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Factors of industrial location


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Title: Factors of industrial location

Factors of industrial location
Types of industries
  • Primary industry
  • Secondary industry
  • Tertiary industry
  • Quaternary industry
  • In this section, we are only confined with the
    manufacturing industry.

  • Primary industry usually known as handicrafts.
  • It is estimated that in Asia, Africa, and the
    Middle East, some 80 - 85 of the industrial
    workers are employed in handicraft industry.

Manufacturing industry can be seen as system.
  • Various inputs (factors of production) such as
    raw material, labour, and power are brought
    together in the production process from which
    produce an output -- the product.

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  • Frequently, the output of one manufacturing
    industry becomes input of the raw materials of
  • e.g. steel is used to make car bodies and
    therefore one of the inputs needed by automobile
  • It can be divided into heavy industry and light

Manufacturing industries can be also divided
  • a. Processing industries
  • A material may undergo a change in physical
    state, chemical composition, volume or mass, in
    creating a product more useful to man.
  • e.g. Steel making is one of the example. It
    change state during process.

For reference, can see this site
  • http//www.nucor.com
  • http//www.posco.co.kr

Two kinds of processing industry
  • 1. Initial Processing industries
  • A single raw material is converted into a more
    concentrated or useful form.
  • For example (1)sugar milling (2)dairy
    processing (3)fruit and vegetable canning
    (4)meat packing (5)grain milling (6)brewing
    and wine making etc.

  • In some cases, the output of the processing
    factory becomes available for immediate
    consumption, e.g. butter, cheese, wine, beer and
    canned fruit.
  • In other cases, some treatment of mineral ores,
    the output must pass through other manufacturing
    for processing before a final product results.

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2. Complex processing industries
  • Some types of processing involves more than a
    single raw material inputs.
  • Raw materials are frequently obtained from
    several different sources, and often subjected to
    a series of lengthy and complex processes that
    involve a high degree of organisation and
    advanced technology.
  • In some cases, the complex processing industries
    may result in a product available for immediate
    consumption, or the required further processing
    or fabricating,
  • e.g. steel making, aluminium production,
    petroleum refining, sugar refining.

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b. Fabricating industries
  • Fabricating involves a change in the physical
    form but not the state of the raw materials used.
  • Fabricating is basically the assembly of finished
    or semi-finished product from other primary or
    secondary manufacturing industries
  • e.g. steel making industry, to produce a finished

  • Examples the manufacture of automobiles,
    aeroplanes, ships, all other types of machinery,
    furniture, and clothing are examples of
    fabricating industries.

  • Some Basic Problems of Industrial Location
  • Distribution Pattern
  • Not evenly distributed around the earth,
    with some manufacturing industries typically
    concentrated in certain localities.

The reasons for the Contemporary Pattern of
Location And the Cause for Dynamic Change of
  • 1.   differences in scale or level of study
  •  micro level or firm level individual firm
  • meso level an industrial district
  • macro level an industrial area or a whole
  • industry

2.   differences in the types of industry
  • e.g. light industry such as textiles make strong
    demands for labour.
  • Heavy industry such as oil refining and petroleum
    results little labour but much capital.

3.   differences in special needs
  • -  need to be close to other industries
  • - need to lower transportation costs by cheap sea
  • -  others

4.   differences in the motives of the individual
entrepreneur in choosing a location
  • some are likely to be motivated by a desire to
    maximise profits and will take risks in doing so.
  • Other may want simply satisfactory profit
    and safe existence.

Despite these diversifying factors of location,
there are common requirements to all
  • 1.   the purchase of raw material or
    semi-processed materials
  • 2.   the processing or assembling of these raw
    materials or semi-processed materials whereby
    value is added to them.
  • 3.   the sale of the finished products.

  • 4.   the payment of transportation costs involved
    in the assembly of the raw materials or
    semi-processed materials and the distribution of
    the finished products.
  • 5.   labour supply
  • 6.   energy resources
  • 7.   capital

II. The Factors affect Industrial Location
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1. Role of Raw Material
  • The degree of attraction exercised by raw
    materials varies according to nature of the
    materials themselves.
  • Raw materials can take many forms
  • 1. products from a primary industry, e.g.
    agriculture, mining, forestry or fishing.

