What are site factors and why are they important?
What will be an ideal response?
Answer: Site factors are industrial location factors related to the costs of production inside the plant, notably labor, land, and capital.
Labor: A labor-intensive industry is one in which wages and other compensation paid to employees constitute a high percentage of expenses. Labor costs an average of 11 percent of overall manufacturing costs in the United States, so a labor-intensive industry would have a much higher percentage than that. The average annual wage paid to male workers exceeds $30,000 in most developed countries, compared to less than $5,000 in most developing countries. Health care, retirement pensions, and other benefits add substantially to the wage compensation in developed countries, but not in developing countries.
Land: In the early years of the Industrial Revolution, multistory factories were constructed in the heart of the city. Now, they are more likely to be built in suburban or rural areas, in part to provide enough space for one-story buildings. Raw materials are typically delivered at one end and moved through the factory on conveyors or forklift trucks. Products are assembled in logical order and shipped out at the other end. Locations on the urban periphery are also attractive for factories to facilitate delivery of inputs and shipment of products. In the past, when most material moved in and out of a factory by rail, a central location was attractive because rail lines converged there. With trucks now responsible for transporting most inputs and products, proximity to major highways is more important for a factory. Especially attractive is the proximity to the junction of a long-distance route and the beltway or ring road that encircles most cities.
Capital: Manufacturers typically borrow capital, the funds to establish new factories or expand existing ones. One important factor in the clustering in California's Silicon Valley of high-tech industries has been availability of capital. One-fourth of all capital in the United States is spent on new industries in the Silicon Valley. The ability to borrow money has become a critical factor in the distribution of industry in developing countries. Financial institutions in many developing countries are short of funds, so new industries must seek loans from banks in developed countries. But enterprises may not get loans if they are located in a country that is perceived to have an unstable political system, a high debt level, or ill-advised economic policies.
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