Module 2 Flashcards
What are Economic Sectors?
They are divided into sectors that reflect the economic development of that society:
i. Primary
ii. Secondary
iii. Tertiary
iv. Quaternary
v. Quinary
The Primary Sector
This sector is the beginning of the production cycle.
- The primary sector involves the exploitation and the extraction of natural resources/economically valuable products from the earth (land, air or water), including agriculture, mining, fishing, forestry.
- They have low economic value
- Products are usually the raw materials for secondary activities
The Secondary Sector
The secondary sector takes raw materials from the primary sector and add value to the materials by changing their form or combining them (via manufacturing/processing) into more useful and valuable commodities.
An example will be the milling of wheat into flour or conversion of bauxite into aluminium products.
The Tertiary Sector
The tertiary sector is concerned with service industries that connect producers to consumers and facilitate commerce and trade or help people meet their needs (health and education).
Services include transport, construction, retailing and wholesaling services.
The Quaternary Sector
The quaternary sector has evolved due to the increasingly sophisticated and complex nature of the tertiary sector in more advanced economies of the world.
This sector involves the collection, processing and dissemination of information and in the administration and control of their own or other enterprises.
It also involves the collection, processing and exchange of money/capital (finance, insurance).
The sector is composed entirely of services rendered by “white collar” professionals working in education, government, management, information processing and research.
The Quinary Sector
The quinary sector is a specialised aspect of the service economy, which involves a subdivision of management functions, encompassing complex, high-level decision- making roles as well as the advancement of human capacities (scientific research, higher education, high-level management) in all types of large public or private organisations and in society.
This sector would include the top executives or officials in such fields as government, science, universities, non-profit, healthcare, culture, and the media.
Changing relative importance of types of Economic Activities
Traditionally, the balance of the various sectors has been seen mostly as a function of economic development However, over time people move from primary tasks into manufacturing to make a major
contribution to a country’s economy.
To support the growing industrial base and the growing aspirations of a more affluent population (many of whom live in urbanized areas), there is a need for a whole range of services including transport and utilities, leading to a relative expansion of tertiary activity.
The decline of manufacturing is of major concern in many advanced economies. In some countries like the USA, Japan and UK, the role of the tertiary sector has become so dominant that their economies are termed post-industrial societies.
Governments in developed countries attempt to replace manufacturing jobs that are lost due to deindustrialization and automation with quaternary jobs.
As high tech and research jobs flow into the cities, other sectors benefit, especially entertainment, tourism, and education. The main challenge with shifting from manufacturing jobs to quaternary jobs is that many of the displaced workers lack the skills required for the new jobs.
Spatial Variation of Industrial Location - Global Scale
The Developed World has the most share of industrial production.
However, there have been significant changes in the last few decades due to the rapid development of the Newly Industrialized Countries (NICs).
The share of manufacturing accounted for by the Developing World will increase further, led by the largest countries in this group such as China and India, as they extend their industrial capabilities.
This is due mainly to transnationals in developed countries that seek lower cost locations elsewhere and also by indigenous investment within the Developing World.
Spatial Variation of Industrial Location - Local Scale
Within in country (LDCs and MDCs), there are areas where manufacturing is highly concentrated and other regions where they are non-existent.
In addition, locations have changed over time, from traditional manufacturing regions (e.g. coalfields) to higher quality of life regions that offer infrastructural
requirements of modern industry.
Also, there has been a shift of industries from urban areas to suburban and rural areas.
Factors responsible for the development and change in a major industrial region - Raw Materials?
The ratio between the weight of the localized materials and the weight of the finished product is known as the MATERIAL INDEX (MI).
{MI= weight of raw materials ÷ weight of finished product}
When MI > 1 = (weight loss) the raw material is gross and industry will be located closest to its most
important raw material (raw material oriented). Example: steel industry
When MI < 1 = (weight gain) the location of the industry will be located near the market (market oriented). Example: beer
MI = 1 (neither weight gain or loss) raw material is pure and the industry can be located at the raw material, the market of at an intermediate point.
