Geography Ch. 10

Agglomeration

Agglomeration

refers to the clustering of productive activities and people for mutual advantage

Agglomeration economies (external economies)

Variable costs as determinant in industrial location decisions

Importance of transportation costs.
• The “balance point.”
• Material-oriented or market-oriented.
Substitution principle.
• A number of potentially optimal locations.
• Spatial margin or profitability.

Albert Weber’s Least-Cost Theory (Weberian Analysis)

Weber explained the optimum location of a manufacturing establishment in terms of the minimization of three basic expenses: relative transport costs, labor costs, and agglomeration costs

Back-office tasks

involve administration and support functions that require no contact with clients

Business services

are performed for companies and include finance, insurance, real estate, legal services, accounting, architecture, and engineering consulting services

Commodity chain

• Production process complex.
• Highly international.
• Asian cities prominent (Singapore, Shanghai, Seoul, Bangalore).

Comparative advantage

• Tells us that areas and countries can best improve their economies through specialization and trade.
• Area or country concentrates on production of those items for which it has the greatest relative advantage or least relative disadvantage.

Consumer services

are performed for individuals and include entertainment, tourism, restaurants, hotels, bars, maintenance services, education, health care, and the vast array of personal services

Ecotourism

travel to wild and scenic locations in ways that are sensitive to local social and environmental concerns

Effective demand

wants backed up by dollars, effective through purchasing power

Factors of production

Flexible production

requires significant acquisition of components and services from outside suppliers

allows producers to shift between different levels of output and from one process or product to another, made possible by:
• Reprogrammable computerized machine tools.
• Computer-aided design.
• Computer-aided manufacturing systems.
Flexible production requires significant acquisition of components and services from outside suppliers

Footloose

the rare instance when transportation costs become a negligible factor in production and marketing

Fordism

Assembly-line production of identical commodities by a rigidly controlled and specialized labor force for generalized mass markets

Foreign direct investment (FDI)

• Purchase or construction of foreign factories and other fixed assets; also merging with or purchasing foreign companies.
• About ⅓ of FDI flows to developing countries.

Front-office tasks

involve face-to-face interactions with clients where projecting the correct corporate image is imperative

Infrastructure

installations and services needed to facilitate industrial and other forms of economic development

Just-in-time manufacturing (JIT)

JIT seeks to reduce inventories.
Reinforces spatial agglomeration tendencies.

Least-cost theory

Minimize relative transport, labor, and agglomeration costs

Maquiladoras

“sister” plants

Market-oriented production process

Multiplier effect

each new firm added to the agglomeration will lead to the further development of infrastructure and linkages

implies total (urban) population growth and thus the expansion of the labor pool and the localized market that are part of agglomeration economies

New International Division of Labor (NIDL)

involved exports of manufactured goods from the “industrial” countries and of raw materials from the “colonial” or “undeveloped” economies

shifting to reflect the growing dominance of countries once regarded as subsistence peasant societies that are now major manufacturing exporters for the world market

Offshoring

the practice of either hiring foreign workers or, commonly, contracting with a foreign third-party service provider to take over particular manufacturing operations

Offshore banking

Outsourcing

• Producing parts or products abroad for domestic sale.
• Also, subcontracting to domestic companies.

subcontracting production or service tasks to an outside company rather than performing them in-house

Post-Fordist Flexible Manufacturing

processes based on smaller production runs of a greater variety of goods aimed at smaller, niche markets

Rationalization of industry

full development of the resources of the country wherever they were found and without regard to the cost or competitiveness of such development

Raw Material-oriented production process

exists when there are limited alternative material sources, when the material is perishable, or when, in its natural state, it contains a large proportion of impurities or nonmarketable components

Spatial margin of profitability

define the area within which profitable operation is possible

Location anywhere within the margin ensures some profit and tolerates both imperfect knowledge and personal (rather than economic) considerations

Substitution principle

• A number of potentially optimal locations.
• Spatial margin or profitability.

Tourism

Tourism is the most important tertiary sector activity.
• World’s largest industry in jobs and value generated.

Transnational Corporation (TNC)

business and industry increasingly stateless and economies borderless

private firms that have established branch operations in nations foreign to their headquarters’ country—become an ever more important driving force in the globalizing world space economy

Ubiquitous Industries

• Inseparable from markets and widely distributed.

Variable costs

“White-Collar” Workers

High-skilled specialists are added to administrative, supervisory, marketing, and other professional staffs, they may greatly outnumber actual production workers in a firm’s employment structure

Scientists, engineers, skilled technicians