Industrial agglomerationIndustrial agglomeration

OutlineOutline

What is industrial agglomeration?What is industrial agglomeration?What are the characteristics of industrial What are the characteristics of industrial

agglomeration?agglomeration?How does industrial agglomeration occur?How does industrial agglomeration occur?Why does industrial agglomeration occur?Why does industrial agglomeration occur? Is industrial agglomeration good?Is industrial agglomeration good?

What is industrial agglomeration?What is industrial agglomeration?

It refers to high concentration of industrial It refers to high concentration of industrial activities in an area because industries activities in an area because industries may enjoy both may enjoy both internalinternal and and external external economieseconomies when they cluster together when they cluster together (agglomerate).(agglomerate).

Is it a phenomenon or process?Is it a phenomenon or process?

Agglomeration as a Agglomeration as a phenomenonphenomenon: it refer: it refers to the spatial clustering or concentration s to the spatial clustering or concentration of industrial activities in a relatively small aof industrial activities in a relatively small area. rea.

Agglomeration as a Agglomeration as a processprocess: it refers to th: it refers to the snowballing process whereby more and e snowballing process whereby more and more manufacturing firms cluster or areally more manufacturing firms cluster or areally concentrate in a relatively small area.concentrate in a relatively small area.

2 forms of agglomeration2 forms of agglomeration

Concentration of Concentration of related or well-linkedrelated or well-linked factories together and form a specialized factories together and form a specialized industrial region. industrial region.

Concentration of Concentration of various kindsvarious kinds of of factories in the industrial zones in urban factories in the industrial zones in urban area.area.

Spatial effects of Ind. Aggl.Spatial effects of Ind. Aggl.

Over time, industrial agglomeration results Over time, industrial agglomeration results in the in the growth of large industrial concentgrowth of large industrial concentrationsrations, producing different areal patterns , producing different areal patterns of industrial land use. They have large nuof industrial land use. They have large numbers of mbers of associated and inter-dependenassociated and inter-dependent factoriest factories, surrounded and served by resi, surrounded and served by residential and commercial areas.dential and commercial areas.

Industrial districts Industrial districts

Hong Kong - Kwun Tong, Tai Kok Tsui, TaHong Kong - Kwun Tong, Tai Kok Tsui, Tai Po Industrial Estatei Po Industrial Estate

Sydney - Paramatta, Alexandria, etc Sydney - Paramatta, Alexandria, etc

Minor industrial centres/towns Minor industrial centres/towns

PRD - Foshan, Dongguang, Shunda PRD - Foshan, Dongguang, Shunda

Industrial cities Industrial cities

Shanghai (textile)Shanghai (textile)Nagoya/Toyota (car-making)Nagoya/Toyota (car-making)Detroit (car-making) Detroit (car-making)

Industrial regions Industrial regions

Silicon Valley in Silicon Valley in California California (electronics)(electronics)

around Inland Sea of around Inland Sea of Japan (shipbuilding)Japan (shipbuilding)

PRD in South China PRD in South China (toy) (toy)

Characteristics of an ind. aggl.Characteristics of an ind. aggl.

Clustering of industrial activitiesClustering of industrial activitiesFunctional linkages Functional linkages production linkages production linkages

+ service linkages+ service linkagesWhen materials move from one firm to When materials move from one firm to

another (another (production linkagesproduction linkages))As the firms share the specialized services As the firms share the specialized services

and facilities (and facilities (service linkagesservice linkages))Economies of scaleEconomies of scale

How is industrial How is industrial agglomeration developed?agglomeration developed?

A case of Quarry BayA case of Quarry Bay

Tai Koo PropertiesTai Koo Properties

Tai Koo Sugar Refinery (1883 – 1972)Tai Koo Sugar Refinery (1883 – 1972) Tai Koo Dockyard (1900 – 1972)Tai Koo Dockyard (1900 – 1972) Tai Koo Coco-cola Bottling Factory (1952-198Tai Koo Coco-cola Bottling Factory (1952-198

0s)0s)

Quarry BayQuarry Bay Tai Koo Sugar Refinery wTai Koo Sugar Refinery w

as established in 1883as established in 1883 With growing trade in raw With growing trade in raw

cane sugar from Java, thcane sugar from Java, the Philippines and North Qe Philippines and North Queensland, and ready maueensland, and ready markets in China and Japan, rkets in China and Japan, Taikoo Sugar ran the worlTaikoo Sugar ran the world's largest sugar plant in id's largest sugar plant in its day, and owned small flts day, and owned small fleet of sugar carrying shipeet of sugar carrying ships. s.