Where raw materials are ubiquitous (found everywhere), their importance as a primary location factors will be of little significance.
However, since few raw materials are ubiquitous, many countries with advanced manufacturing bases need to import raw materials.
Industries located along the coast (tidewater locations) assume a similar role to raw-material locations.
Some large ports contain marked concentrations of industries such as oil-refining, flour-milling, sugar refining, as they are point of import for oil, wheat and sugarcane.
Factors responsible for the development and change in a major industrial region - Transport
Although once a major locational factor, the share of industry’s total costs accounted for by transportation has declined steadily overtime, mainly due to:
- Major advances in all modes of transport - Major improvements in the efficiency of transport networks - Technological developments moving industry to the increasing production of higher value/lower bulk goods
Factors responsible for the development and change in a major industrial region - Technology
Changes in the way that products are made can be an important factor in determining location.
For example, in the 19th century, the most profitable location for steel production changed after innovations involved in the production process.
Technological innovation has also affected the transport costs, as well as the efficiency in the modes of transportation.
Factors responsible for the development and change in a major industrial region - Industrial Inertia
Sometimes the factors (including advantages) determining a location have changed but the plant remains as it is too costly to move.
In such circumstances, the location is said to be caused by inertia.
For example, a furniture industry that once relied on local wood supplies as its raw materials might now mainly use wood brought in from other locations.
Factors responsible for the development and change in a major industrial region - Globalization
Globalization of manufacturing is evident in the wider production of goods and the resultant pattern of trade flows and in the explosion in the volume of transnational investment (TNCs)
TNCs have the resources to switch production from country to country and they are often criticised for acting in their own interests rather than any particular national or regional interest.
New Industrial Division of Labour (role of Multi-National Corporations (MNC))
The New Industrial Division of Labour (NIDL) is a global division of labour associated with the growth of transnational corporations and the deindustrialization of the advanced economies (reorganisation/relocation of economic activities from a national to a global scale).
The most common pattern is for research and development in more economically developed countries, and cheap, less skilled labour in less economically developed countries.
The impacts of the NIDL have been uneven: between nations, where some benefit more than others, and within nations, in locally specific ways.
Agglomeration
The clustering of activities at certain locations and the savings made by a firm as a result of locating close to similar ones. Savings are derived from decreased unit costs for transportation, public utilities and the shared of specialist services such as advertising
Multinational corporation (MNC)/Transnational corporations (TNC)
A large, global organization that has its headquarters in a country of the developed world and branches located in numerous other countries in both the developed and developing worlds
Comparative Advantage
This principle states that countries and regions will produce those items to which they are best suited. It results in regional specialization.
The comparative advantage of one industrial area over another with regard to a particular product might result, from the existence of abundant raw materials, cheap labour and energy, or the existence of a low-cost production system making efficient use of technology
When other countries’ comparative advantages reflect lower labour, land, raw materials and capital cost, manufacturing activities may willing relocate from higher-cost market locations to lower-cost foreign production sites (via outsourcing and/or offshoring).
What is outsourcing?
Outsourcing refers to the contracting out of an entire business function, a project, or certain activities (it used to provide itself) to an external provider within or outside a country in order to cut costs.
For instance, a US car company can outsource production of a certain car part to a Chinese company. The Chinese company, in turn, can outsource production of various components of that part to various other Chinese companies.
In the second half of the 20th century, as companies tended to grow larger and skills were required to be more and more specialized, companies found that external providers were often able to get work done faster and more efficiently owing to skills they possessed.
Benefits of Outsourcing
Some reasons for outsourcing include:
1) Cost advantage: Costs are arguably the chief motivation behind outsourcing. Often companies find that contracting work out to a third party is cheaper.
2) Focus on core competency: There are a lot of business functions in a company (such as marketing, accounting, finance and logistics). Most of these are not “core” to the company. Having to handle non-core functions is a distraction and are costly, so many companies outsource them.
