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Chapter 11 Lecture The Cultural Landscape Eleventh Edition Industry and Manufacturing Matthew Cartlidge University of Nebraska-Lincoln © 2014 Pearson Education, Inc. Key Issues 1. Where is industry distributed? 2. Why are situation and site factors important? 3. How does industrialization affect the environment? 4. Why are situation and site factors changing? © 2014 Pearson Education, Inc. KEY ISSUE 1: WHERE IS INDUSTRY DISTRIBUTED? © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. Where Is Industry Distributed? • Modern concept of industry: the manufacturing of goods in a factory – Origin: England in late 1700s • Industrial Revolution - improvements made in industrial technology that transformed the process of manufacturing goods • Remember: also coincided with Second Agricultural Revolution © 2014 Pearson Education, Inc. Industrial Revolution • Facilitated by the availability of natural resources in the hearth countries (water power, coal, iron ore) • Diffusion of industry led to growing populations and increased food supplies (remember the Second Agricultural Revolution!) • This freed workers from farming and caused many to seek industrial jobs in cities • Increased the demand for raw materials and the search for new markets: led to colonialism © 2014 Pearson Education, Inc. Diffusion of Industrial Revolution © 2014 Pearson Education, Inc. Where Is Industry Distributed? Industry is concentrated in three regions: 1. Europe 2. North America 3. East Asia Each of these three regions accounts for about 25% of the world’s total industrial output. Other two main regions of industry: 1. Brazil 2. India © 2014 Pearson Education, Inc. Europe’s Early Industrial Centers Europe was the first region to industrialize during the nineteenth century. Numerous industrial centers emerged in Europe as countries competed with each other for supremacy. © 2014 Pearson Education, Inc. North America’s Early Industrial Centers North America’s manufacturing was traditionally highly concentrated in the northeastern United States and southeastern Canada. In recent years, manufacturing has relocated to the South, lured by lower wages and legislation that has made it difficult for unions to organize factory workers. © 2014 Pearson Education, Inc. East Asia’s Early Industrial Areas East Asia became an important industrial region in the second half of the 20th century, beginning with Japan. Into the 21st century, China has emerged as the world’s leading manufacturing country by most measures. © 2014 Pearson Education, Inc. Newly Industrialized Country (NIC) • NIC: A country whose level of economic development ranks it somewhere between developing and developed (“semi-periphery”) • These countries have moved away from an agriculture-based economy and into a more industrialized, urban economy. – In the 1970s and 1980s, examples of newly industrialized countries included Hong Kong, South Korea, Singapore and Taiwan. – Examples in the 2000s include South Africa, Mexico, Brazil, China, India, Malaysia, the Philippines, Thailand and Turkey © 2014 Pearson Education, Inc. Sectors of the economy 1. Primary - Agriculture, fishing, forestry, and mining – Largest sector in low-income, pre-industrial nations 2. Secondary - Transforms raw materials into manufactured goods – Grows quickly as societies industrialize 3. Tertiary - Involves services rather than goods – Dominates post-industrial societies – Trade, finance, real estate, government, transportation, education, entertainment, media © 2014 Pearson Education, Inc. Offshoots of Tertiary Sector 4. Quaternary – intellectual activities – research and development, management and administration, libraries, information technology, government, education 5. Quinary - highest levels of decision making in a society or economy – top executives or officials in government, science, universities, nonprofit, healthcare, culture, and the media © 2014 Pearson Education, Inc. The most common occupations in America Retail salesperson Cashier Fast-food worker Office clerk Registered nurse Waiter Customer-service rep Manual laborer Secretary Janitor General manager Stock clerk Bookkeeper Heavy-truck driver Nursing assistant © 2014 Pearson Education, Inc. 4.5 million 3.3 million 3.0 million 2.8 million 2.7 million 2.4 million 2.4 million 2.3 million 2.2 million 2.1 million 2.0 million 1.8 million 1.6 million 1.6 million 1.4 million © 2014 Pearson Education, Inc. The most disproportionately popular job per state © 2014 Pearson Education, Inc. Basic and Non-basic Industries Basic Non-Basic • Basic industries are cityforming • Non-basic industries are cityserving • Provide services to people and • Provide services for people and business outside the community business located within the community • Bring money into their community from the outside • Do not generate money from outside sources • Basic industries are the main business for which a city is known • Detroit – automobiles • Pittsburgh – steel • San Jose – computer chips • Milwaukee – beer © 2014 Pearson Education, Inc. Weber’s Model of Industrial Location • Alfred Weber – 1909 Germany • Also called the “Least Cost Theory” • Explains the location of industries in terms of 3 factors: 1. Transportation – cost of moving raw materials to factory and finished products to market 2. Labor – Cheap labor may allow an industry to make up for higher transportation costs 3. Agglomeration – if several industries cluster in one city, they can share talents, services, and facilities © 2014 Pearson Education, Inc. Weber’s Model • The substitution principle states that business owners can juggle expenses as long as labor, land rent, transportation, and other costs don’t all go up at once • Need to find the “sweet spot” that is best for the company financially • The sweet spot can move depending on the variables – Ex: Nike pays extra for transportation in exchange for cheap labor overseas © 2014 Pearson Education, Inc. Weber’s Industrial “Least Cost” Model Labor “Sweet spot” Agglomeration © 2014 Pearson Education, Inc. Transportation Contemporary Economic Landscape The contemporary economic landscape has been transformed by the emergence of: 1. Service industries 2. High technology industries 3. Growth poles © 2014 Pearson Education, Inc. Service Industries • In the global economic core, service industries (tertiary, quaternary, quinary) employ more workers than primary and secondary industries combined • Quaternary and quinary have experienced rapid growth in the last 30 years, giving greater meaning to the word “postindustrial” • Not all services contribute to an economy equally – Ex: you pay $20 for a haircut and $20,000 for a surgery © 2014 Pearson Education, Inc. Three Types of Service-Sector Jobs 1. Consumer services (50% of all jobs in U.S.) – Retail, Education, Health, Leisure 2. Business services (25% of all jobs in U.S.) – Professional, Financial, Transportation 3. Public services (10% of all jobs in U.S.) – Government, Security and Protection © 2014 Pearson Education, Inc. Where Are Services Distributed? • Rising and Falling Service Employment – Service sector of the economy has seen nearly all of the growth in employment worldwide. – Service sector has also been most negatively impacted by the recession. • Change in Number of Employees – Within business services, jobs expanded most rapidly in professional services - engineering, management, and law. – Within consumer services, fastest increase has been in health care. © 2014 Pearson Education, Inc. Economic Bases of U.S. Cities © 2014 Pearson Education, Inc. Changes in U.S. Employment © 2014 Pearson Education, Inc. High-Technology Industries • Designated by government to benefit from lower taxes, with goal of providing high-tech jobs to local population • Attracts designers of computers, telecommunications, medical equipment, etc. • Examples of high-technology corridors are – California’s Silicon Valley – North Carolina’s Research Triangle © 2014 Pearson Education, Inc. High-Tech Corridors • Attracted by prospect of developing links with existing research communities and availability of a highly educated workforce • California’s Silicon Valley (UC – Berkley, Stanford University) is home to Adobe, HP, Intel, IBM, Apple, eBay, PayPal, Twitter, Facebook, Netflix, Dell, YouTube • North Carolina’s Research Triangle (Duke, NC State, and UNC – Chapel Hill) is also home to many high-tech companies © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. Major Employers in NC Research Triangle • • • • • • • • • • • • • • • • American Airlines Bayer The Body Shop Burt's Bees Duke University DuPont Fidelity Investments General Electric GlaxoSmithKline IBM PNC Qualcomm Quintiles Sony Ericsson Toyota Verizon © 2014 Pearson Education, Inc. Growth Poles • Growth Pole Theory: economic development is not uniform over an entire region, but instead takes place around a specific “pole” (cluster) • Like a “magnet” • Silicon Valley and Research Triangle became growth poles because the concentration of businesses spurred economic development in the surrounding areas © 2014 Pearson Education, Inc. Rust Belt and Sun Belt • Rust Belt: The industrial zone of the northeastern United States (around Great Lakes) used to be called the Manufacturing Belt – Evokes image of abandoned, rusted out steel factories • Sun Belt: southern region of the United States – Both population and economy of this region has grown recently as service sector businesses have chosen to locate where climate is warm © 2014 Pearson Education, Inc. Rust Belt and Sun Belt © 2014 Pearson Education, Inc. Ecotourism • Ecotourism is defined as "responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education" • Helps to protect the environment AND generate jobs © 2014 Pearson Education, Inc. Principles of Ecotourism • Build environmental and cultural awareness and respect. • Provide direct financial benefits for conservation. • Generate financial benefits for both local people and private industry. • Help to raise sensitivity to host countries' political, environmental, and social