Industrial agglomeration

Clustering of industrial activities in a particular area

Forms of industrial agglomeration

• Enlargement of an industrial plant

• clustering of same/related industries

• clustering of unrelated industries

Enlargement of industrial plant

iron smelting steel making steel rolling

iron an steel plant

Internal economies of scale

• Greater possibility of specialization

• mass production

• bulk purchasing

• special transport rates

• more efficient use of machines and labour

• lower production cost

Clustering of related industries

engineering ship-building car making

iron and steel plant

External economies of scale

• Inter-plant transport saving

• access to common pool of skilled labour

• presence of special training institutions

• presence of ancillary services

• research and development of collective facilities

• sharing cost of certain operation

Clustering of unrelated industries

engineering ship-building metal fabricating car making

iron and steel plant

Chemical plant Textile industry Electronics

Advantages of clustering

• Enjoy an already well-developed infra-structure

• enjoy a common pool of skilled labour and expertise

• enjoy cheaper supplies of material inputs and ancillary services

Processes of industrial agglomeration

The rise of an industrial district

An industry set up in an area

Same industries move in Related industries move in

A number of unrelated industries move in

An industrial district consisting different types of factories forms