3) Quality and Capability: Often companies do not have in-house expertise for certain activities. In these cases, it is more efficient to outsource and the resulting products and services tend to be of higher quality when provided by outsourcing vendors.
4) Labour flexibility: Outsourcing provides flexibility so the company does not have to worry about hiring and firing. For example, a company may need a large number software programming experts for 6-8 months to develop an application. It would be infeasible to hire people for only 6 months.
Offshoring
The relocation of an industry from one country to another. The industry relocated may involve the assembly of a finished product made from parts and components produced in and imported from MEDCs
Some factors that MNCs consider when offshoring include:
1) Costs of factors of production (wages, raw material, transportation costs, utilities such as electricity)
2)Taxes (many countries offer subsidies to entice MNCs to set up shop)
3)Skills available among the work force
Benefits of Offshoring
Offshoring provides many of the same benefits as outsourcing, including:
1) Cost savings: Companies usually offshore manufacturing or services to developing countries where wages are low, resulting in cost savings. These savings are passed on to the customers, shareholders and managers of these companies.
2) Skills: The competitive advantage of nations often means that some countries or regions develop a much better environment for certain types of industries. This means there is better availability of skilled human resources in that region for specific types of tasks.
For example, India and the Philippines have a large pool of English-speaking, college educated youth; as well as a mature training infrastructure; that makes it ideal for business process outsourcing.
Therefore, many companies choose to offshore certain
business functions (e.g. call centres for customer support) to these locations.
Criticisms of Outsourcing and Offshoring
1) Politicians and laid-off workers often blame offshoring for “stealing jobs”.
2) Most economists, however, agree that offshoring lowers costs for companies and passes on benefits to consumers and shareholders.
There are, however, risks associated with offshoring, including:
1) Project failure due to poor communication
2) Civil or political unrest impacting production or service delivery
3) Arbitrary changes in economic policy of governments may force unnecessary restrictions on MNCs
4) Poor infrastructure in the developing country may affect quality or timeliness
What is Butler’s Tourism Lifecycle Model?
The purpose of the Butler Model or resort development is to look at the way that tourist resorts, grow and develop. Therefore, the Butler Model is a way of studying tourist resorts and seeing how they change over time and in relation to the changing demands of the tourist industry.
Stages of Butler’s Tourism Lifecycle Model
STAGE 1 - The Exploration Stage:
- Small numbers of tourists.
- Based on primary tourist attractions. These maybe natural or cultural
- Tourism has no economic or social significance to local residents
STAGE 2 - The Involvement Stage
- Local residents become involved in tourism
- Emergence of secondary tourism facilities such as guest houses
- a tourist season may develop
- Pressure develops for governments to improve transport for tourists
STAGE 3 - The Development Stage
- High numbers of tourists that may exceed the local population during peak periods
- Heavy advertising will create a well-defined tourist market
- Local involvement and control of tourism declines rapidly
- External organisations will provide secondary tourism attractions
STAGE 4 - The Consolidation Stage
- Tourism growth slows but the numbers of tourists exceeds the local population
- The area’s economy is tied to tourism
- Marketing and advertising will be wide-reaching
- Major franchises and tourism chains will be represented
- Resort areas will have a well-defined recreational business district
- Tourism arouses opposition and discontent from some local people
STAGE 5- The Stagnation Stage
- Visitor numbers have reached their peak
- Carrying capacity has been reached or exceeded
- Tourism causes environmental, social and economic problems
- The resort becomes divorced from its geographic environment
- Artificial tourism attractions now supersede the original primary attractions
After reaching stagnation, Butler saw that rejuvenation or decline as possible alternatives.
STAGE 6 (a) - The Decline Scenario
- Unable to compete with newer tourism attractions
- Holidaymakers replaced by weekend or day-trippers
- Tourism facilities replaced by non-tourism activities
- Ultimately, the area may become a tourism slum or drop out of the tourism market completely
STAGE 6 (b) - The Rejuvenation Scenario
- Requires a complete change in tourism attractions.