  • 2.    semi-processed (semi-finished) products
    from an initial processing or complex processing
    industry, e.g. raw sugar, steel plates.
  • 3.    semi-processed products from a fabrication
    industry, e.g. electricity circuits, car engines.

In term of spatial distribution, raw materials
can be classified into 2 broad types
  • 1.  Ubiquitous raw material which are found
    practically everywhere, e.g. water, sand,
    atmospheric gases
  • 2.  Sporadic or localized raw materials which
    are found only at specific sites and are of many
    types, e.g. coal, petroleum, iron ore, bauxite,

  • Ubiquitous raw material cannot exert strong
    locational tie or influence on industrial
    location as can localised / sporadic raw
  • Historically, many manufacturing industries had a
    tendency of locating very close to their raw
    materials raw-material oriented.

  • A. If the lose a great deal of weight or bulk
    during the production process, the factories will
    be attracted to sources of raw materials because
    transport cost can be saved.
  • e.g. sugar is only 1/8 of the weight of sugar
  • cane
  • Goldsmith one tonne pf raw material produce a
    few grams of metal.
  • Alumina refining which uses about 4 tonnes of
    bauxite to produce 2 tonnes of alumina.

b. If the materials are perishable
  • e.g. fruits canning, vegetable and food
    preservation, palm oil refining, meat-packing,
    they have to locate themselves near their sources
    of raw.
  • Initial processing has to be carried out on the
    site before the raw materials can be sent and
    arrive in fresh forms at the market.

c. High value of raw materials per ton
  • If material of high value per ton (e.g. wool),
    then it can bear a heavier cost of transport and
    plants will be found further away from away from
    sources of materials.
  • Materials of low value per unit of weight, e.g.
    copper ore will attract industries near them.

d. Possibility of using substitute materials
  • Where materials are substitutable, the pull of
    any one of them is reduced, e.g. either pig-iron
    or scrap can be fed into the converter so steel
    production may not be set up nearer to the iron

e. Number of materials involved
  • Attraction of one material in ONE direction may
    be counteracted by pull of another in a different
    direction, e.g. iron and steel industry employs
    several types of raw materials and location based
    on access to both coal and iron ore can be found.

f. Influence of freight rate
  • If the materials are costly or difficult to
    handle, then raw material supply plays a very
    important role in location decision.

  • g. hazardous or dangerous materials which require
    to travel long distance
  • These may include the generation of nuclear
    electricity and making of nuclear armaments.

  • A marked decline in the locational pull or
    attraction of raw materials on industrial
    location because of
  • 1.   improvements in transport
  • technology which allow raw materials to be
    transported over longer distances at lower costs
    (cheapening of transportation).

  • 2. advances in production techniques which
    allow the same amount of products to be produced
    forma reduced amount of raw materials.
  • 3. greater attractiveness of the market location.
  • 4.  advantages of agglomeration of manufacturing

  • A. Sugar milling (case study)

Physical requirements
  • 1. alluvial flat land with deep and well-drained
    soils of volcanic origin.
  • 2. completely (frost-free) - mean monthly
    temperatures (should not fall below 18 ? for
    optimum growth.
  • 3. annual rainfall 2000mm per annum but it is
    also necessary to have a slightly dry period

Processing cane into raw sugar
  • crushing the cane to extract juice. (The
    remaining cane fibber is a dry material called
    'bagasse'. This is used as fuel.
  • cleaning dirt out of juice in settling tanks.
  • boiling juice twice to form syrup-coated sugar
    crystals. (??)
  • spinning off syrup from crystals.

  • 5. A thick syrup, called molasses (??)is also
    spun off in this final centrifuging and this is
    then sent to distilleries to be made into
    industrial alcohol, rum (?)
  • 6. It is also sold to farmers for stock feed and

Raw material (case study)
  • 1. Perishability of harvested cane
  •       transshipment must be avoided.
  • 2. Cane, is an extremely bulky, and cumbersome
    crop of low specific value, i.e. 'value per unit
    weight is low.

  • For example, an average yield of cane is 84
    tonnes per hectare, compared to less than 2.5
    tonnes per hectare of wheat and other cereals.
  • As a result, cane is difficult and costly to be

  • Therefore, the transport system focusing on each
    mill has to be both fast and capable of handling
    very large quantities.
  • Also, it is more economical to keep the haul as
    short as possible. Thus, mills have to located in
    the midst of their assigned cane areas.

