Sie sind auf Seite 1von 5

FACTORS TO CONSIDER WHEN ESTABLISHING DESCRIPTION OF FACTORS TO CONSIDER AN

INDUSTRY
Thunen developed the general framework for the economic analysis of Location Theory (Thunen, 1875 and
Isard, 1956). He was primarily concerned with the aggregate analysis of location of industries. He utilized
the "least-cost" approach to location. This approach required that industries be located in areas where the
least costs will be incurred on the day to day running of the industry. Of the early theorists, Launhardt,
whose work appeared in 1885, provided the most significant contributions to the study of industrial location.
According to Launhardt (1875) there is a difference in the location of industry by variations in cost and
demand factors at alternative locations. He demonstrated the importance of transportation costs. Other
contemporary theorists such as Weber developed a much more comprehensive theory in 1909 for the
location of industries generally. While he looked at a number of factors, three determinants or factors stood
out and these included: transportation costs, labor costs, and what Weber referred to as agglomeration
forces. [(Friedrich, C. (1929)]
Many industrial location studies use the Weberian theory to better understand the decision making
process. World over, nations are industrializing in a bid to increase economic growth and development.
Zambia, just like any other developing country, has also come up with an industrialization policy that has
seen the setting up industrialization incubation centers called Multi Facility Economic Zones (MFEZ) in
Chambishi and the Lusaka South MFEZ.
So many scholars have defined an industry. According to Matimba (2000:8), an industry is explained as
being concerned with the extraction of raw materials and the subsequent transformation of such raw
materials into finished goods. Like production, industries are classified as Primary industry, Secondary
Industry and Tertiary industry
Primary industries are concerned with the actual extraction of raw materials from natural resources such as
the extractive industries. On other hand, secondary industries are concerned with the transformation of raw
materials into finished goods.
The location of industries is an important aspect of the sustainability of such industries once established. If
certain factors are not considered, industries cannot thrive and as such the need for proper industrial
location is crucial. This exposition will describe the various factors that are considered when establishing an
industry as explained by the Weberian theory and other industrial location theorists.
Environmental Reasons are also important factors affecting the establishment of industries. The
environment forms an organized ecosystem in which various species of animals and plants thrive some of
whose existence is beneficial to the existence of man. The Government through Zambia Environmental
Management Agency (ZEMA) is charged with the responsibility to ascertain whether a particular industry

1 | Page

can be established or not. Sometimes, the agency may after carrying out an Environmental Impact
Assessment (EIA) stop an industry from taking off unless certain benchmarks are met.
The other factor considered when establishing industries is that of availability of raw materials that are
necessary for the sustenance of the industry. Most industries locate where the raw materials come from.
The reasons for this are that the cost of raw materials adds up to the cost of production. The cost structure
of most businesses is that they need to minimize the costs and maximize profits. Industries locate near the
source of raw materials in order to reduce the cost of doing business. For example, most ginneries are
located in the central and eastern provinces because the regions are the major producers of the raw
material; cotton. In Kabwe, the defunct Mulungushi Textiles joint venture between Zambia and china was
located in there to take advantage of abundant raw materials (cotton) in the town.
This aspect of labour in relation to the location of industries is based on a number of factors which in
summary can be Low cost labor, attitude of workers towards work, managerial labor, skilled labor and the
general Wage rates. Others include unskilled labor, unions, educational level of labor and the ultimate
dependability of labour.
The other factor that determines the location of industries is the aspect of transport network. Transport
facilities here include Pipeline facilities, airway facilities, highway facilities, rail and road facilities. Other
important transportation services include; trucking services. Waterway transportation, shipping cost of raw
materials, cost of finished goods transportation, availability of postal services as well as warehousing and
storage facilities. Availability of wholesale outlets is all critical aspects that are needed or critical to the
location of industries. According to Wokorach (2000:23) transport is the movement of people, raw
materials, and goods from one place to another. Transport, like raw materials is a direct cost of production.
Transport is an important factor to consider when establishing an industry due to the following reasons;
Transport, like stated above is used in the movement of people from one place to another. This is because
industries are labour intensive and these need to be moved from their homes to the places of work- the
industries. In addition to this reason, transport ought to be considered as a factor because it is used to
transport raw materials from the point where they are produced to the industry or plant. For example, the
wood processing industry located in Ndola needs a reliable form of transport for transporting raw materials
from the plantations.
Further the importance of transport in the establishment of industries is that once finished goods have been
produced, they need to be transported to the market where they are demanded. This is possible through the
use of the various modes of transport such as road, rail and air, including water transport in areas where it
is developed. In Zambia, the line of rail from Chingola to Livingstone is industrialized because of the fact
that there is a readily available transport system for the quick transportation of goods to the markets once
manufactured.