climates. • Design, construct and operate low-impact facilities. • Work in partnership with indigenous people to create empowerment for them. © 2014 Pearson Education, Inc. KEY ISSUE 2: WHY ARE SITUATION AND SITE FACTORS IMPORTANT? © 2014 Pearson Education, Inc. Situation and Site Factors Geographers attempt to explain why one location may prove more profitable for a factory than others. Companies ordinarily face two geographic costs: 1. Situation factors – costs associated with the established transportation networks accessible from a specific place. • The farther something is transported, the more it costs 2. Site factors – costs resulting from the unique characteristics of a location. • Labor, capital, and land vary by location © 2014 Pearson Education, Inc. Situation Factors Two main situation factors: 1. Proximity to Input: optimal plant location is near the raw materials ‒ This is best when raw material transportation costs are greater than transportation costs of product to consumer ‒ When raw materials cost more than final product, it is called a bulk-reducing industry ‒ Examples: lumber turned into paper, iron turned into steel © 2014 Pearson Education, Inc. 2. Proximity to Market: the optimal plant location is as close as possible to the customer – This is best when the cost of transporting raw materials is less than the cost of transporting the product to consumers – When the final product weighs more or takes up more space than the raw materials, it is called a bulk-gaining industry – Examples: beverage bottling, automobile assembly, potato chips – Exception: wine is bottled near the raw materials (grapes) because grapes are very fragile © 2014 Pearson Education, Inc. • Manufacturers may also prefer proximity to market if: – They are a single-market manufacturer with only one or two customers • A manufacturer or buttons, zippers, etc. makes sense to be located close to a garment factory (its “customer”) – They have perishable products • Bread bakers, milk bottlers, newspaper printers © 2014 Pearson Education, Inc. Bulk-gaining: Beverage Production Beer is a bulk-gaining industry. The cans or bottles are filled mostly with water. Most beer is bottled near major metropolitan areas, where most of the consumers are clustered © 2014 Pearson Education, Inc. Footloose Industries • For some businesses, transportation costs are not a factor • Footloose industries can locate anywhere and be profitable • Examples: – Call centers – Credit card processing centers – Online companies – Computer chips (small and light, easy to transport anywhere) © 2014 Pearson Education, Inc. Site Factors: Labor, Capital, and Land 1. Labor – • Most important factor on a global scale • Minimizing labor costs is extremely important to some industries • A labor-intensive industry is an industry in which wages and other compensation paid to employees constitute a higher percentage of expenses. • Example: it costs more to make a car but is less labor intensive than making a t-shirt – car part manufacturing is more automated; more of a t-shirt company’s costs go to paying the factory worker © 2014 Pearson Education, Inc. Site Factors: Labor, Capital, and Land 2. Capital • Money available, buildings, machinery, equipment available 3. Land • Must consider natural resources and the actual land itself • Modern factories are most efficient when they are in one-story buildings (need more space) –Mostly available in suburban and rural locations –Land tends to be cheaper than land in the city © 2014 Pearson Education, Inc. Basis for Trade • Comparative advantage: the competitive edge enjoyed by one location over another – Places with favorable growing conditions and inexpensive labor will become specialized in the production of something like bananas – Goes with “international trade” approach to development • Complementarity: one place can supply what another place demands, and vice versa – Places “compliment” each other – Some locations specialize in one economic activity and exchange goods with other regions © 2014 Pearson Education, Inc. Challenges for Developed Countries • Trading blocs (groups of countries working together for trade) • Three most important trading blocs: 1. NAFTA - North American Free Trade Agreement (U.S., Canada, Mexico) 2. EU - European Union 3. ASEAN – Association of Southeast Asian Nations © 2014 Pearson Education, Inc. Trading Blocs • Free movement of products across borders in these regions • No tariffs or barriers to trade among member countries – Example: parts of cars are made in different countries within the bloc and moved easily across borders • Competition among blocs: barriers such as taxes, lengthy permit procedures, and quotas on exports have been placed between blocs – Ex: Japanese government maintains quotas on the number of cars Japanese companies can export to the U.S. © 2014 Pearson Education, Inc. Problems within blocs • In the EU – industry is concentrated in Germany, France, and UK – Within those countries, some areas are more industrialized (and thus richer) than others – France – most industry and wealth are around Paris – Germany – eastern part lags far behind the west • Within NAFTA, Mexico’s economy lags behind those of the U.S. and Canada © 2014 Pearson Education, Inc. Transnational Corporations • Most cooperation and competition within and among trading blocs takes place through transnational corporations – companies that operate factories in countries other than the ones in which they are headquartered • Most transnational corporations are headquartered in the U.S., but some are located in Japan or Europe © 2014 Pearson Education, Inc. Transnational Corporations © 2014 Pearson Education, Inc. Outsourcing • Where to produce or assemble a product is only a small aspect of the commodity chain • A large part of business decision making today has to do with where to have parts produced and assembled • Outsourcing – a company moving production or services abroad – Gained a negative connotation as people felt American jobs were moved elsewhere – Media focused on outsourcing of jobs to China and call centers to India © 2014 Pearson Education, Inc. • Top 5 U.S employers in India: – General Electric: 17,800 employees – Hewlett-Packard: 11,000 employees – IBM – 6,000 employees – American Express – 4,000 employees – Dell – 3,800 employees • Typical salary for a computer programmer: U.S. - $70,000 India - $8,000 • But remember India’s cost of living is 1/5 of ours! © 2014 Pearson Education, Inc. Challenges for Less Developed Countries Challenges for LDCs: 1. Distance from markets – wealthy consumers in MDCs are generally far away – need to invest a lot in transportation 2. Inadequate infrastructure – lacking in transportation, communication, equipment, and also schools and universities to educate workers, managers, and executives 3. Competition – companies seek out low-cost labor in LDCs but keep highly skilled jobs in MDCs © 2014 Pearson Education, Inc. New International Division of Labor • Also known as global division of labor or outsourcing • Key features: – Core countries depend on periphery and semiperiphery for lower-cost production and massproduced goods – Efficient transportation leads to separation of producers and consumers – Locations are selected that have lower operating costs (no pollution regulations, no tariffs, etc.) – Higher-skilled jobs and headquarters are kept in core countries © 2014 Pearson Education, Inc. New International Division of Labor • Impacts on the United States: – Unemployment – Deindustrialization – restructuring toward tertiary/quaternary job sectors – Migration from areas of unemployment to areas of employment (Rust Belt to Sun Belt) – Availability of less-expensive goods changes the standard of living © 2014 Pearson Education, Inc. New International Division of Labor • Impacts on developing countries such as Mexico, China, and India: – Added job opportunities – Entry of women into the workforce – Child labor – Increased wage gap – Migration – Pollution – Regional growth and concentration of wealth, pollution, etc. – Westernization/globalization effects on society and culture of region © 2014 Pearson Education, Inc. U.S. Clothing Manufacturing © 2014 Pearson Education, Inc. KEY ISSUE 4: WHY ARE SITUATION AND SITE FACTORS CHANGING? © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. United States’ Top 10 Exports 1. Machinery including computers: US$190.5 billion (13.1% of total exports) 2. Electrical machinery, equipment: $167.2 billion (11.5%) 3. Aircraft, spacecraft: $134.6 billion (9.3%) 4. Vehicles : $124.3 billion (8.5%) 5. Mineral fuels including oil: $94.7 billion (6.5%) 6. Optical, technical, medical apparatus: $82.0 billion (5.6%) 7. Plastics, plastic articles: $58.4 billion (4.0%) 8. Gems, precious metals: $57.8 billion (4.0%) 9. Pharmaceuticals: $47.1 billion (3.2%) 10. Organic chemicals: $33.9 billion (2.3%) © 2014 Pearson Education, Inc. United States’ Top 10 Imports 1. Electrical machinery, equipment: US$336 billion (14.9% of total imports) 2. Machinery including computers: $315.4 billion (14%) 3. Vehicles: $285 billion (12.7%) 4. Mineral fuels including oil: $163.4 billion (7.3%) 5. Pharmaceuticals: $92.5 billion (4.1%) 6. Optical, technical, medical apparatus: $80.8 billion (3.6%) 7. Gems, precious metals: $67.3 billion (3%) 8. Furniture, bedding, lighting , signs, prefab buildings: $63.1 billion (2.8%) 9. Plastics, plastic articles: $50.4 billion (2.2%) 10. Organic chemicals: $49.8 billion (2.2%) © 2014 Pearson Education, Inc. China’s Top Exports 1. Electrical machinery, equipment: US$557.1 billion (26.3% of total exports) 2. Machinery including computers: $344.8 billion (16.3%) 3. Furniture, bedding, lighting , signs, prefab buildings: $89.5 billion (4.2%) 4. Knit or crochet clothing, accessories: $75 billion (3.5%) 5. Clothing, accessories (not knit or crochet): $72.8 billion (3.4%) 6. Optical, technical, medical apparatus: $67.9 billion (3.2%) 7. Plastics, plastic articles: $64 billion (3%) 8. Vehicles: $60.4 billion (2.9%) 9. Articles of iron or steel: $53.1 billion (2.5%) 10. Footwear: $47.8 billion (2.3%) © 2014 Pearson Education, Inc. Changes within Developed Regions Shifts within the U.S. • Northeastern U.S. lost 6 million jobs in manufacturing between 1950 and 2010 • Industry in the U.S. over time has shifted from the Northeast toward the South and West • California and Texas had largest increases • Industrialization during the late 19th and early 20th centuries largely bypassed the South, because they lacked the needed infrastructure (had not recovered from losing Civil War) © 2014 Pearson Education, Inc. Shifts within the U.S. • More recently, manufacturers have been lured to the south by right-to-work laws – workers cannot be forced to join a union (makes it cheaper for the company to operate) • Many people in South will work for lower wages and forego joining a union • Steel, textiles, tobacco, and furniture industries have become dispersed through smaller communities in the South • Gulf Coast has access to oil and natural gas © 2014 Pearson Education, Inc. Changes in U.S. Manufacturing © 2014 Pearson Education, Inc. Interregional Shifts in Europe • Manufacturing has diffused from traditional industrial centers in northwestern Europe toward Southern and Eastern Europe • European government policies have encouraged this relocation because incomes in Southern and Eastern Europe lag behind Europe’s average – After-effects of Communism © 2014 Pearson Education, Inc. Manufacturing Value as a % of GNI © 2014 Pearson Education, Inc. Special Economic Zones (SEZ) – Designated areas in countries that possess special economic regulations that are different from other areas in the same country. – Companies receive tax incentives, lower tariffs, or eased environmental restrictions – China has been the most successful in using SEZs – allow foreign companies to have free trade rights and to outsource – China has even declared an entire province (Hainan) to be an SEZ – Most SEZs are cities © 2014 Pearson Education, Inc. Special Economic Zones SEZs were created by the governments of various countries in order to – Attract foreign investment – Develop an area by improving infrastructure – Provide jobs to the local population – Promote technology and creating skilled manpower – Increase the economic growth of a country © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. Types of Special Economic Zones • Free Trade Zone – Geographic area where goods may be landed, stored, handled, manufactured, or reconfigured – Generally located around major seaports, international airports, or country borders – Referred to as “foreign-trade zones” in the United States - provide exemption from state and local inventory taxes • Export Processing Zones – Specifically export-based © 2014 Pearson Education, Inc. • U.S. Foreign Trade Zones are located at all Customs Points of Entry • Tariff and tax relief is designed to lower the costs of U.S.based operations engaged in international trade • They are considered to be foreign soil © 2014 Pearson Education, Inc. What happens in a Foreign Trade Zone? © 2014 Pearson Education, Inc. Export Processing Zone (EPZ) • Areas within developing countries • Offer incentives and a barrier-free environment to promote economic growth • Attract foreign investment for export-oriented production. • Over 850 EPZs exist today • Employ 27 million workers – up to 90% female © 2014 Pearson Education, Inc. Maquiladoras Example of EPZ: Mexico attracts labor-intensive industries because of its relatively low-cost labor and its proximity to the U.S. – Plants in Mexico near the U.S. border are known as maquiladoras – Companies receive tax breaks if they ship materials from the U.S., assemble components in Mexico, and export finished product back to U.S. © 2014 Pearson Education, Inc. Maquiladoras © 2014 Pearson Education, Inc. BRICS • The countries expected to dominate global manufacturing during 21st century: – Brazil, Russia, India, China, South Africa • These countries control 25% of the world’s land area and contain 3.6 billion people • Account for 22% of the world’s GDP • China is expected to pass the U.S. as the world’s largest economy around 2020 • South Africa was added to the acronym in 2010 © 2014 Pearson Education, Inc. © 2014 Pearson Education, Inc. GDP for BRIC Countries © 2014 Pearson Education, Inc. • By 2050, the world’s largest economies are expected to be held by: 1. China 2. India 3. United States 4. Indonesia 5. Nigeria 6. Brazil 7. Russia © 2014 Pearson Education, Inc. Asian Tigers or Asian Dragons • Hong Kong, Singapore, South Korea, and Taiwan • Free-market, developed economies • Had exceptionally high growth rates and rapid industrialization between the 1960s and 1990s • Hong Kong and Singapore have become world leading international financial centers • South Korea and Taiwan are world leaders in manufacturing information technology • They serve as role models for many developing countries, especially the Tiger Cub Economies (Indonesia, Malaysia, Philippines, Thailand) © 2014 Pearson Education, Inc. Tigers (red) and Tiger Cubs (yellow) © 2014 Pearson Education, Inc.