Economics

13 Factors Affecting Location Of Industries

The location of several firms producing a commodity in a particular place or region is known as localization or concentration or simply location of industries. Areas or Regions also specialize in the production of a good. Localization or location of industries is also described as Concentration of industries or Geographical division of labor.

In India the textile industry in Maharashtra, the sugar industry in Uttar Pradesh, the Jute industry in West Bengal etc., are some of the examples concentration or location of industries.

13 Factors Affecting Location Of Industries

1. Availability of raw-materials or nearness to raw-materials: Availability of raw materials or nearness to raw materials is a primary factor which governs location of industries. An industry is located in that place where raw materials are available in abundance and at cheaper rates. For example, ship manufacturing industry is located at Visakhapatnam as the ocean is nearer to that place. Similarly, oil refinery factories are established at Visakhapatnam because oil is imported through Vizag port. Industries require imported raw-materials are also located near the shipyard areas.

Weber classified raw-materials into two types namely : 1) localized materials and ubiquitous. 2) weight losing materials and weight adding materials. Sugarcane, iron ore, raw jute, cotton etc. are localized materials. Clay, water and sand are ubiquitous. Ubiquitous have no influence on location. But localized materials influence the location of an industry in a particular place. Localized materials are again classified into two types 1)weight losing (gross) materials and 2) weight adding (pure) materials. Coal is weight losing material as it loses its weight in the process of manufacture. As against cotton is a weight adding (pure) material.

It is uneconomical to  transport coal to distant areas. So it is better to establish Iron and steel industry near the coal mines. That is why the Tata Iron and Steel was- established in Jamshedpur. Iron ore deposits are available in plenty in that place. On other hand, weight adding materials like cotton etc. can be transported to any place as it adds its weight to production of cloth. It may be noted that raw-materials available in all places do not influence the location of an industry. Example: Water, day etc. Brick manufacturing industry can be started at any place because clay is available anywhere in the country. But raw-materials available only in some places influence the location of industry. Industries have to be established only in those places where such raw-materials are available.

2. Availability of power:  Availability of power is another important factor of concentration or location of industries. In old days steam was used for running industries. As a result industry were established near the coal mines. But with the invention of of electricity, today industries are located in any place where electricity is available. Industries like  aluminum units are located near the hydroelectric projects.

3. Transport costs: Transport costs also influence the location of industries. Industries incur transport costs for bringing raw-materials and for sending the finished goods into the markets. It is economical to start an industry near an area where transport costs are minimum and low. Raw-materials which occupy large place and which are heavy, require huge cost for transporting them. So an industry must be located near the area where the transport costs are minimum.

4. Split location : Sometimes the different stages of production are decentralized and production is organized at different places for reducing transport costs. For example paper industry requires bamboo-pulp. So the raw-material, bamboo-pulp manufacturing unit of the paper industry has to be located near the forest. The paper manufacturing unit must he located near the market. Hence splitting of the Production of a commodity at different stages brings economies to the industry.

5. Nearness to the market: This is a chief factor governing the location of all industry in modern period. Several advantages are secured when an industry is established near the market. The sales position will increase. Production can he carried on in accordance with the changes in the consumer’s tastes. Economies of transport can be secured in importing raw-materials. Hence, the modern entrepreneurs prefer to establish industries near the market places.

 6. Availability of labor: Labor are required for organizing the productive affairs of an industry. The entrepreneurs like to start industries in those areas where labor is abundantly available. For example, the Tea industry is located in North India because laborers are available at cheaper rates. The growth of cotton textile industry near Bombay is due to the availability of cheap labor. Max Weber described raw-materials, power, transport, markets, labor as the primary factors.

7. Climatic conditions: The location of industries is also governed by the climatic prevalent in an area. For example the cotton textile industry requires moist climate. That is why it is located near Bombay. The climate in Simla and Darjeeling is suitable for the growth of coffee and tea plantations.

8. Momentum of early start: Sometimes two or three factories may be established in a particular place due to some reasons. In course of time several industries are started in that place due to momentum of early start of some industries

9. Political factors : The policy of government also influences the location of industries. The Government may establish an industry on political considerations by giving several incentives. It provides finance, land. water, transport. and communication facilities in backward regions with a view to developing them. It also provides tax concession, marketing consultancy, export and import facilities.

10. Religious Factors: Places of pilgrimage attract the entrepreneurs to start industries for producing those articles which are demanded by the pilgrims.

11. Availability of capital : Capital is the most essential factor for the establishment of an industry in a locality. Generally industries are located near those places where capital facilities are available. The entrepreneurs find it easy to get credit at cheaper rates of interest in urban areas. Because, in urban areas banks and other financial institutions exist in large number. It is due to the availability of easy and cheap credit facilities that led to the location of industries near, Bombay, Calcutta, Visakhapatnam, Hyderabad etc. in India. But due to the expansion of banking system, industries are being decentralized to different places in our country.

12. Advantages of integration: Advantages of integration is another factor governing location of industries. The articles of an industry are necessary for another industry. If these industries are located at a particular place, they can secure the advantages of integration.

13. Agglomeration tendencies : Concentration of an industry in a particular locality leads to the establishment of several industries in that locality. This is so because new industries consider it economical to establish their units in that locality due to the availability of several facilities. In this way, concentration leads to further concentration.

Thus, several factors govern the location of an Industry. But we have to remember that these factors are dynamic in nature. We can’t say that an industry will always remain in a particular place. Availability of new raw-materials, improvement in technology, development of new areas etc. influence the localization or location of industries

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