-Previously untapped tourism resources maybe found.
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Types of Tourism
1) Elite Tourism eg.Ecotourism
It seeks to minimize the environmental impacts of visitor pressure on the natural environment. This sustainable form of tourism involves the conservation of nature with the twin aims of economic gain and protection of the flora, fauna and culture. (E.g Guyana, Belize and Suriname)
2) Cultural
It looks at the way of life of a people and includes customs, practices and food. Carnival celebrations are a major part of cultural tourism with every Caribbean Island having some form of carnival celebrations which serves as peak periods of tourism arrivals (E.g Trinidad, Barbados -Crop Over)
3) Sun, sea and sand (island tourism) associated with Mass Tourism
The Caribbean’s warm tropical climate with gentle land and breezes and many beautiful beaches. As such it is a very attractive location for tourist from North America and Europe who flock to the Caribbean for sunbathing and water sports such as scuba diving, parasailing and windsurfing (E.g Barbados, Jamaica, Tobago)
Weber’s Model of Industrial Location
His model attempts to explain some of the complexities of industrial location. His model is based on the idea of least-cost location and attempts to predict where industries should be sited in order to have the lowest cost
Assumptions made in Weber’s Model of Industrial Location
(1) The model described an isolated state with uniform climate, political, economic and cultural systems. The transport system is uniform in all directions and the topography is flat
(2) Perfect competition, implying a high number of firms and customers (resources and markets are unlimited at their given location; no monopoly)
(3) Several natural resources, such are water, are ubiquitous (available everywhere) while many production inputs such as labour, fuel and
minerals are available at specific locations
(4) Several fixed locations of labour where given wage rates operate. Labour is immobile and unlimited at these locations
Raw Materials & Least-cost Locations
Weber divided the raw material into two categories:
[i] Localized, relating to a particular region e.g., limestone used for cement, iron ore, coal and other natural deposits etc. These affect the location of a plant in different regions.
[ii] Ubiquitous i.e., which are universally available such as water, air and bricks etc. These do not affect the location.
The location of plants which employ mostly localized materials depends upon the amount of weight lost from the materials during production. Only part of some raw materials may be used in production while the rest is waste. Hence, localized raw materials are further subdivided into two classes:
[i] Gross Raw Materials (weight losing materials), are those which do not form part of the finished products but are important for the finished product (e.g. coal). Industries using gross raw materials can be located near the sources of these materials, thereby reducing the cost of transportation.
[ii] Pure Raw Materials are materials which are totally used in production (no weight gain or loss). In these situations, raw materials are directly converted into the finished product and form the major portion of the article produced (e.g. cotton, wool, iron ore etc.). These industries should be situated near the consumption markets because the transportation costs for the final product will be higher than the costs of transporting the raw materials
Labour Cost & Weber’s Model
Weber examined the effect of cheap and efficient labour in the location of industry. Savings in labour cost achieved by moving to an area of cheap labour can offset increased transport cost incurred.
He introduced the idea of a critical isodapne which is the point at which savings made by reduced labour cost equal the losses incurred by extra transport costs, where labour is located within the critical isodapane it would be profitable to depart from the Least cost location relating to transport cost
Agglomeration and Deglomeration Economies & Weber’s Model
Agglomeration occurs when it is profitable for several industries to locate in close proximity while deglomeration occurs when firms separate from one another
Benefits of agglomeration include the reduction in cost due to savings in the cost of land and labour. However due to competition, and a declining market, firms disperse from a particular location
Criticism of Weber’s Model
1) Outdated
- Improvements in technology and transport
- Globalization
- Mobile labour force
2) Simplistic
- Faulty assumptions
-The world is complex and dynamic
3) Government policies unrecognized
- Quotas
- Land-use patterns
- Subsidies
