Factors Influencing Industrial Location

Generally, location of industries is influenced by economic considerations though certain noneconomic considerations also might influence the location of some industries. Maximization of profit which also implies cost minimization is the most important goal in their choice of particular places for the location of industries. There are several factors which pull the industry to a particular place. Some of the major factors influencing location are discussed below: 1. Availability of raw materials: In determining the location of an industry, nearness to sources of raw material is of vital importance. Nearness to the sources of raw materials would reduce the cost of production of the industry. For most of the major industries, the cost of raw materials form the bulk of the total cost. Therefore, most of the agro-based and forest-based industries are located in the vicinity of the sources of raw material supply. 2. Availability of Labour: Adequate supply of cheap and skilled labour is necessary for and industry. The attraction of an industry towards labour centres depends on the ratio of labour cost to the total cost of production which Weber calls Labour cost of Index. The availability of skilled workers in the interior parts of Bombay region was one of the factors responsible for the initial concentration of cotton textile industry in the region. 3. Proximity to Markets: Access to markets is an important factor which the entrepreneur must take into consideration. Industries producing perishable or bulky commodities which cannot be transported over long distance are generally located in close proximity to markets. Industries located near the markets could be able to reduce the costs of transport in distributing the finished product as in the case of bread and bakery, ice, tins, cans manufacturing, etc. Accessibility of markets is more important in the case of industries manufacturing consumer goods rather than producer goods. 4. Transport Facilities: Transport facilities, generally, influence the location of industry. The transportation with its three modes, i.e., water, road, and rail collectively plays an important role. So the junction points of water-ways, roadways and railways become humming centres of industrial activity. Further, the modes and rates of transport and transport policy of Government considerably affect the location of industrial units. The heavy concentration of cotton textile industry in Bombay has been due to the cheap and excellent transportation network both in regard to raw materials and markets. 5. Power: Another factor influencing the location of an industry is the availability of cheap power. Water, wind, coal, gas, oil and electricity are the chief sources of power. Both water and wind power was widely sought at sources of power supply before the invention of steam engine. During the nineteenth century, nearness to coal-fields became the principal locating influence on the setting up of new industries, particularly, for heavy industries. With the introduction of other sources of power like electricity, gas, oil, etc. the power factor became more flexible leading to dispersal and decentralization of industries. 6. Site and Services: Existence of public utility services, cheapness of the value of the site, amenities attached to a particular site like level of ground, the nature of vegetation and location
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of allied activities influence the location of an industry to a certain extent. The government has classified some areas as backward areas where the entrepreneurs would be granted various incentives like subsidies, or provision of finance at concessional rate, or supply of power a cheaper rates and provision of education and training facilities. Some entrepreneurs induced by such incentives may come forward to locate their units in such areas. 7. Finance: Finance is required for the setting up of an industry, for its running, and also at the time of its expansion. The availability of capital at cheap rates of interests and in adequate amount is a dominating factor influencing industrial location. For instance, a review of location history of Indian cotton textile industry indicates that concentration of the industry in and around Bombay in the early days was mainly due to the presence of rich and enterprising Parsi and Bhatia merchants, who supplied vast financial resources. 8. Natural and Climatic Considerations: Natural and climatic considerations include the level of ground, topography of a region, water facilities, drainage facilities, disposal of waste products, etc. These factors sometimes influence the location of industries. For instance, in the case of cotton textile industry, humid climate provides an added advantage since the frequency of yarn breakage is low. The humid climate of Bombay in India and Manchester in Britain offered great scope for the development of cotton textile industry in those centres. 9. Personal Factors: In deciding location of industrial units, sometimes an entrepreneur may have personal preferences and prejudices against certain localities. For instance, Mr. Ford started to manufacture motor cars in Detroit simply because it was his home-town. In such cases, personal factor dominates other considerations. However, this kind of domination is rare. 10. Strategic Considerations: In modern times, strategic considerations are playing a vital role in determining industrial location. During war-time a safe location is assuming special significance. This is because in times of war the main targets of air attacks would be armament and ammunition factories and industries supplying other commodities which are required for war. The Russian experience during the Second World War provides and interesting example. 11. External Economies: External economies also exert considerable influence on the location of industries. External economies arise due to the growth of specialized subsidiary activities when a particular industry is mainly localized at a particular centre with port and shipping facilities. External economies could also be enjoyed when a large number of industrial units in the same industry were located in close proximity to one another. 12. Miscellaneous Factors: Historical incidents also play a dominating role in determining the location of industries in certain cases. The development of cotton-textile industry in Lancashire provides an interesting example for this. Further, the size of and industrial unit would also have much influence in choosing location. This is because the size of industrial units depends upon the radius of the circle within which they can profitably distribute their goods and upon the density of population living within the circle.

