IntroductionIntroduction

Conceptual/Theoretical FrameworkConceptual/Theoretical Framework

Practice/Case studiesPractice/Case studies

RetailingRetailing

WholesalingWholesaling

Office sectorOffice sector

Tertiary and Quaternary SectorsTertiary and Quaternary Sectors

ConceptsConcepts

* * Primary:Primary: extraction or manipulation of extraction or manipulation of

natural resources to provide food, energynatural resources to provide food, energy

and raw materials.and raw materials.

* * Secondary:Secondary: processing of materials into processing of materials into

saleable products and nonsaleable residuals,saleable products and nonsaleable residuals,

increasing the value of commodities byincreasing the value of commodities by

changing their form.changing their form.

* * Tertiary:Tertiary: perform services directly to perform services directly to

consumer and/or indirectly to producer, consumer and/or indirectly to producer,

which often produce no tangible goods.which often produce no tangible goods.

* * QuaternaryQuaternary: economic activities that are: economic activities that are

concerned with acquiring (e.g. researchconcerned with acquiring (e.g. research

institute), processing (e.g. office managers),institute), processing (e.g. office managers),

or transmitting (e.g. media) knowledge.or transmitting (e.g. media) knowledge.

* * Quinary: Quinary: activities involving decision-makingactivities involving decision-making

Why tertiary and quaternary activitiesWhy tertiary and quaternary activities??

1919thth Century 19 Century 19thth~20~20th th 2020thth ~21 ~21thth

11stst Wave 2 Wave 2ndnd Wave 3 Wave 3rdrd Wave Wave

Pre-industrial Industrial Post-industrialPre-industrial Industrial Post-industrial

Services

Secondary

Primary

Services

Secondary

Primary

Services

Secondary

Primary

Reasons:Reasons:

* Technological advancements:* Technological advancements:

Technological TechnologicalTechnological Technological

Advances AdvancesAdvances Advances

* Economic: the Engel’s Law* Economic: the Engel’s Law

Primary Secondary Service Sector

- The Post-industrial Society- The Post-industrial Society

Daniel Bell, 1973. The coming of post-industrial SocietyDaniel Bell, 1973. The coming of post-industrial Society

* Characteristics of a post-industrial society as * Characteristics of a post-industrial society as

compared with the industrial societycompared with the industrial society

i. Dominance of the service sector/ white collar jobi. Dominance of the service sector/ white collar job

( manufacturing/ blue collar-industrial )( manufacturing/ blue collar-industrial )

( primary – pre-industrial )/Peasants( primary – pre-industrial )/Peasants

ii. Primacy of theoretical and instrumental knowledgeii. Primacy of theoretical and instrumental knowledge concomitant educational institutions concomitant educational institutions ( Economic growth, private enterprises )( Economic growth, private enterprises ) ( tradition, ritual, familial, non-economical )( tradition, ritual, familial, non-economical )

iii. Emphasis on consumption and leisureiii. Emphasis on consumption and leisure ( Materialist, production for production sale)( Materialist, production for production sale) ( ritual/ spiritual )( ritual/ spiritual )

iv. Democracy, liberal political idea, social welfare, iv. Democracy, liberal political idea, social welfare, state intervenestate intervene ( individual freedom and rights, laissez-faire)( individual freedom and rights, laissez-faire) ( authoritarian, monarchy )( authoritarian, monarchy )

Theory on the Location of Tertiary and Theory on the Location of Tertiary and Quaternary ActivitiesQuaternary Activities

IntroductionIntroduction

Central Place Theory: among citiesCentral Place Theory: among cities

Bid-rent Analysis: within cityBid-rent Analysis: within city

Quaternary Place TheoryQuaternary Place Theory

Central Place TheoryCentral Place Theory

Definition:Definition: - Central Place:- Central Place: Any place that produces a goods Any place that produces a goods

or serviceor service

- Central Place Theory:- Central Place Theory: A theoretical explanation A theoretical explanation

for the spatial distribution of different-sized cities. for the spatial distribution of different-sized cities.

