Factors for localization of
Industry
Saima Ashraf
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 of Localization of Industry
• 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.
• Labour Supply. Every plant requires an adequate supply of labour with
appropriate skills. Weber deduced that an industrial unit will deviate format
eh point of minimum transpiration cost to the cheaper labour centre if the
additional cost of transportation at the new centre is more than
compensated by the savings in labour cost. but this hypothesis has lost its
significance in the recent years because of many reasons. Labour is easily
mobile concern cannot go. Moreover, certain industries are capital intensive
and they require less labour.
Factors of Localization of Industry
• 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.
Factors of Localization of Industry
• 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.
Factors of Localization of Industry
• 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.
Factors of Localization of Industry
• 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.
Factors of Localization of Industry
• 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 support of state. Industrial relations atmosphere in the region
may also affect the location of certain industrial units.
Conclusion
• The Challenges of industrialization are of great magnitude and
complexity. Many social, political, economic and psychological
barriers have to be overcome. The problem is extremely urgent to
rapidly transform from essentially Agrarian to Industrial Economy.
Industrialization will help to overcome poverty, Create jobs, Increase
GDP, lower inflation. The creation of wealth will help achieve over all
humanitarian and peace goals.