3. Weight lose material
  • Each 7 tonnes of cane brought in from the fields
    yields only 1 tonne approximately of raw sugar in
    the milling process.
  • Thus, the overriding consideration in siting
    sugar mills is to locate them as close as
    possible to the fields with efficient bulk
    transport system

B. Copper processing (Case Study)
  • Highly concentrated into a few major mining
  • a. interior south-western U.S
  • b. the Ural (???)and Caucasus regions of
  • c. Zambia and Zaire in south-central

  • d. east-interior Canada
  • e. central and northern Chile
  • f. Peru, the Philippines

  • Most of these regions are in relatively isolated,
    sparsely settled and underdeveloped parts of the
    earth distant from the major consuming regions.

Distribution of consuming regions
  • In the advanced nations (industrial regions)
  • North-eastern part of the USA and Canada,
    the-west coast of the USA, western Europe,
    European USSR and southern Japan.

2. Locational Factors
  • High weight loss ratio - Large amounts of
    worthless waste material except for the small
    quantities of recoverable gold, silver, lead,
    zinc etc are mined with copper ores.
  • In other words, for every 100 tonnes of copper
    ore mined, only 1 or 2 tonnes Of pure copper are

  • Thus, the weight loss ratio is very high (97-98)
  • Therefore, it is desirable to upgrade the ores at
    the mine in order to reduce the transport costs
    associated with moving huge quantities of bulky
    materials of low specific value.
  • Therefore, strong materials orientation

3. Copper manufacturing (case study)
1. Concentrating the ore
  • The purpose of this stage is to upgrade the crude
    ore by removing most of the waste material. The
    concentration mills convert each 100 tonnes of
    ore into about 2 or 3 tonnes of copper
  • In order to save transport cost, nearly all
    concentrating mills are found within a few
    kilometres of the mines that supply them.
  • thus, copper concentration is an excellent
    example of a materials oriented initial
    processing industry.

2. Smelting the concentrate (regarded as part of
the initial processing)
  • - The concentrate from the mills has only
    about 30 to 40 copper content.
  • - therefore, the purpose of smelting is to
    remove the remaining worthless impurities.
  • - From 2 or 3 tonnes of concentrate, the
    smelters produce about 1 tonne of blister copper,
    which is over 99 pure. Thus this stage has
    weight loss ratio of approximately 60.

  • Because of this fairly high ratio, smelters tend
    to locate close to the concentrators, or at some
    point convenient to several mills.

3. refining the blister copper
  • The blister copper is 99 pure, but is still
    unsuitable for the manufacture of electrical
    wiring and other items.
  • Hence, it must be refined by electrolysis to
    remove the impurities - gold, silver, zinc, lead
    etc. This very low weight loss ratio and the
    valuable nature of the by-products, mean that
    electrolytic refining is not tied to the mining
  • In fact, the high specific value of the blister
    copper means that it is economical to transport
    it to markets, where power and labor factors are
    usually more favorable.

Role of Market
  • 1. An outstanding locational influence on modern
    manufacturing as a whole.
  • A market location is attractive to many kinds
    of industries, particular consumer goods
    industries, and likewise many capital goods

  • a. Consumer goods Industries which are
    producing goods for consuming markets in large
    urban areas.
  • Textiles and many kinds of processed food are
    good examples, with their raw materials sources
    widely spaced from their market-based factory
  • It is clear that consumer goods industries have
    to be sited in densely populated regions such as
    cities and conurbations.

  • b. capital goods industries - which sell their
    products to be further processed or fabricated by
    other plants, are less dependent upon
    distribution of population.
  • However, since their products are very often sold
    to the consumer goods industries, many capital
    goods industries are likewise attracted to
    urban-based and market-based locations.
  • Good example include the production of car tyres
    and the assembly of motor vehicles,etc.

a. The market will exert a strong pull on
industry if
Industries have become market-oriented for the
following reasons
  • (i) Bulkiness of the products
  • If there is an increase in weight (weight-gaining
    products), in order to save on transport cost .
    e.g. breweries, soft drink manufacturing
    (coca-cola), bottling plant are all market

  • ii. Perishability of the products, e.g. bakery
  • iii. Fragility of the product e.g. glassware,
  • iv. If the industries require close personal
  • between producer and consumer. E.g.
  • v. If the product is relatively cheap (low value,
  • bulky) and transport cost will increase
    the cost
  • substantially e.g.cement-making
  • vi. If a market is a concentrated and specialized
  • e.g. farm machinery industry in US is
    located near
  • to mid-west while the cotton picking
    machine is
  • produced in the south.