It also explains how different types of services are It also explains how different types of services are

located in different sized settlements.located in different sized settlements.

Walter Christaller (1933) Walter Christaller (1933) Central Places in South GermanyCentral Places in South Germany

August Losch (1939) August Losch (1939) Economies of LocationEconomies of Location

- - Questions:Questions: why and how are different types of why and how are different types of services location in different sized settlements?services location in different sized settlements?

- Assumptions: - Assumptions: Isotropic surfaceIsotropic surface: infinite, flat plain that is not disturbed : infinite, flat plain that is not disturbed

by topographical features, no mountains, no by topographical features, no mountains, no ocean, no river.ocean, no river.

Ubiquitous transport servicesUbiquitous transport services: transport services are : transport services are found everywhere.found everywhere.

Transport cost increases as a function of distanceTransport cost increases as a function of distanceDistance minimizationDistance minimizationEven distribution of consumersEven distribution of consumersPerfect market competitionPerfect market competitionAll consumers must be served.All consumers must be served.

Constructing the theoryConstructing the theory

1)1) One good/service with one producer/sellerOne good/service with one producer/seller

= += +

Cost CostCost Cost

Distance QuantityDistance Quantity

DemandedDemanded

Cost the consumerhas to pay

Cost at the point of production

Cost of travelling to the store

Cost at point of

production

high

low

highlow

Quantity DemandedQuantity Demanded

DistanceDistance

RangeRange RangeRange Threshold Threshold

Distance

Q

* * RangeRange: the farthest distance: the farthest distance

a consumer is willing to a consumer is willing to

travel to obtain a giventravel to obtain a given

good/ servicegood/ service

* * ThresholdThreshold: the minimum market: the minimum market

(distance/ population) the seller must sell to in (distance/ population) the seller must sell to in order to make a minimum level of profits to order to make a minimum level of profits to stay in businessstay in business

R

Range Threshold

i)i) RangeRange/ / ThresholdThreshold

Low Low High High(inexpensive, (expensive,(inexpensive, (expensive,

Cheap,Cheap, infrequently infrequently purchased)purchased)

frequently used) e.g. cars, jewelleryfrequently used) e.g. cars, jewellery

e.g. salt, sugare.g. salt, sugar

milk, breadmilk, bread

Low-order goods High-order goodsLow-order goods High-order goods

iiii) ) RangeRange VS. VS. ThresholdThreshold::

Range - Threshold = profit surplusRange - Threshold = profit surplus

Range > Threshold : Surplus → competition of new storeRange > Threshold : Surplus → competition of new store

Range < Threshold: bankruptcyRange < Threshold: bankruptcy

Range = Threshold: balanceRange = Threshold: balance

2. One good/ service with many producers/ sellers2. One good/ service with many producers/ sellers

incomplete coverageoverlapping ideal market shape

3) Many goods/ services with many producers/sellers3) Many goods/ services with many producers/sellers

* Low-order goods in low-order central places with * Low-order goods in low-order central places with small market areas.small market areas.

High-order goods in high-order central places with High-order goods in high-order central places with large market areas.large market areas.

* A hierarchy of central places organized by the K * A hierarchy of central places organized by the K principles.principles.

K PrincipleK Principle: refers to the number of hexagonal market : refers to the number of hexagonal market areas of one order that are contained within the areas of one order that are contained within the hexagonal market area of the next higher order.hexagonal market area of the next higher order.

Bid-Rent AnalysisBid-Rent Analysis

* William Alonso (1960) * William Alonso (1960) Location and Land UseLocation and Land Use* Q: How are service activities located within the city?* Q: How are service activities located within the city? A: determined by land rent.A: determined by land rent.- Assumptions:- Assumptions:Land use arrangement shaped by economic forcesLand use arrangement shaped by economic forcesFree market competition for landFree market competition for landLand value/ rent decreases from the center to the suburb.Land value/ rent decreases from the center to the suburb.

