Industrial inertia
Case Study: Japan’s Iron and Steel Industry
Japan’s steel ind. - an overview
rapid development in the last 30 years
increased 10 times from 1960-1990
2nd largest steel producer in the world
leading steel exporter
Processes of steel production
Pre-war steel centres
Kamaishi (釜石 )Kitakyushu (北九州 )Muroran (室蘭 )located near coalfieldsraw-material orientedcoastal locations
Post-war agglomeration
Osaka-Kobe area (大阪神戶 )
Tokyo-Yokohama area (東京橫濱 )
Fukuyama (福山 )Nagoya (名古屋 )Manufacturing beltmarket-orientedcoastal location
Reasons for industrial agglomeration
change from raw-material oriented to market-oriented
past – near coalfields but now – near marketsattracted by coastal locationsAnd large conurbations due to supply of scrap
metal and labourTherefore, they cluster along Manufacturing
Belt
Reasons for indsutrial relocation
integrated steel plantsneed a lot of flat land (space-demanding)which is available near coastal areas by
reclamation
Reasons for indsutrial relocation
declining supply of local coal and iron ore
ports enable import of raw materials
Reasons for indsutrial relocation
coastal locations have deep water ports and good port facilities
bulk carriers can be usedto reduce transport cost
Iron and Steel Plant in Kyushu
Transporting RM in Kyushu
Iron and Steel Plant in Kyushu
Reasons for indsutrial relocation
large local and overseas marketsfreight rate of products > raw materialstherefore, market-orientation is
preferable
Reasons for indsutrial relocation
steel-using industries / industrial linkagesfound in Manufacturing Beltship-building/car industriesEnjoys agglomeration economies
Reasons for indsutrial relocation
large cities can provide scrap metalcan replace pig iron
Will all factories move to new locations? Why?
NoSome firms or particular groups of industries
tend to remain in an existing location (non-optimal sites) after the original factors for their location have weakened or disappeared.
Sometimes, the locations were more favourable in the past than they are now.
This is called industrial inertia.
Why do the firms stay in original locations?
They don’t move because there are still favourable factors of the present location.
Can you list some?
Favourable factors of the present location
Physical infrastructure, e.g. roads, water and electricity supplies, are present.
Ancillary services are available.A pool of skilled labour is available.The firms need to be near to existing market.The firms need to maintain existing linkages
with other firms (with long established business relations)
Why do the firms stay in original locations?
Taking risks to move to new locationsPossible problems encountered in new
locationsCan you list some?
Possible problems encountered in the new locations
At the new sites, personal ties and linkages with the original industrial network may break down.
At the new locations, the cost and time of training new labour are needed.
There are risks and uncertainties in the new production environments. Knowledge about new regions is not so perfect.
There are diseconomies of disinvestment, e.g. high cost will be involved in moving bulky capital equipment.
But what happens to other firms which do not move?
2 possible outcomes:Close down of factories urban decayIndustrial inertia re-industrialization
How can industrial regions manage to survive?
contraction of businessdownsizing the workforceclosure of inefficient plantsrestructuring by adaptation of existing
industries in situ, introducing more efficient production methods
developing new industries/new productsmovement towards specialization of products