Factors of localization

The factors of localization can be divided into the following categories:

Primary factors

Supply of Raw Materials: It is necessary to consider the adequate supply of raw materials and the nature of raw materials. The cost of raw materials is an important element of the total cost of production. If the supply of raw materials is not regular, it may lead to frequent stoppages and breakages in production. The time and the cost of transporting raw materials are also important. Therefore, industrial units are located near sources of raw materials. When the raw materials are heavier than the finished product — e.g. sugarcane — the factory is located near the raw material producing center. Nearness to the source of raw material reduces the cost of transportation.

When the finished products are heavy and raw materials nearness to raw material is not important because raw material may be collected from several sources. Nearness to raw materials is important in case of such industries such as sugar, cement, jute and cotton textiles.

Nearness to Market

Every producer wants to sell his product in the market. Nearness to market is important from the point of view of his control over the market. In those industries where raw materials are obtained from different source, nearness to the sources of raw materials is to as important as nearness to the market. Nearness to the market is important for supplying goods to customer in the minimum period of time. Nearness to the market reduces the cost of transporting finished goods to the market and enhances taking advantage of favorable prices and demand in the market. Nearness to market is important in case of industries producing light, delicate and perishable goods – e.g. glass, cosmetics, food products, fashionable goods having a changing demand etc.

Transport Facilities

Speedy transport facilities are needed for regular and timely supply of raw materials at low cost and for transporting finished on time in market. Transport facilities are needed for transporting laborers and establishing contact in the market, timely with change in market demand. A producer has to choose a speedy and cheap means of transport after making a comparative cost study of different means of transport — e.g. roads, railways, waterways etc. Transport facilities are important for getting control over foreign markets.


Power is necessary for the process pf production and for transporting finishing goods and raw materials. Power may be electrical, diesel and atomic energy. All types of power are localized and mobile. Power shortages lead to tremendous losses due to the stoppage of machinery. Therefore, industries must have a sufficient and regular supply of power if continuity in production is to be maintained and if industries are to operate at the full capacity. Usually, heavy industries like machine tools and coal mining industries are located near sources of power. Industrialization of villages depends on the local availability of electricity or diesel power in underdeveloped areas. All types of industries, whether big or small, require power.