Factors Influencing Industrial Location
Generally, location of industries is influenced by economic considerations though certain non-economic considerations also might influence the location of some industries. Maximisation 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
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
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 were 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 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 locational history of Indian cotton textile industry indicates
that concentration of the industry in and around
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
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
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