Glossary
Agglomeration
The clustering of businesses in a specific area, often for mutual benefit, leading to increased efficiency and productivity.
Example:
The concentration of high-tech companies in Silicon Valley is a prime example of agglomeration, where firms benefit from shared infrastructure, a skilled workforce, and knowledge spillover.
Economies of Scale
Cost advantages that companies achieve as their production volume increases, leading to lower average costs per unit.
Example:
A large online retailer can purchase shipping boxes in massive quantities, benefiting from economies of scale that allow them to get a much lower price per box than a small local shop.
Growth Poles
Centers of economic activity designed to stimulate growth in a surrounding region, often through government investment or specific industries.
Example:
The establishment of a new university research park can act as a growth pole, attracting related businesses and fostering innovation in the surrounding community.
Just-In-Time (JIT) Delivery
A production strategy where materials and goods are delivered precisely when they are needed in the manufacturing process, minimizing inventory and waste.
Example:
An automobile assembly plant using Just-In-Time (JIT) Delivery receives car seats from a supplier only hours before they are installed, drastically reducing the need for large warehouses.
Labor Costs
The wages, salaries, and benefits paid to workers involved in the production process, influencing a firm's location decision.
Example:
Many textile companies have moved production to countries like Vietnam or Bangladesh to take advantage of lower labor costs, even if it means longer shipping times.
New Asian Tigers
A group of highly developed economies in Asia (Hong Kong, South Korea, Taiwan, and Singapore) that achieved rapid industrialization and economic growth through export-oriented manufacturing.
Example:
South Korea, one of the New Asian Tigers, transformed its economy from agrarian to a global leader in electronics and automotive manufacturing within a few decades.
Newly Industrialized Countries (NICs)
Countries that have undergone rapid economic growth and industrialization, often transitioning from an agricultural to an industrial economy.
Example:
India is considered a Newly Industrialized Country (NIC) due to its significant growth in manufacturing and service sectors over the past few decades.
Offshoring
The relocation of a company's business processes or production facilities to another country, often to take advantage of lower labor costs or more favorable regulations.
Example:
A clothing brand might offshore its manufacturing to factories in Vietnam, moving the actual production facilities overseas to reduce expenses.
Outsourcing
The practice of hiring an external third-party company to perform tasks or provide services that were previously done in-house.
Example:
A tech company might outsource its customer support operations to a call center in another country to reduce operational costs.
Post-Fordist Production
A flexible and customized production system characterized by advanced technology, responsiveness to consumer demand, and specialized labor, moving away from mass production.
Example:
A custom sneaker company that allows customers to design their own shoes and then produces them on demand is an example of Post-Fordist Production, prioritizing flexibility over standardized mass output.
Special Economic Zones (SEZs)
Designated geographical areas within a country that have different economic laws and regulations from the rest of the country, designed to attract foreign investment and boost economic activity.
Example:
China's Shenzhen Special Economic Zone (SEZ) attracted massive foreign investment by offering tax incentives and relaxed regulations, transforming a fishing village into a global manufacturing and tech hub.
Transportation Costs
The expenses associated with moving raw materials to a factory and finished goods to markets, a key factor in industrial location.
Example:
A potato chip factory might locate close to potato farms to minimize the transportation costs of bulky raw materials, even if labor is slightly more expensive.
Weber's Least Cost Theory
A theory explaining where industries locate based on minimizing three key costs: transportation, labor, and agglomeration.
Example:
A furniture company using Weber's Least Cost Theory might choose to locate its factory near a large forest for cheap timber (transportation of raw materials) and also near a major city for access to skilled carpenters (labor costs).