2 | Page

The other factor that is considered when establishing an industry is the cost of doing business in a particular
economy. The cost of doing business can be defined as the aggregate (combination) of all factors relating to
costs incurred in the registration and subsequent running of business. In Zambia, for example, the Zambia
Development Agency Act of 2006 spells out a number of fiscal incentives to various forms and categories of
businesses registered in Zambia such as tax holidays, and zero rating the importation of certain capital
equipment for certain sectors of the economy (Mwiiya; 2009:12). Clarity of corporate investment laws in a
given country such as regulations concerning joint ventures and mergers, regulations on transfer of
earnings out of country. Taxation of foreign owned companies, foreign ownership laws and requirements on
what percentage of employees may be foreign are important factors that influence the location of industries
world over. The time that it takes to register a company, is also a factor necessary as when it takes long the
implication is that there is unnecessary prevalence of bureaucratic red tape.
The establishment of Multi Economic Facility Zones as incubation centers for industrialization is one such
innovation by the government aimed at lowering the cost of doing business thereby attracting so much
Foreign Direct investment (FDI) to set up industries in the country. So when investors are looking for a
destination to locate industries in, they consider such a business environment where the cost of doing
business is very competitive. This is the reason why governments struggle to market their countries as
preferred destinations for business. Any negative shifts in the fiscal policy especially that regarding taxation
is passed; most industries threaten to close operations because they consider the business environment
detrimental to business development in terms industrial location. Recently, the government announced a
hike in the mineral loyalties tax from about 8% to 20% and already companies are threatening to close
operations.
Another notable factor that is considered when establishing an industry is the availability of a reliable source
of power. Energy keeps the wheels of industry turning and as such without reliable source of electric power
in a given area; it is difficult to locate an industry there. For example, the extractive industry such as the
mining sector is power intensive. North western province is dubbed the new copper belt but this tag is
threatened by the lack reliable power in the area. While availability of a reliable power source is important, it
is important to consider the cost of the power as well as fuels and other petroleum products.
In the North Western Province, Only Solwezi and Kasempa are currently connected to the national grid. The
rest of the towns run on thermal power implying that major mining industries cannot locate their despite
having the raw materials. Other utilities that are important in locating industries other than power supply
include the attitude of utility agents. Water supply, cost and quality is also an important utility that is
necessary in the location of industries especially for those industries that require water as a component of
the industrial processes. In many industrial processes, water is either used as an ingredient of the process
of as necessity to production, hence the need.

3 | Page

Disposable facilities of industrial waste are also important as a factor necessary to consider when
establishing an Industrial processes emit a lot of effluent or wastes on a daily basis. This is so because not
all the components of the raw materials are required in the process of production. In considering the
location of an industry therefore, space for the dumping of wastes far from where such wastes can be
detrimental to the ecosystem is an important factor.
Hamilton, (1974) asserts, that once produced, finished goods are taken to the target population; people
who demand the goods produced This group of consumers constitutes the market for the goods
produced. It is useless and it does not make any business sense to produce goods where is no market for
the goods that are produced. Industrial location theorists such as Weber argue that the location of an
industry to a large extent is affected by the availability of a ready market for the products that the industry
will be producing.
The foregoing reason accounts for why companies that manufacture explosives will for example locate on
the copper belt because that is where their target market is. The market for the goods that are produced in
industries including covers the existing consumer market, existing producer market, and Potential consumer
market. This factor includes the need to anticipate growth of markets. Shipping costs to market areas.
Marketing services, Income trends are also important to look at in addition to demographic factors such as
population incomes and consumption behaviours and dynamics
Keeble, D. (1976:34) indicates that Competition is a term that has been used to refer to having a number of
players on the market. It is the opposite of monopoly; a situation where one industry dominates a particular
sector. While competition is good as it plays a part in enhancing of the quality of goods on the market, it is
important to note that when establishing an industry, a less competitive environment is considered. This is
an important factor because if the business environment is not very competitive, an industry will have a
larger market share thereby being profitable. As indicated, this does not suggest that the company must
monopolize the market because the ills of monopoly are poor service delivery, price instability and poor
product quality.
In a nutshell, it is trendy nowadays to create industries in countries as a surest way of both creating
employment for the general citizenry as well as improving national development and the balance of trade
and payments. It is however important to note that industrial location is critical before an industry is located
if full benefits are to be realized from its existence. The exposition in the foregoing has outlined the
important factors that are influential in industrial location in any given economy.

4 | Page

BIBLIOGRAPHY
Cameron,G. & Clark, B. (1966) Industrial movement and the regional problem. Glasgow: University Press
Chapman, and Walker, D.(1991) Industrial Location, Principles and Policies (2nd Ed.) London: Blackwell.
Friedrich, C. (1929). Alfred Weber's Theory of the Location of Industries Chicago: University Press.
Hamilton, F.(1974). Spatial Perspectives on Industrial Organization and Decision Making. London: Wiley.
Keeble, D. (1976). Industrial Location and Planning in the United Kingdom London: Methuen
Matimba, A (2000) Distinction in Commerce, Livingstone
Mwiiya, C (2009) Business Law, Kabwe: Mulungushi University
Wokorach, J.B (1999) Commerce: A Complete Course, Mochudi: Salama Publishers

5 | Page