Locational change is a process according to which the number, capacity,
nature and the location of production is modified with the purpose of
making it more productive (cost effective) and to better service the
needs of the market. The above figure represents a simplification of
the process with four locations and four products with their respective
These four processes are not exclusive as firms can apply more than
one strategy at once. For instance, concentration and specialization
are often concomitant.
- Intensification. Based on a more intensive use of labor
to increase production, or a reduction of labor to produce the same
quantity. It is often the results of changes in labor practices,
technological innovation and more capital intensive production (e.g.
mechanization). Locations and markets do not change.
- Specialization. With growing competitive pressures, a
locational process of specialization may take place where each location
is producing in the sector it has the most comparative advantages.
The resulting productivity gains are often accompanied by labor
reductions (sometimes more labor if the location has low labor costs).
Specialization also forces market expansion and flows between regional
markets as the geography of distribution is modified. This is the
type of locational change that relies the most on transportation.
- Concentration. Implies the closing of the least productive
units. If the same level of output is required, then other units
will have to increase their production accordingly. Additional production
often takes place at the most productive location. It is also common
that concentration takes place when demand is declining.
- Rationalization and relocation. The most important locational
change, as several production units are closed and production move
to a new lower cost location. The market often becomes global.