  • Market is population centre
  • Concentration of industry will create market
  • The distribution cost is higher than procurement

EXAMPLES The Changing Pattern of Oil Refinery
from raw material to market
location (case study)
  • 1.The high proportion of wastes meant that it was
    uneconomical to transport crude oil very far
    before refining. It is natural that refineries
    established in the early days were at the source
  • 2. Near the turn of the century came the first
    big demand for petrol owing to the development of
    the motor vehicle, and this meant that a
    substantial proportion of former waste became
    an important market product.

  • 3. The proportion of waste was further diminished
    by the development of the cracking process.
    Cracking is, however, an expensive process but
    only a limited amount of waste is produced.
  • 4. The overall result of these changes in demand
    is that today up to 95 of crude oil can be made
    to yield marketable products.
  • One of the main reasons, therefore, for the
    location of refineries at source, a high
    proportion of waste has disappeared, and it is no
    accident that in recent years we have seen a
    marked shift to market location.

  • 5.Market refineries are more flexible in the
    sense that they can accept the crude oil from
    competing regions, while source refinery is
    virtually tied to using oil from a single source.
  • In the Suez Crisis, for example, when the
    supplies of oil from the Middle East to Western
    Europe were interrupted, British refineries were
    able to switch to Venezuelan oil.

  • 6. Skill man are more easily to found in
    developed countries (market) than at the
    underdevelop countries (raw material)
  • In developed territories where the danger of
    "civil strike and political instability is at

  • It is therefore surprising that political and
    strategic refineries have encourage the
    development of market-oriented refineries in the
    post-war years.
  • This is a notable trend for modern industry to
    seek a market location, and this is true of the
    oil-refining industry. The strength of the
    attractive power of the market should be in no
    doubt to anyone.

3. Role of Transportation
  • Terminal costs are incurred because of the costs
    due to loading, unloading and temporary storage,
    and the cost of preparing shipping documents
  • Haulage costs are related to the distance of the
    journey covered, and include fuel costs, labor
    costs, maintenance costs and depreciation on the
    means of transport vehicle concerned.

  • Most modern industries find it necessary to bring
    in raw materials from a large number of sources,
    and to distribute their finished products to a
    large number of markets.
  • Usually manufacturing industries prefer locations
    with good transport infrastructure (e.g. road,
    railways, harbors and airports)

  • 1. coastal ports e.g. Sydney, London,
  • 2. railway centers e.g. Chicago (with 27 rail
    lines converging upon it), Paris.
  • Ports, canals, roads, railway, and airports have
    all, at different times and to different degrees,
    been important influences on industrial location.
    Thus, industrial location and technological
    change in transport are linked together.

  • (i)  Water transport offers the lowest cost per
    tonne per km for long hauls.
  • (ii) It is the cheaper means. It usually have
    very large cargo capacities and the natural water
    route,(rivers, seaway and oceans )needs little

  • (i) Sea transport much slower than other means of
  • (ii) It may be disturbed easily by storm and
    other adverse weather conditions.
  • (iii) Deep-water harbors well sheltered from
    strong wind must be available, or else heavy
    investment may be necessary artificial harbor
  • (iv) Heavy capital investment are required for
    the construction of container terminals.

  • R I

  • 1. At either R or M, only 1 set of terminal
  • costs is incurred.
  • 2. At any intermediate site I between R and
  • M, 2 sets of terminal costs are incurred,
  • one for the procurement of raw materials
  • and one for the distribution of finished
  • 3. Since a lot of terminal costs could be
    saved, it
  • would be cheaper to locate the
  • plant at either R or M than at any
  • point I.

Case 2
  • Location at the break-of-bulk point (transhipment
  • - for manufacturing plants the consignment
  • of which requires transhipment, i.e.
  • transfer from one carrier to another, e.g.
  • from railway to sea transport).

