Posted on

Factors that Influence the Location of an Industry

Nearness to Raw Materials

The availability of raw materials present in a particular area attracts a businessman to locate his industry. Examples are timber, minerals, iron ore, sugarcane, fruits, milk, meat, cement, etc. Most meat canning industries are located in northern Nigeria where there is abundant cattle; the sugar industry is located at Bacita where there is plenty of sugar cane. The fishing industry is located at Bonny in Rivers State because of the sea. It will profit an industrialist to site an industry where there is source of supply.

Nearness to Power Supply

Industrialists consider the amount and the reliability of a given energy before they decide to set up their factory. In modern times, manufacturing industries use coal, gas and electricity as a regular power supply to operate machines used in production. A cheap and reliable source of power reduces overhead and recurrent cost in the factory’s total operational cost. This encourages the siting of industry.

Nearness to the Market

The market for the produced goods are set up near the factory because most of the finished products may be fragile goods which are not meant for long distance, for example, bread and dairy products. Where goods are perishable, handling cost will be reduced only if location is close to the market site. Industries providing consumer services, such as tailoring, household appliances, etc., are usually sited in urban centres which have a high population concentration and where income per head is higher. This is an important factor which the industrialist has to consider as he disposes his final products.

Nearness to Labour Supply

New industries tend to be established where the necessary labour is available. All classes of workers to be needed which may be unskilled, semi-skilled or skilled by the factory must be available to encourage the location of an industry. Examples include oil industry in Port Harcourt, salt production in Bonny and fishing in Okrika.

Government Policy

The major policy of the government is to ensure even development. This can be done if Government will give incentives in form of loan, or subsidy to industries tax free to enable them to reduce cost structure, thereby promoting healthy competition among firms. Government sometimes establishes industries in rural areas to reduce the rural-urban migration of the population by providing employment opportunities, electricity and infrastructural facilities to enhance economic development. For this reason, industrialists may like to site an industry in such a location.

Political Stability

Unstable economy helps to drive away most of the businessmen to invest because of political crises. This will disturb trade relationship among nations. Industrialists are discouraged to site an industry in any area where there is conflict or war since their aim is to minimise loss and maximise profit. But when the political atmosphere of an area is stable, then industrialists are willing to invest.

Availability to Transport

Transportation cost is regarded as the most important factor in the location of industry. A good and efficient transportation system such as good road network and railways helps to reduce the cost structure of a firm, and eventually, fasten the movement of goods, thereby reducing wastes. Where transport is expensive and difficult to convey goods from one place to another, an industrialist will consider moving nearer either to the source of supply, or the market to enable him reduce the transport cost. Therefore, an industrialist may be forced to choose another favourable site.

READ MORE