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SERVICES PP #2 Why are consumer services distributed in a regular pattern? Consumer services and business services do not have the same distributions Consumer services generally follow a regular pattern based on size of settlements Larger settlements offer more consumer services than smaller settlements Central Place Theory Selecting the right location for a new shop is probably the most important factor in the profitability of a consumer service Central Place theory helps explain how the most profitable location can be identified Central Place Theory A Central place is a market center for the exchange of goods and services by people attracted from the surrounding area Central Place Theory 1st proposed in 1930s by German geographer Walter Christaller Theory applies most clearly in regions that are neither heavily industrialized nor interrupted by major physical features such as rivers or mountain ranges Concept was further developed in the United States in 1950s Centrally located to maximize accessibility from surrounding area Central places compete against each other to serve as markets for goods and services for the surrounding region This competition creates a regular pattern of settlements Market Area of A Service The area surrounding a service from which customers are attracted is the market area or hinterland A region with a core where the characteristic is most intense Consumers near the center of the circle obtain services from local establishments To establish a market area, a circle is drawn around a node of service on a map Customers prefer to get services from nearest location Market area is like a nodal region The entire United States can be divided into market areas based on the hinterland surrounding the largest urban settlements The territory inside the circle is the market area The closer to the periphery of the circle, the greater the % of consumers who will choose to obtain services from other nodes About 171 functional regions called “daily urban systems” To represent central place theory, geographers draw hexagons around settlements Used instead of circles b/c no gaps Designated Market Areas Size of Market Area The Market area of every service varies To determine the extent of a market area need two pieces of information about a service Range is the radius of the circle drawn to delineate a service’s market area Expressed usually in travel time (minutes, hours) than in distance People are willing to go short distances for everyday services, like groceries Willing to drive further distances for other services, like a concert Example: Definition: Maximum distance people are willing to travel for use of a service Definition: Threshold of Service Range and threshold Range of Service In a large urban settlement a fast-food franchise has a range of roughly 3 miles whereas a concert arena has a range of roughly 60 miles Once range is determined, provider must determine where a location is suitable by counting potential customers Minimum number of people needed to support the service Every business has a minimum number of customers required to generate enough sales to make a profit Census data helps with determining population Example threshold for a supermarket is about 30,000 people How potential customers are counted inside the range depends on the product Example: Movie theaters attract younger people Also wealth is taken into account Market-Area Analysis Profitability of a location Is a good or service going to be profitable in that location? Compute range, threshold, and draw a circle with a 15 mile radius and count people within circle Best location in non-linear settlement Geographers still apply the gravity model to find the best location, following these steps Optimal location within a market Next question after range and threshold is where IN the market area should the service be located to maximize profitability? Best location in linear settlement Gravity model: predicts that the optimal location of a service is directly related to the number of people in the area and inversely related to the distance people must travel to access it Customer patterns: Greater # of people living in a particular place = greater potential customers Farther people are from particular service, less likely are to use it Identify a possible site for a new service Within the range of the service, identify where every potential user lives Measure the distance from the possible site of the new service to every potential user Divide each potential user by the distance to the potential site for the service Sum all of the results of potential users divided by distances Select a possible location for the new service, and repeat steps 2, 3, 4, and 5 Compare the results of step 5 for all possible sites. The site with the highest score has the highest potential number of users, therefore the optimal location for the service Hierarchy of Services and Settlements Small settlements are limited to consumer services that have small thresholds, short ranges, and small market areas, because too few people live in small settlements to support many services A large department store or specialty store cannot survive in a small settlement because it needs a large population to support it Larger settlements provide services having larger thresholds, ranges, and market areas Services more diverse We only travel further distances if the price is much lower or unavailable locally Nesting of Services and Settlements According to Central Place Theory, market areas across an MDC would be series of hexagons of various sizes, unless interrupted by physical features Christaller Four different levels of market area Hamlet Very small market area, represented by the smallest contiguous hexagons Village Town City Showed that distances between settlements in southern Germany followed a regular pattern MDCs have numerous small settlements with small thresholds and ranges, and far fewer large settlements with large thresholds and ranges Nesting pattern is illustrated with overlapping hexagons of different size Indentified 7 sizes market hamlet, township center, county seat, district city, small state capital, provincial head capital, regional capital city In Germany, Hamlets had an average population of 800 Principle of Nesting Market Areas Also works at the scale of services within a city Rank-Size Distribution of Settlements Geographers observed in MDCs that ranking settlements by size (population) produces a regular pattern or hierarchy Rank-Size Rule Country’s nth-largest settlement is 1/n the population of the largest settlement i.e. second largest city is ½ size of the largest Important because a country that follows the Rank-size rule, like the United States, tends to be a society that is sufficiently wealthy to justify the provision of goods and services to consumers Don’t always follow Rank-Size Rule Primate City Rule third largest city is 1/3 size of the largest and so on….. Should graph like a straight line If it does not graph on a straight line, then the country does not have a rank-size distribution Largest settlement has more than twice as many people as the secondranking settlement Largest city is called primate city Example: Denmark- Copenhagen United Kingdom- London Romania- Bucharest