Industrial agglomeration - Cheung Chuk Shan College

Industrial agglomeration - Cheung Chuk Shan College

Industrial agglomeration Outline What is industrial agglomeration? What are the characteristics of industrial agglomeration? How does industrial agglomeration occur? Why does industrial agglomeration occur? Is industrial agglomeration good?

What is industrial agglomeration? It refers to high concentration of industrial activities in an area because industries may enjoy both internal and external economies when they cluster together (agglomerate). Is it a phenomenon or process?

Agglomeration as a phenomenon: it refer s to the spatial clustering or concentration of industrial activities in a relatively small a rea. Agglomeration as a process: it refers to th e snowballing process whereby more and more manufacturing firms cluster or areally concentrate in a relatively small area.

2 forms of agglomeration Concentration of related or well-linked factories together and form a specialized industrial region. Concentration of various kinds of factories in the industrial zones in urban area. Spatial effects of Ind. Aggl.

Over time, industrial agglomeration results in the growth of large industrial concent rations, producing different areal patterns of industrial land use. They have large nu mbers of associated and inter-dependen t factories, surrounded and served by resi dential and commercial areas. Industrial districts

Hong Kong - Kwun Tong, Tai Kok Tsui, Ta i Po Industrial Estate Sydney - Paramatta, Alexandria, etc Minor industrial centres/towns PRD - Foshan, Dongguang, Shunda

Industrial cities Shanghai (textile) Nagoya/Toyota (car-making) Detroit (car-making) Industrial regions Silicon Valley in

California (electronics) around Inland Sea of Japan (shipbuilding) PRD in South China (toy) Characteristics of an ind. aggl. Clustering of industrial activities

Functional linkages production linkages + service linkages When materials move from one firm to another (production linkages) As the firms share the specialized services and facilities (service linkages) Economies of scale How is industrial agglomeration developed? A case of Quarry Bay

Tai Koo Properties Tai Koo Sugar Refinery (1883 1972) Tai Koo Dockyard (1900 1972) Tai Koo Coco-cola Bottling Factory (1952-198 0s) Quarry Bay

Tai Koo Sugar Refinery w as established in 1883 With growing trade in raw cane sugar from Java, th e Philippines and North Q ueensland, and ready ma rkets in China and Japan, Taikoo Sugar ran the worl

d's largest sugar plant in i ts day, and owned small fl eet of sugar carrying ship s. What were the original factors and attraction for the sugar factory? Available of land Coastal location

Sheltered location Availability of labour The problem More than 3,000 workers were needed but the population of Shaukeiwan was only 3,2 74 Hostels were provided and so workers fro m other places were attracted

More jobs mean more income. It in turns i ncreased the purchasing power of people Other related facilities were provided, e.g. clinic, school Tai Koo Dockyard in 1900, on land adj acent to the sugar re finery, construction

work began on Taik oo Dockyard. Industrial agglomeration Taikoo Dockyard launched its first riverboa t in 1910, soon began to produce coasters for the company. The dockyard was to become one of Hong Kong's biggest, and also one of its most pr

ogressive employers, providing its own ho using, hospital and school. Snowballing effects More jobs more income higher purch asing power development of entertainm ent ( ) More jobs more settlements growth of urban population in Quarry Bay

More population more services = more public utilities Snowballing effects Quarry Bay was still an important industrial distri ct in 1970s and 1980s Factories included soft-drinks factory (7-up), Prin ting (Kodak), car repair centre ( ), various electronics ind.

The growing population supported the industries which become more profitable and enjoyed the b enefits from agglomeration The whole process is cumulative and growth bec omes self-sustaining. Myrdals Model of Cumulative C ausation Process A new industrial plant set up

extra employment/more jobs income and the purchasing power as the size of the population grows increases the demand for consumer goods, houses, schools and services more employment opportunities in other industries, e.g. in commerce, construction, service, etc. Myrdals Model of Cumulative Ca usation Process

The new industry itself demands local goods and services. It may attract linked industries which supply it with raw materials (called supplier-industries) or use its products (called user-industries). Myrdals Model of Cumulative Ca usation Process

further increases employment and expanding services, public utilities and construction. attract even more economic activities which b ecome more profitable (enjoying the benefits fro m agglomeration economies) the expanding city (increase in city scale) reache s the threshold level for various services. Thus, the whole process is cumulative and growt h becomes self-sustaining.

Reasons for industrial agglomeration What benefits can be obtained from industrial agglomeration? Initial factors and attraction They refer to the original factors that attract the l ocation of early industries at a certain site. These factors can be natural or man-made. The

y start the cumulative process of industrial agglo meration and create the snowballing effects on i ndustrial development and agglomeration. The area with initial growing factors is known as the growth pole. Linkages Subcontract links Information

links Service links Production unit Marketing links Subcontract

links Vertical linkages Garment Factory Cloth Textile Factory Synthesis fiber Chemical factory Horizontal Linkages Iron & Steel

Factory Engine Factory Glass-making Tyre-making Factory Factory Motor car assembly factory

Diagonal Linkages Fruit canning bottling Sugar refinery Sugar mill

Ice cream Jammaking Glass bottle factory 3 types of Industrial linkages vertical

(one-to-one) linkage - forward and backward linkage horizontal (many-to-one) linkage diagonal (one-to-many) linkage Industries with simple vertical linkages hav e a very strong production relationship. Th ey can obtain the greatest economic adva ntages, once they are grouped or agglome rated together in a small area. Benefits from vertical linkages

lower cost of transporting goods from facto ry to factory, e.g. integrated plants of I&S i nd. (transfer economies) Localization economies energy savings, e.g. I&S ind.

waste products or final products from one industr y can be the raw materials of another speci alization in production. economies of division of labour + mechanizati on discounts can be obtained when several firms bu ying similar inputs in bulk. Advertising cost good reputation. presence of ancillary services saving of storage close relationships among factories makes it eas

y to solve the problems of similar nature and to maintain higher level of production skills. Urbanization economies a pool of skilled labour and managerial ex pertise infrastructure savings snowballing effect research & development

attracting investment Diseconomies of scale Physical shortage of land for expansion shortage of labour traffic congestion urban decay Economic

rising rent rising labour cost high tax Social pollution / environmental problems high crime rate

pressure from labour union pressure from green groups government policy Solution to industrial agglomeration Industrial degglomeration/decentralization (to be discussed in the next lesson)

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