12 Factors Affecting Industrial Location | Explained

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Factors Affecting Industrial Location

While making a choice of a suitable region for a proposed industrial enterprise, the following factors affecting industrial location:

  1. Availability of Raw Material
  2. Accessibility to the Market
  3. Availability of Labor
  4. Transport and Communication Facilities
  5. Supply of Cheap Fuel, Power and Water
  6. Natural and Climatic Considerations
  7. Personal and Historical Consideration
  8. Momentum of an Early Start
  9. Political and Strategic Considerations
  10. Government Policy
  11. Financial Facilities
  12. Miscellaneous Factors

Availability of Raw Material

In the selection of plant location, the availability of raw materials is an important factor; because the cost of raw materials forms, a substantial part of the total cost of production. The localized gross materials have an important influence on the concentration of an industry. Ubiquities may not have a major influence over it.

Often a factory is situated near the source of raw materials which are weight-losing or gross bulky or heavy in nature. For example, the sugar industry in India is located in the U.P. and Bihar where sugarcane is grown. Similarly, the jute industry was attracted, to the source of its raw materials near Calcutta.

Accessibility to the Market

Since goods are manufactured with the object of selling them in the market, easy access to the market becomes an important consideration in the choice of an industrial location. Industries whose products are costly to carry on account of fragility, perishability, or bulk are located in close proximity, to the market.

This tendency becomes more emphasized if the raw materials are less costly to transport or are derived from diverse sources, and lose little weight in the manufacturing process Evolution of new markets is an important factor.

Availability of Labor

Labor is probably the most important single factor influencing plant location. Industries in general and labor-intensive industries in particular, which need manual workers in large numbers, have a tendency to be located in those areas where the supply of labor is easy and wages are low.

Transport and Communication Facilities

Transport facilities i.e. storage, handling, and service facilities play an important role in the location of any manufacturing undertaking; as raw materials must be brought to the factory and the finished products must be dispatched economically and without undue delay.

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In some industries where raw materials form a major item of cost, cheap and easy transport facilities become an important consideration. In others, where the raw materials are bulky and their transportation is relatively costly.

It would be an advantage to have the works located close to the source, of supply in order to facilitate transport activities and maintain the transportation charges, at their lowest possible level. That is why steel and iron works are to be found near coal and iron-producing areas.

Supply of Cheap Fuel, Power and Water

The factor of cheap and easy supply of fuel and power must also enter into the question of the choice of site as the item reflects itself in the final cost of products. In the past, coal had an unrivaled sway over the industrial growth of a country.

At present, there are, however, several other sources of power, e.g., electricity, gas, oil, and waterpower. As electric power can be carried to great distances from its sources, industries today have been somewhat free in choosing their locations throughout the country.

Coal as a source of power has maintained a position in those cases, where carbon content becomes necessary; but in other cases, alternative sources of power are making rapid headway. However, it is the cost factor that decides the form of power and influences the location of industrial enterprises.

Natural and Climatic Considerations

Factors like the level of the ground, the topography of a region, drainage facilities, disposal of waste products and climate, etc., may also affect the location of a manufacturing enterprise. Extractive industries like coal, iron ore and bauxite are located within fairly narrow limits fixed by natural conditions.

The climate also plays an important role. For example, a dry climate is essential for flour milling industries, etc. and therefore, they are located in Kanpur, Poona which does not have a damp climate. Similarly, for the cotton textile industry, a humid climate is important; as under such a climate, the frequency of yarn breakage is low.

Personal and Historical Consideration

Sometimes enterprises are located at particular places on account of the personal preferences and prejudices of the entrepreneurs concerned. For instance, Henry Ford established the automobile industry in Detroit because it was his hometown.

Lord Nuffield founded Morris Motors in Coerley, South-East of Oxford, because the school in which his father was educated happened to be for sale. Similarly, industries grow in certain places on historical grounds.

It is said that the cotton industry “first settled in Lancashire because the woollen industry was already there, foreigners were kindly received and Manchester was not a Corporation”. In India, many industries were pioneered in the Presidency towns because it was there that the British settled first.

Momentum of an Early Start

When a few industries are set up in an area, transport facilities, particularly railway stations come up there, banks open branches, repairs and maintenance shops are opened and, even, townships grow. All these provide momentum to the future establishment of industries in the areas.

For example, Durgapur Steel Plant may be tile .biggest industrial unit in Durgapur but many other industries have also been set up in wake of the establishment of the Steel Plant.

Political and Strategic Considerations

Recently, political and strategic considerations also have been influencing the selection of a region where the business is to be located. Lack of political stability in a particular state stands in the way of the establishment of industrial enterprises and/or drives away those already established, as has happened in West Bengal, Punjab, and Jammu and Kashmir.

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Strategic considerations are particularly important for those industries that produce materials ‘for war and products of national importance. Such industries are the main targets of attacks and, therefore, should be located at places that are relatively immune from air attackers.

For instance, India’s aircraft factory is located in Bangalore and her main arsenal is situated in Jubbalpore; both places are relatively safe from enemy invasion.

Government Policy

In planned economies like India, governments play an important role in the location of industries. Such governments often encourage the setting of industrial enterprises in the backward regions, by means of subsidies, tax rebates, provision of easy finance, transport facilities, etc.

This policy helps in achieving balanced regional development throughout the country. Recently, many state governments in India have attracted industrial entrepreneurs, by offering them various incentives like land and power at concessional rates, tax rebates, etc. to speed up the tempo of industrialization in their respective states.

Financial Facilities

Finance is the lifeblood of any industrial enterprise. Therefore, the availability of adequate finance at cheaper rates influences the consideration of its location to some extent. However, the financial facilities are not likely to exercise much influence on location decisions; because capital is highly mobile.

Under certain special circumstances, this factor may become important. For instance, the Government of India encouraged special financial institutions like ICICI, IDBI, IFCI, etc. to provide more funds at cheaper rates to underdeveloped regions of the country so as to attract industries to those regions. With the same purpose, the nationalized commercial banks are also encouraged to open more branches in such areas.

Miscellaneous Factors

The decision about industrial location may be affected by numerous other factors that may not be reducible to economic terms in the stuck sense of the term. “Police and fire protection, recreational and social facilities of the community, schools, and colleges for employees and their children, housing, trends of local land values, telephone service, and the nearness of complementary or service plants should all have a bearing on executive decisions”. Any of these factors may assume dominating proportions in a particular case.


FAQs Section

What are the factors affecting industrial location?

The following are the factors affecting industrial location:
1. Availability of Raw Material
2. Accessibility to the Market
3. Availability of Labor
4. Transport and Communication Facilities
5. Supply of Cheap Fuel, Power and Water
6. Natural and Climatic Considerations
7. Personal and Historical Consideration
8. Momentum of an Early Start
9. Political and Strategic Considerations
10. Government Policy.