What were the original factors and What were the original factors and attraction for the sugar factory?attraction for the sugar factory?

Available of landAvailable of landCoastal locationCoastal locationSheltered locationSheltered locationAvailability of labourAvailability of labour

The problemThe problem

More than 3,000 workers were needed but More than 3,000 workers were needed but the population of Shaukeiwan was only 3,2the population of Shaukeiwan was only 3,274 74

Hostels were provided and so workers froHostels were provided and so workers from other places were attractedm other places were attracted

More jobs mean more income. It in turns iMore jobs mean more income. It in turns increased the purchasing power of peoplencreased the purchasing power of people

Other related facilities were provided, e.g. Other related facilities were provided, e.g. clinic, schoolclinic, school

Tai Koo DockyardTai Koo Dockyard

in 1900, on land adjin 1900, on land adjacent to the sugar reacent to the sugar refinery, construction finery, construction work began on Taikwork began on Taikoo Dockyard. oo Dockyard.

Industrial agglomerationIndustrial agglomeration

Taikoo Dockyard launched its first riverboaTaikoo Dockyard launched its first riverboat in 1910, soon began to produce coasters t in 1910, soon began to produce coasters for the company. for the company.

The dockyard was to become one of Hong The dockyard was to become one of Hong Kong's biggest, and also one of its most prKong's biggest, and also one of its most progressive employers, providing its own hoogressive employers, providing its own housing, hospital and school. using, hospital and school.

Snowballing effectsSnowballing effects

More jobs More jobs more income more income higher purch higher purchasing power asing power development of entertainm development of entertainment (ent ( 麗池夜總會麗池夜總會 ))

More jobs More jobs more settlements more settlements growth growth of urban population in Quarry Bayof urban population in Quarry Bay

More population More population more services = more more services = more public utilitiespublic utilities

Snowballing effectsSnowballing effects Quarry Bay was still an important industrial distriQuarry Bay was still an important industrial distri

ct in 1970s and 1980sct in 1970s and 1980s Factories included soft-drinks factory (7-up), PrinFactories included soft-drinks factory (7-up), Prin

ting (Kodak), car repair centre (ting (Kodak), car repair centre ( 大昌行大昌行 ), various ), various electronics ind.electronics ind.

The growing population supported the industries The growing population supported the industries which become more profitable and enjoyed the bwhich become more profitable and enjoyed the benefits from agglomeration enefits from agglomeration

The whole process is cumulative and growth becThe whole process is cumulative and growth becomes self-sustaining.omes self-sustaining.

Myrdal’s Model of Cumulative CMyrdal’s Model of Cumulative Causation Processausation Process

A new industrial plant set up A new industrial plant set up extra employment/more jobs extra employment/more jobs income and the purchasing power income and the purchasing power ↑↑as the as the

size of the population grows size of the population grows increases the demand for consumer increases the demand for consumer

goods, houses, schools and services goods, houses, schools and services more employment opportunities in other more employment opportunities in other

industries, e.g. in commerce, construction, industries, e.g. in commerce, construction, service, etc.service, etc.

Myrdal’s Model of Cumulative CaMyrdal’s Model of Cumulative Causation Processusation Process

The The new industrynew industry itself demands local itself demands local goods and services. goods and services.

It may attract linked industries which It may attract linked industries which supply it with raw materials (called supply it with raw materials (called supplier-industries) or use its products supplier-industries) or use its products (called user-industries).(called user-industries).

Myrdal’s Model of Cumulative CaMyrdal’s Model of Cumulative Causation Processusation Process

further increases employment and expanding further increases employment and expanding services, public utilities and construction.services, public utilities and construction.

attract even more economic activities which battract even more economic activities which become more profitable (enjoying the benefits froecome more profitable (enjoying the benefits from agglomeration economies)m agglomeration economies)

the expanding city (increase in city scale) reachethe expanding city (increase in city scale) reaches the s the thresholdthreshold level for various services. level for various services.