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  • The place where transfer from one carrier to
    another occurs is referred to as a break-of-bulk
    point or transshipment point.
  • Here, the terminal costs are unavoidable, and
    hence the step-up in the procurement cost curve
    moving towards the market, and the step-up in the
    distribution cost curve moving towards the
    material source.
  • A market orientation or materials orientation
    will incur these additional terminal costs, which
    push up the total transport costs at either

  • However, if the manufacturing takes place at the
    transshipment point, some of the reloading
    terminal costs may be avoided, especially if the
    manufacturing process results in some weight
    reduction and/or bulk reduction.
  • Break-of-bulk locations are frequently least cost
    location for manufacturing plants which process
    bulky raw materials arriving by sea, e.g. sugar
    refining, oil refining, steel milling.

Case 3
  • 1. the finishing products are bulkier or more
  • fragile than the new material.
  • 2. the finished products may require special
  • handling facilities, e.g. refrigeration.
  • 3. raw materials can be carried in bulk
  • carriers and trains whereas the finished
  • products cannot.
  • e.g. furniture-making/ manufacture of washing
    machines, processing of agricultural products
    into chilled/frozen foods.

  • As a result of lower assembly costs relative to
    distribution costs, such industries tend to be
    located at or near their market.

  • 4. The role of Labour
  • Labour is needed to operate any industrial
    plant but the type and amount vary from industry
    to industry.
  • In some industries, labour input is a large
    cost item while other may be of minor importance.

  • Labour is relatively immobile factor, difficult
    to move to new areas or to new jobs. Largely for
    this reason, labour-intensive industries may be
    attracted to areas that have a surplus of labour.

  • For these industries labour costs, form a very
    high proportion of total costs and, if costs vary
    from place to place, may exert a strong
    locational influence.
  • a. i. quantity of labour
  • Labour intensive ratio
  • number employed /value of shipment from

b. Labour varies spatially in quality and
  • Labour costs are determined by 3 main
  • payments to workers
  • educational level of workers and costs of
    training workers
  • Stability of labour force

5. The role of capital
  • a. Fixed capital land, construction of factory
    building, machinery for processing and social
    capital (social services) of the area, including
    public housing, school, hospital. It also include
    physical infrastructure (e.g. road, railways).
  • b. Working capital - It is needed to finance the
    costly factory system, to pay wages, purchase
    stock of material, component parts, finished
    product not yet sold and money (money capital)

The location effect of capital
  • - Fixed capital is much more immobile, difficult
    and costly to move. This is the reason for
    geographical inertia.
  • Money capital can be obtained from investment of
    manufacturers, sale of shares to private
    investors, loan from banks, insurance companies
    and government. More mobile.

6. The Role of Power Resources
  • a. Cost of energy varies over space
  • A known resources may not be used because of
    its inaccessibility, e.g. oil in Siberia.

  • b. There is also time variation in demand
  • and supply.
  • Technological advances may make formerly useless
    to be valuable and desired.

  • The fuel and power resources obtained from modern
    industries are coal, natural gas, petroleum,
    water power and nuclear energy.
  • The fuel can be directly or indirectly, that is,
    the fuel is converted to energy in another form
    usually easier for transport e.g. coal to produce

7. The Role of Government / Government Influence
  • Government influence is increasing felt in the
    development of industries in many developed and
    developing countries, whether they have a free
    enterprise economy (i.e. laissez-faire), mixed or
    planned economy.

  • In particular, government influence on
    manufacturing location is most marked in the
    planned economies in socialist countries.
  • Government exhibits its influence through
  • - infrastructure
  • - government spending
  • - legal framework
  • - education and training facilities

In free economic local government
  • a. On a local scale, conflict of interest (the
    problem of noise, dirt, smoke, offensive smell,
    danger and traffic congestion)
  • between industrial landuse and other e.g.
    residential, educational, recreational has
  • led the city government to introduce zoning
  • laws.

  • b. Government may set up regulations controlling
    the maximum hours of work, the minimum age of
    work, minimum wages etc. to protect the labors
    from the capitalists' exploitation.
  • c. To encourage dispersion by offering cheap
    land, industrial estates, better transport system
    and all infrastructure.