Factors affecting plant location decisions and the need for such decisions
Units concerning both manufacturing as well as the assembling of the products are on a very large scale affected by the decisions involving the location of the plant. Location of the plant itself becomes a very important factor concerning service facilities, as the plant location decisions are strategic and long-term in nature. Plant location decisions need detailed analysis because: Wrong plant location generally affects cost parameters i.e. poor location can act as a continuous stimulus of higher cost. Marketing, transportation, quality, customer satisfaction are some of the other factors which are greatly influenced by the plant location decisions hence these decisions require in-depth analysis. Once a plant is set up at a location which is not much suitable, it is a very disturbing as well as very expensive process to shift works of a company to some other place, as it would largely affect the cycle of production. The investments involved in the in setting up of the plant premises .buying of the land etc are very large and especially in the case of big multinational companies, the investments can go into millions of rupees, so economic factors of the location should be very minutely and carefully checked and discussed in order to achieve good returns on the money which has been invested. The Need for location decisions These decisions are needed when a new plant is to be set up or when the operations involved in the company at the present location need to be expanded but expansion becomes difficult because of the poor selection of the site for such operations. These decisions are sometimes taken because of the social or the political conditions engulfing the working of a company. The way the works of a company have to be performed, largely depends upon the industrial policies issued by the government. Any change that creeps in the industrial policy of the government which favors decentralization and hence does not permit any change or any expansion of the existing plant requires strictly evaluated location decisions. Factors governing plant location: Regional factors: These factors include proximity of the plant to the market and also to the sources of the raw materials. They also include infrastructural facilities, transportation facilities, and availability of skilled workers, legislation, the taxation and also the work attitude of the workers. Robinson was the one who has very clearly and efficiently justified industrial location concerns using pure materials nearer to the markets or the consumption centers. According to Robinson, the place of production is likely to be at the place of consumption where the final product is more expensive to carry because it is more bulky, more fragile or more perishable than is raw materials. Community factors: These involve accommodation, education, entertainment and transport facilities. It also includes attitude of the community, supporting industries and services, suitability of the land etc. Examples of plant location (India)
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Most of the textile mills are found in or near Mumbai and Ahmadabad because of the humidity conditions that prevail there. Sites for nuclear power plants to be located in different parts of the country largely depend upon environmental, safety, socio-economic and also the engineering factors affecting the construction and operation of such plants. Steel plants are generally located near the Jharkhand, Bengal, and Chhattisgarh and Orissa regions. This choice of site is mainly because of more economical transport of the finished goods as compared to basic raw materials. Similar case is observed in the plants which manufacture cement; such plants are located near the lime and the coal deposits. Naptha / oil based fertilizer plants at Mangalore, Madras, Cochin have been located near ports, which act as a great source for the import of the raw materials. Proximity to market forms a major factor which affects plant location decisions in case of machine tool industries. In case of such industries, sites are scattered over different parts of the country such as Ludhiana, Pune, Bangalore, Calcutta, Mumbai etc. Information Technology/BPO/Software Industries depend largely on availability of skilled personnel, infrastructure etc Because of these reasons most of such organizations operate in urban areas such as Delhi, Chennai, Hyderabad, Bangalore, Pune etc.

Factors responsible for the Localization of Industries

Manufacturing is the second largest type of production after primary production activity 'of hunting, fishing, mining, lumbering, farming etc. Manufacturing has undergone a big change as a result of advancement of science and technology. From the making of few simple items, like handmade cloth, mustard oil, agricultural implements etc. manufacturing to-day involves highly technical and complex machines, equipments and tools for the assembly of automobiles, ships, aircrafts, space ships, agricultural machines, computers and so on. For centuries, manufacturing had been a household work and items like agricultural implements; weapons etc. were produced on a small-scale. But with the increasing demand due to increase in population, it took the form of cottage industry and later, large scale manufacturing industries. Manufacturing is related to processing and altering the raw materials of agriculture, forests and that of minerals into finished or partially finished products. The agro raw materials which are transformed into finished products are cotton, wool, jute, sugarcane etc. and that of minerals are iron ore, copper, manganese, mica etc. Presently, the most important manufacturing industries are those which bring together manufactured items of different industries to make complicated machines and equipments required in means of transportation, agriculture, mining, military warfare etc.Development of industries is of utmost importance to man. In fact, their development is considered to be an index of a country's economic prosperity and strength. The location of manufacturing industries depends upon a number of geographical and economic factors. These factors are known as factors of localization of industries or agglomeration of industries. The most important factors
