
- decentralization and helped the development of new towns in the 1980s.
- e.g. industrial ___estates____ in the New Territories enabled population
b. __international___ flow of labour
- highly skilled workers and IT professionals have higher degree of labour _mobility____
- managerial personnel and ___professionals____ in the MDCs are sent to production centres
in the LDCs for giving technological advice and management
- e.g. US-based IT firms set up ___regional___ headquarters in Singapore aim at exploring
the Asian market
2. Employment opportunities
a. Relocation of industries may provide a large number of __jobs__ for new industrial areas. This
may lead to ___multiplying______ effect as industrialization may attract population growth
which means a large local __market__ (greater demand for manufacturing products) and more
abundant supply of __labour____. Industrialization means more _tax_ revenue for the local
government to improve infrastructure which may in turn attract more economic activities.
b. __Unemployment___ will occur if factories are forced to __shut___ down. Industrial
__decline____ may cause __depopulation_____ in some cities, leading to urban __decay____.
 IND 1: Locational Factors - 25

3. Economic restructuring
- relocation of some industries may provide an opportunity for shifting importance from
manufacturing sector to ___tertiary____ and __quaternary____ sectors.
- e.g. due to relocation of industries from HK to mainland China in the 1980s, the demand for
business services like _banking___, financial and __insurance____ services has increased
rapidly. ___IT_____ industry becomes increasingly important in Hong Kong.
- e.g. industrial decline in Hong Kong since the 1990s paves way for the growth of IT
industries and ___creative______ industries, e.g. architecture, art and design and
multi-media production.
C. Environmental impact
1. Iron and steel industries cause _air___ pollution due to combustion of __coal__ from power
plants and steel furnaces
2. Light industries like __textile__ and garment making produce __sewage___ that contains toxic
substances such as heavy metals, polluting rivers and streams in the Zhujiang Delta Region.
3. Disposal of ___electronic___ waste is common due to the short life cycle of IT products.

D. Case studies (for discussion)

1. In Guangdong, more assembly plants of IT firms will be moved back to the US.
Socio-economic impacts on Guangdong Benefits to the US
- more land released - avoids over-reliance on Asia
- favours economic restructuring / development of high-tech - easier to control intellectual
industry property right
- favour the development of local enterprises - more local investment
- lowers pollution level / improve living quality - create jobs
- decrease GDP / reduction in value-added industrial output - fosters economic development /
- loss of foreign direct investment / decrease in export value increase government income
- less tax revenue for government / unfavours development of - improve social stability
infrastructure
- closing down of factories / unemployment
- social problems / social unrest

2. Multi-point production with headquarters in the MDCs and production plants in LDCs
Positive impacts on MDCs Positive impacts on LDCs
- relocation of polluting industries paves the way for - multiplying effect to local economies
economic restructuring - improved economies can raise people’s income and living
- indirectly improve the environmental quality of the standard
cities - more tax revenue for the local government to improve basic
- reurbanization in some old industrial areas after infrastructure
redevelopment - improve quality of life of the local people
- better utilization of old industrial land for other - more rapid urbanization
uses - stimulate the economic growth of the places where they are
- more employment opportunities in other sectors of located
economy - the products of LDCs may enter the MDCs in return
Adverse impacts on MDCs Adverse impacts on LDCs
- loss of low-skilled jobs due to closure of - negative impacts to environmental qualities as a result of
production plants in MDCs pollution since these countries pay insufficient attention to
- unemployment for low-income / middle-income environmental conservation
blue collar workers - most of the profits derived go overseas
- local urban decay in old traditional industrial areas - the computer may pull out their investment at any time brining
 IND 1: Locational Factors - 26

- environmental / social problems as the local instability to their economies

government has less revenue to improve and - closure of some indigenous industries due to keen competition
maintain the infrastructure - over-reliance on TNCs for economic development makes the
- depopulation in these areas local economy fragile
- profits of transnational firms surge as they
successfully export their products and services to
new markets / around the world
- increased wealth gap in MDCs as the beneficiaries
are usually the high-income groups

3. Development of iron and steel centres in Panzhihua

Benefits to Panzhihua Adverse impacts on Panzhihua
- brings new job opportunities to inland areas - serious environmental pollution due to
- multiplying effect on local economy the lack of environmental awareness
- improvement in infrastructure - rise in cost of living
- higher level of urbanization - rise in land price may cause housing
problems
- rapid urbanization may add strain on
various public services in the cities

E. Measures to ease the problems caused by changes to industrial location and to modes of
production (T98-103)
1. To build a _____sustainable_______ economy
- a ___diverse____ economy including development of tourism
- lower _taxes__ and improve __infrastructure____ to attract new industries
- set up industrial __parks__ to provide improved facilities
- to provide __retraining______ programmes for laid-off workers
- to provide __education______
- to improve social __security____ system to help those unemployed
2. To develop an eco-efficient production
- to increase the ___durability_____ of manufactured products
- to use ___recycled_____ resources
- to _____reduce_______ material use
- to _____reduce_______ energy use
- to _____reduce_______ toxic dispersion
- to______reuse_______ material
- to provide service on the ___efficient_____ use of the product
3. To alleviate the environment impacts, industrialists can
- support development of ___green____ industries
- adopt a policy of extended producer ___responsibilities_____ system, e.g. developing and
making of products + post-production stages including the ___collection_____ and recycling
of old finished products

F. Limitations of the measures in alleviating impacts of industrial relocation (T101, Table 6.2)