LDCs often follow primate rule Indicates that there is not enough wealth in society to pay for a full variety of services Have to travel much further for shops, hospitals, etc. Periodic Markets Services at the lower end of the central place hierarchy may be provided at a periodic market Frequency varies by culture Definition: collection of individual vendors who come together to offer goods and services in a location on specified days Typically set up in a street or other public space Provides goods to mainly residents of LDCs or rural areas of MDCs Vendors often mobile, part-time, provide small quantities Muslim countries Rural China Korea Africa Why do Business Services Locate in Large Settlements?? Every urban settlement provides consumer services to people in a surrounding area But not every settlement of a given size has the same number and types of business services Hierarchy of Business Services Services in World Cities World cities are most closely integrated into the global economic system because they are at the center of flow of information and capital Business services concentrate in disproportionately large numbers in world cities New forms of transportation and communication services were expected to reduce the need for clustering of services in large cities Example: the Railroad in the 19th century or motor vehicle in the 20th century In some cases opposite Hierarchy of Business Services Business services in world cities Clustering of business services in the modern world city is a product of the Industrial Revolution World cities attract the headquarters of banks, insurance companies, and specialized financial institutions Shares of major corporations are bought and sold on the stock exchanges, which are located in world cities Lawyers, accountants, and other professionals cluster in world cities to provide advice to major corporations Advertising agencies, marketing firms, and other services concerned with fashion and style also locate in world cities Consumer services in world cities Because of large size, world cities have retail services with extensive market areas But they may have even more retailers than large size alone would predict A disproportionately large number of wealthy people live in world cities Leisure services of national significance cluster in world cities Example: concerts, plays, professional sporting events Contain largest libraries and museums Hierarchy of Business Services Public services in world cities World cities are centers of national or international political power Most are national capitals, often contain: Palaces, mansions for heads of state Imposing structures for national legislature Courts Offices for government agencies Also clustered in world cities are offices for groups having business with the government Foreign embassies, labor unions, etc. Exception!!! New York City is unlike other world cities, it is not the nation’s capital Home to the world’s major international organizations, the United Nations, it attracts thousands of diplomats and bureaucrats Hierarchy of Business Services Four Levels of Business services World Cities Dominant London, NYC, Tokyo Specialized Producer-service centers Offer more narrow and highly specialized variety of services One group specializes in management and R&D activities related to specific industries Each is largest city in one of three main regions in developed world Major Chicago, L.A., D.C., Brussels, Frankfurt, Paris, Zurich, Sao Paulo, Singapore Secondary Houston, Miami, San Fran, Toronto Bangkok, Bombay, Hong Kong, Manila, Osaka, Seoul, Taipei Berlin, Madrid, Milan, Rotterdam, Vienna Buenos Aires, Caracas, Mexico City, Rio de Janerio Johannesburg, Sydney Contain headquarters of large corps, well developed banking facilities, etc. Two divisions: regional, subregional Second group specializes as centers of government and education Notably state capitals that also have a major university Example: Albany, NY; Raleigh-Durham, NC; Columbia, SC Dependent centers These provide relatively unskilled jobs and depend for their economic health on decisions made in world cities, regional command and control centers, and specialized producer-service centers Four sub-types in United States Command and Control centers Example: motor vehicles- Detroit, SteelPittsburgh, semi-conductors- San Jose, CA Resort, Retirement, and Residential Centers Manufacturing centers, Military centers Mining centers Business Services in LDCs In the global economy, LDCs specialize in two distinctive types of business services: Offshore financial services Provide two important functions Taxes Taxes on income, profits, and capital gains are typically low or non-existent Corporations have incorporated in an off-shore center also have tax-free exemption regardless of nationality of owners U.S. loses an estimated $70 billion in tax revenue each year Privacy Secrecy laws can help evade disclosure in home countries Can protect assets from malpractice suits or divorce Can hide illegal activities Example: Cayman Islands Back-office functions Known as business-processing outsourcing (BPO) Include processing insurance claims, payroll management, transcription work, etc. Also includes centers for responding to billing or technical inquires LDCs attract BPO because: Low wages Ability to speak English Economic Base of Settlements A settlement’s distinctive economic structure derives from its basic industries Basic Industry export outside of settlement Can be identified by computing the % of community’s workers employed in different types of businesses The % of workers employed in a particular industry in a community is then compared to the % of all workers in the country in that industry If % is much higher in the local community, then that type of business is a basic economic activity Non-basic Industry customers live in same community Economic base unique collection of basic industries defines its base Important because exporting by the basic industries brings money into the local economy Stimulates the provision for more non-basic consumer services for the settlement That attracts new workers, who bring more families That brings more consumer services to meet new needs Economic Base of Settlements Specialization of Cities in Different Services Examples: Settlements in the U.S. can be classified by their type of basic activity Each type of basic activity has a different spatial distribution Concept of basic industries used to be referred to as manufacturing In post-industrial America, increasingly the basic economic activities are in business, consumer, or public services Business Services General business : large metro areas such as L.A., NYC, and Chicago Computing and data processing: Boston and San Jose High-tech: Austin, Orlando, RaleighDurham Management-consulting: D.C. Consumer Services Entertainment and Recreation: Atlantic City, Las Vegas, Reno Medical Services: Rochester, Minnesota Public Services State capitals Large Universities Military bases Economic Base of Settlements Distribution of Talent Individuals possessing special talents are not distributed uniformly among cities Some cities have a higher % of talented individuals than others Correlation found between the distribution of talent and the distribution of diversity in the largest U.S. cities
