The following factors are responsible for the encouragement of localisation of industries. Such factors include:
(i) Availability of Technical Economies:
Many firms which produce car parts are established nearer to a car assembly plant. Other firms which use the same spare parts in production may be established closer to an industry which produces them. This comes as a result of the benefits which industries gain from other industries by being close to existing facilities.
(ii) Presence of Infrastructural Facilities:
The presence of infrastructural facilities such as roads, banking and insurance, power supply and water, may encourage many industries to be set up in an areas resulting in a localisation of industries.
(iii) Choice of Site:
The geographical conditions of an area such as political stability, climate, population concentration, and communication, the case of distribution and marketing of goods influence location. For this reason, concentration of many firms in an area may be encouraged.
(iv) Availability of Labour:
The presence of many skilled labour required for the operations of an industry, such as consultants, accountants, advertising executives, public relations experts, etc., may encourage many firms, which use the same type of labour, to establish themselves in an area.
(v) Availability of Raw Materials:
This is an important factor that may encourage the concentration of many firms in an area. This is because, if an industry depends mainly on raw materials, other firms which use the same type of raw materials which are heavy and very costly to carry, may be forced to establish themselves in the same area resulting in localisation of industries.