Ways of government intervention or influence
  • Traiffs
  • Quotas
  • Subsides bounties
  • Government ownership
  • Lease restriction
  • Loans
  • Strategic consideration
  • Tax concessions

Some possible measures of government intervention
  • 1. Provision of infrastructure in areas
    established for industrial development
  • 2.Provision of land (often cheaper and more
    extensive land) for industrial use. e.g. Tai Po
    and Fo Tan Industrial Estates in the N.T, Hong

  • 3. Establishment of manufacturing industries in
    depressed regions and new industrial areas
  • (a) In countries of planned economies, e.g.
  • the Chinese government has established a
  • large petroleum refinery and
  • works at Urumqi in Xinjiang in order to
  • regional economic balance and industrial
  • dispersion.
  • (b) In countries of mixed economies, e.g.
  • and France, the governments can
  • nationalized plants in depressed regions
  • rural areas.

  • e.g. The British government has
  • established new factories such as Ford
  • at Halewood (near Liverpool), British
  • at Bathgate (near Edinburgh), etc.
  • 4. Introduction of favourable terms of trade to
  • industries in order to attract foreign
  • and the establishment of
  • industries
  • e.g. By granting tax concessions (low
    rates on
  • profit taxes)

  • 5. Protection of the country's own-industries
    and/or new industries
  • e.g. By imposing tariffs on imported finished
    products or raw materials and imposing quotas on

  • 6.At city or regional levels, governments may
    adopt zoning policies which specify the site of
    industries in various industrial districts
  • (e.g. Tai Po Industrial Estate for industries not
    possibly accommodated in the inner city's
    multi-storey buildings) and/or industrial
    regions. e.g. Metropolitan Sydney, Australia

  • 7. Setting up of training institutions for
    industries in specified industrial estates or
  • 8. Introduction of anti-pollution laws and
    traffic control regulations to reduce pollution
    and other environmental problems in existing
    problem areas.

  • 9 Town planning measures and strong central
  • These may
  • limit the establishment of repulsive industries
    (e.g. leather tanning)and environmentally
    dangerous industries (e.g. chemical works) to
    some specified regions
  • encourage the development of cleaner industries
    and force the manufacturers to adopt sewage
    treatment of their waste products before

    AFTER 1949
  • Case Study(2) Government influence on industrial
    location in Australia
  • Please refer to the online notes

8.The Role of Technology Change
  • Technology as a factor of manufacturing location
    is needed in the production, transport and
    marketing of the finished products.
  • In particular, technological advances in various
    aspects affect considerably the location of
    manufacturing industry.

  • Firms tend to be located at the site where the
    total costs are minimized. Changes in technology
    at any state of production will alter the least
    cost point and induce a locational shift.

9. Climate and Water Supply
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a.   Climate
  • certain agriculture raw materials are limited by
    the climate, e.g. equatorial climate rubber for
  • availability of water may influence the location
    of textile industry.
  • cost of heating, cooling, humidifying and
  • types of demand may depend on the climate e.g.
    heater in cold environment.

b. Water supply
  • water can serve as raw materials e.g. soft drink,
  • washing and cooling e.g. textile, paper making

10. Land Space
  • a. The increasing scale of manufacturing factory
    demands for a more spacious site. A lot of
    industries take a sub-urbanized location, e.g.
    motor vehicle assembly, oil refinery
  • While smaller labour-intensive industry are
    in residential buildings or flatted-factory
  • b. Physical demand of the industry
  • e.g. ship building demands a water frontage.

  • c. Cost of the land
  • Land prices vary from region to region. Rental
    will normally decrease from the city center. But,
    it is determined by the market Mechanism.

11. Personal Factors Behavioral and Random
factors for decision making
  • a. Geographical inertia many
  • industries are located at the place
  • where they were set up even though
  • the favourable factors have been
  • faded out.

  • b. In making decision on the location of
    plants, most of the industrial entrepreneurs do
    not have complete knowledge about the various
    factors of production and the general business
  • Accordingly, industries can rarely hope to be
    sited at places with minimal costs, i.e. optimal
    locations. Personal consideration may influence
    the final decision on a location.

  • c.   Economic factors are seldom the only factors
    considered in the building of a factory plants
    non-economic factors also enter the consideration
    in many locational decisions.
  • Many industrialists would be satisfied with a
    high level of profits profit maximization is a
    motive more applicable to large manufacturing
    plants than to small and medium size
    manufacturing firms.
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