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are: (i) Raw material.(ii) Source of Power.(iii) Labour.(iv) Means of transportation.(v) Market. (vi) Other factors like climate, Government Policies, capital, water, land etc. (i) Raw Material. Among the factors influencing location of an industry, close proximity to raw material availability of regular supply of cheap raw material are of utmost significance. Therefore, industries are set up close to or in the regions where raw material is available in plenty. This speaks for the localization of jute industry in West Bengal, Sugar industry in U.P and concentration of heavy industries in the states of Chattisgarh and West Bengal.If the raw material is heavy and of small value, the industries are set up in the regions of raw material. Iron smelting, brick making, cement manufacturing are best examples.Iron and Steel Plants at Jamshedpur (Jharkhand), Rourkela (Orissa), Bhilai (Chhattisgarh) and Durgapur (West Bengal) have been set up near the sources of raw material i.e., Iron ore. (ii) Source of Power. All types of manufacturing industries depend upon one or the other sources of power. It may be coal, oil, electricity, gas etc.In the industries, especially those of ferrous metallurgy, coal is the main source of power; therefore, these heavy industries are closely tied down to coal fields. The iron and steel industry of India in the Damodar Valley of Chattisgarh at Jamshedpur is located near the coal fields of Raniganj and Jharia. (iii) Labour. Modern industry requires large labour force, both skilled and unskilled. The availability of cheap labour in a region is an important factor determining the localization of industries. Different types of industries require different types of labour force. For example, watch-making, electronics, aeronautics; computers etc. require highly skilled labour, whereas, on the other hand, cotton textile manufacturing, sugar making, jute textile etc. employ more of unskilled labour. The development of the plantations in Assam and cotton textiles in Maharashtra is attributed to the availability of cheap efficient labour. In these regions it has also been seen that industrial centers tend to attract more industries, because plenty of labour is available in these centers, for example, Mumbai and Kolkata have become industrial cities of the country mainly because of availability of plenty of labour in and around these mega cities. (iv) Means of Transportation. Industries depend upon efficient and cheap transportation system, which is essential for the movement of raw material as well as the finished products. They may be rail, road or water. Railway junctions are considered to be the most suitable sites for the localization of industries. These enjoy benefits of easy transportation from different directions. Similarly sea ports also develop as industrial centers because of availability of facilities of water transportation for export and import of products. (v) Market. Market is an important factor in determining localization of industries. Goods are manufactured to be sold in the market. Industries are generally set up close to urban centres. Sometimes, dense population may not prove to be solid market for the disposal of the different industrial products. If the people are poor, the purchasing capacity also becomes poor.In some of the Asian countries, where people are poor, industries which are engaged in the manufacturing of cheap and essential goods like coarse cloth find an adequate market. This explains why underdeveloped countries, though densely populated are poor in manufacturing industries. (vi) Other Factors.(a)Climate: Climate also plays a part in the location of industries. The stimulating cool temperate climate is more suitable for the development of industries because
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this type of climate adds to the work efficiency of the labour force. This is one of the major reasons why temperate latitudes have well-developed manufacturing industries rather than the tropics or the desert or the Tundra regions. Climate plays a significant role in location of cotton textile manufacturing industries. The cool and humid climate helps in spinning of yarn and weaving of cloth processes. Development of film industry at Mumbai is due to favourable climate. (b)Capital. Development of industries requires a large capital investment. It may come from any source, local or foreign. Banks and other financial institutions play an important role in the growth of industries from time to time. (b) Government Policy. In order to give boost to industries in the country, the government gives certain guidelines, tax exemptions, electricity at concessional rates, subsidies, rail link etc., if these are set up as per government plan.Mohali; an industrial town near Chandigarh has come up on the industrial map of India because of Government policies. Thus Government Policy plays a significant role in determining place of location of an industry. If the Government bans import of foreign cars, the automobile industry is bound to flourish in that country. (d)Early Start. There is a tendency to set up new units in the area, where that industry is already much developed. It is because the area has been enjoying benefits of developed means of transport, financial institutions, banking facilities, availability of skilled labour and marketing ease. Hosiery industry got concentrated at Ludhiana can be cited as one example of role of early start. (e) Personal Preferences. Personal whims, prejudices of an entrepreneur and preferences also matter sometimes in the setting up of an industry in an area, ignoring all the economic and commercial considerations. In a democratic set up, sometimes political matters also initiate the establishment of certain heavy industries in certain regions. The setting of a Railway Coach Factory at Kapurthala in Punjab has been set up due to political interests rather than economic considerations. Construction of oil refinery at Bhatinda is another example of a political decision. Localization of industries at a place gives rise to a number of problems also. These are:(i) High cost of living.(ii) Shortage of living space.(iii) Sky high land prices.(iv) Traffic jams.(v) Pollution.(vi) Growth of slums. Some of the industries are highly localized in the country. These are due to combination of a number of geographical and socio-economic factors already discussed above. The examples are: Sugar Manufacturing: U.P. and Bihar.. Jute Textiles: West Bengal.. Cotton Textiles: Maharashtra and Gujarat. Cement Industry: M.P. and Rajasthan.. Iron and Steel: Jharkhand and Orissa.. Cinematography Mumbai. Leather goods: Kanpur, Agra.. Hosiery: Ludhiana.. Sports goods: Jalandhar.. Computers: Bangalore, Hyderabad, Gurgaon