Dist.CBD

$Rent

- Bid-Rent CurvesBid-Rent Curves::

A set of land rents that an individual would A set of land rents that an individual would pay at various distance from the CBD in order pay at various distance from the CBD in order to maintain a minimum level of profits.to maintain a minimum level of profits.

- Argument: Land will be distributed to those - Argument: Land will be distributed to those activities that need it and are able to pay for it.activities that need it and are able to pay for it.

CBD →

$Rent

Distance

CommComm..

ManufManuf..

Res.Res.

Agri.Agri.

$ Rent

Comm.

Manuf.

Res.

Agri.

CBD Distance

Figure 11.23 Generalized urban land use patternFigure 11.23 Generalized urban land use pattern

$ Rent

CBD Distance

High order

Low order

CBD Distance

$ RentDept.Store

clothing

jewellery

furniture

groceries

Quaternary Place TheoryQuaternary Place Theory

- Primary: Von Thunen’s Agricultural Land Use- Primary: Von Thunen’s Agricultural Land Use

- Secondary : Weber’s Industrial Location- Secondary : Weber’s Industrial Location

- Tertiary: Christaller’s Central Place- Tertiary: Christaller’s Central Place

- Quaternary: Control/ Production Functions- Quaternary: Control/ Production Functions

* A theory that explains the size, number and * A theory that explains the size, number and spatial distribution of decision-making centers, spatial distribution of decision-making centers, command/ control points, and how systems of command/ control points, and how systems of these centers evolve into a spatial decision-these centers evolve into a spatial decision-making landscape.making landscape.

Question:Question:

Relationship between the control function and Relationship between the control function and

the production and the geography of the production and the geography of

corporations.corporations.

* Definition:* Definition:

* * Control FunctionControl Function: associated with white collar : associated with white collar management whose task was making decisions management whose task was making decisions by drawing upon intangible knowledge and by drawing upon intangible knowledge and informationinformation

* * Production FunctionProduction Function: associated with blue : associated with blue collar workers whose task was to manufacture collar workers whose task was to manufacture output by drawing upon tangible inputs.output by drawing upon tangible inputs.

* Changing Mechanism: 3 stages* Changing Mechanism: 3 stages

Stage I: Before the WarStage I: Before the War

- single capitalist/ family → corporation- single capitalist/ family → corporation

- separated control function from production - separated control function from production

functionfunction

Control/ production functions in the same cityControl/ production functions in the same city

Stage II: After World War IIStage II: After World War II

I. Horizontal Integration: a process whereby firms I. Horizontal Integration: a process whereby firms in the same sector merged together to make in the same sector merged together to make the corporation larger.the corporation larger.

Corporate Corporate

Head office Head office

Larger corporations moved to large citiesLarger corporations moved to large cities

MarketingLocation analysis

Accounting Advertisement R &D

II. Vertical Integration: a process whereby firms II. Vertical Integration: a process whereby firms take over all sectors that contribute to the take over all sectors that contribute to the production of their output: from extraction of production of their output: from extraction of raw materials to R&D.raw materials to R&D.

Production Production

Head Office

Regional Office

Factories

Major City

Minor City

Production Site

Stage III: Post-1973 oil crisisStage III: Post-1973 oil crisis

Internationalization of capital investment and manufactureInternationalization of capital investment and manufactureMulti-National corporations (MNCs)Multi-National corporations (MNCs)

““electronic highways”electronic highways”““Wired cities”Wired cities”

Head Office

Regional Office

Factories

World Cities

Low-order Cities

Scattered across the globe

Summary:Summary:- Key question: why control functions of a firm Key question: why control functions of a firm

are located where they are?are located where they are?

1920s: same city1920s: same city- 3 Stages after WWII: vertical/ horizontal 3 Stages after WWII: vertical/ horizontal

integration integration large citieslarge cities post-1973: dispersed across the post-1973: dispersed across the

globe globe