Thus, the whole process is Thus, the whole process is cumulativecumulative and growt and growth becomes h becomes self-sustainingself-sustaining..

Reasons for industrial Reasons for industrial agglomerationagglomeration

What benefits can be obtained What benefits can be obtained from industrial agglomeration?from industrial agglomeration?

Initial factors and attractionInitial factors and attraction

They refer to the They refer to the original factorsoriginal factors that attract the l that attract the location of early industries at a certain site. ocation of early industries at a certain site.

These factors can be These factors can be naturalnatural or or man-mademan-made. The. They start the y start the cumulative processcumulative process of industrial agglo of industrial agglomeration and create the meration and create the snowballing effectssnowballing effects on i on industrial development and agglomeration.ndustrial development and agglomeration.

The area with initial growing factors is known as The area with initial growing factors is known as the the growth pole.growth pole.

Linkages

Production unit

Subcontract links

Information links

Service links

Marketinglinks

Subcontractlinks

Vertical linkagesVertical linkages

Garment Factory

Textile Factory

Chemical factory

Synthesis fiber

Cloth

Horizontal LinkagesHorizontal Linkages

Iron & Steel Factory

Engine Factory

Glass-making Factory

Tyre-making Factory

Motor car assembly factory

Diagonal LinkagesDiagonal Linkages

Fruit canning

bottling Ice creamJam-

making

Sugarrefinery

Sugar mill

Glass bottlefactory

3 types of Industrial linkages3 types of Industrial linkages

vertical vertical (one-to-one) linkage - forward and (one-to-one) linkage - forward and backward linkagebackward linkage

horizontalhorizontal (many-to-one) linkage (many-to-one) linkage diagonaldiagonal (one-to-many) linkage (one-to-many) linkage Industries with simple vertical linkages havIndustries with simple vertical linkages hav

e a very strong production relationship. The a very strong production relationship. They can obtain the greatest economic advaey can obtain the greatest economic advantages, once they are grouped or agglomentages, once they are grouped or agglomerated together in a small area.rated together in a small area.

Benefits from vertical linkagesBenefits from vertical linkages lower cost of transporting goods from factolower cost of transporting goods from facto

ry to factory, e.g. integrated plants of I&S iry to factory, e.g. integrated plants of I&S ind. (nd. (transfer economiestransfer economies))

Localization economiesLocalization economies energy savings, e.g. I&S ind.energy savings, e.g. I&S ind. waste products or final products from one industrwaste products or final products from one industr

y can be the raw materials of another y can be the raw materials of another ∴ ∴ specispecializationalization in production. in production.

economies of division of labour + mechanizatieconomies of division of labour + mechanizationon

discountsdiscounts can be obtained when several firms bu can be obtained when several firms buying similar inputs in bulk. ying similar inputs in bulk.

Advertising costAdvertising cost ↓↓∵∵ good reputation. good reputation. presence of ancillary servicespresence of ancillary services saving of storagesaving of storage close relationships among factories makes it easclose relationships among factories makes it eas

y to solve the problems of similar nature and to y to solve the problems of similar nature and to maintain higher level of production skills.maintain higher level of production skills.

Urbanization economiesUrbanization economies

a pool of skilled labour and managerial exa pool of skilled labour and managerial expertisepertise

infrastructure savingsinfrastructure savingssnowballing effectsnowballing effect research & developmentresearch & developmentattracting investmentattracting investment

Diseconomies of scaleDiseconomies of scalePhysicalPhysical

shortage of land for expansionshortage of land for expansionshortage of labourshortage of labour traffic congestiontraffic congestionurban decayurban decay

EconomicEconomic rising rentrising rent rising labour costrising labour costhigh taxhigh tax

SocialSocialpollution / environmental problemspollution / environmental problemshigh crime ratehigh crime ratepressure from labour unionpressure from labour unionpressure from green groupspressure from green groupsgovernment policygovernment policy

Solution to industrial agglomerationSolution to industrial agglomeration

Industrial degglomeration/decentralizationIndustrial degglomeration/decentralization

(to be discussed in the next lesson)(to be discussed in the next lesson)