Services PP #2 Why are consumer services distributed in a regular pattern? - PowerPoint Presentation

1. Services PP #2

2. Why are consumer services distributed in a regular pattern?Consumer services and business services do not have the same distributionsConsumer services generally follow a regular pattern based on size of settlementsLarger settlements offer more consumer services than smaller settlements

3. Central Place TheorySelecting the right location for a new shop is probably the most important factor in the profitability of a consumer serviceCentral Place theory helps explain how the most profitable location can be identifiedCentral Place Theory1st proposed in 1930s by German geographer Walter Christaller Theory applies most clearly in regions that are neither heavily industrialized nor interrupted by major physical features such as rivers or mountain rangesConcept was further developed in the United States in 1950sCentral Place TheoryA Central place is a market center for the exchange of goods and services by people attracted from the surrounding areaCentrally located to maximize accessibility from surrounding areaCentral places compete against each other to serve as markets for goods and services for the surrounding regionThis competition creates a regular pattern of settlements

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7. Market Area of A ServiceThe area surrounding a service from which customers are attracted is the market area or hinterlandMarket area is like a nodal regionA region with a core where the characteristic is most intenseTo establish a market area, a circle is drawn around a node of service on a mapThe territory inside the circle is the market areaCustomers prefer to get services from nearest locationConsumers near the center of the circle obtain services from local establishmentsThe closer to the periphery of the circle, the greater the % of consumers who will choose to obtain services from other nodesThe entire United States can be divided into market areas based on the hinterland surrounding the largest urban settlementsAbout 171 functional regions called “daily urban systems”To represent central place theory, geographers draw hexagons around settlementsUsed instead of circles b/c no gaps

8. Designated Market Areas

9. Size of Market AreaThe Market area of every service variesTo determine the extent of a market area need two pieces of information about a serviceRange and thresholdRange of ServiceDefinition:Maximum distance people are willing to travel for use of a serviceRange is the radius of the circle drawn to delineate a service’s market areaExpressed usually in travel time (minutes, hours) than in distancePeople are willing to go short distances for everyday services, like groceriesWilling to drive further distances for other services, like a concertExample:In a large urban settlement a fast-food franchise has a range of roughly 3 miles whereas a concert arena has a range of roughly 60 milesThreshold of ServiceDefinition:Minimum number of people needed to support the serviceEvery business has a minimum number of customers required to generate enough sales to make a profitOnce range is determined, provider must determine where a location is suitable by counting potential customers Census data helps with determining populationExample threshold for a supermarket is about 30,000 peopleHow potential customers are counted inside the range depends on the productExample: Movie theaters attract younger peopleAlso wealth is taken into account

10. Market-Area AnalysisProfitability of a locationIs a good or service going to be profitable in that location?Compute range, threshold, and draw a circle with a 15 mile radius and count people within circleOptimal location within a marketNext question after range and threshold is where IN the market area should the service be located to maximize profitability?Best location in linear settlementGravity model: predicts that the optimal location of a service is directly related to the number of people in the area and inversely related to the distance people must travel to access itCustomer patterns:Greater # of people living in a particular place = greater potential customersFarther people are from particular service, less likely are to use itBest location in non-linear settlementGeographers still apply the gravity model to find the best location, following these stepsIdentify a possible site for a new serviceWithin the range of the service, identify where every potential user livesMeasure the distance from the possible site of the new service to every potential userDivide each potential user by the distance to the potential site for the serviceSum all of the results of potential users divided by distancesSelect a possible location for the new service, and repeat steps 2, 3, 4, and 5Compare the results of step 5 for all possible sites. The site with the highest score has the highest potential number of users, therefore the optimal location for the service

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12. Hierarchy of Services and SettlementsSmall settlements are limited to consumer services that have small thresholds, short ranges, and small market areas, because too few people live in small settlements to support many servicesA large department store or specialty store cannot survive in a small settlement because it needs a large population to support itLarger settlements provide services having larger thresholds, ranges, and market areasServices more diverseWe only travel further distances if the price is much lower or unavailable locally

13. Nesting of Services and SettlementsAccording to Central Place Theory, market areas across an MDC would be series of hexagons of various sizes, unless interrupted by physical featuresMDCs have numerous small settlements with small thresholds and ranges, and far fewer large settlements with large thresholds and rangesNesting pattern is illustrated with overlapping hexagons of different sizeFour different levels of market areaHamletVery small market area, represented by the smallest contiguous hexagonsVillageTown CityChristaller Showed that distances between settlements in southern Germany followed a regular patternIndentified 7 sizes market hamlet, township center, county seat, district city, small state capital, provincial head capital, regional capital cityIn Germany, Hamlets had an average population of 800Principle of Nesting Market AreasAlso works at the scale of services within a city

14. Rank-Size Distribution of SettlementsGeographers observed in MDCs that ranking settlements by size (population) produces a regular pattern or hierarchyRank-Size RuleCountry’s nth-largest settlement is 1/n the population of the largest settlementi.e. second largest city is ½ size of the largestthird largest city is 1/3 size of the largest and so on…..Should graph like a straight lineIf it does not graph on a straight line, then the country does not have a rank-size distributionImportant because a country that follows the Rank-size rule, like the United States, tends to be a society that is sufficiently wealthy to justify the provision of goods and services to consumersDon’t always follow Rank-Size RulePrimate City RuleLargest settlement has more than twice as many people as the second-ranking settlementLargest city is called primate cityExample: Denmark- CopenhagenUnited Kingdom- LondonRomania- BucharestLDCs often follow primate ruleIndicates that there is not enough wealth in society to pay for a full variety of servicesHave to travel much further for shops, hospitals, etc.

15. Periodic MarketsServices at the lower end of the central place hierarchy may be provided at a periodic marketDefinition: collection of individual vendors who come together to offer goods and services in a location on specified daysTypically set up in a street or other public spaceProvides goods to mainly residents of LDCs or rural areas of MDCsVendors often mobile, part-time, provide small quantitiesFrequency varies by cultureMuslim countriesRural ChinaKoreaAfrica

16. Why do Business Services Locate in Large Settlements??Every urban settlement provides consumer services to people in a surrounding areaBut not every settlement of a given size has the same number and types of business services

17. Hierarchy of Business ServicesServices in World CitiesWorld cities are most closely integrated into the global economic system because they are at the center of flow of information and capitalBusiness services concentrate in disproportionately large numbers in world citiesNew forms of transportation and communication services were expected to reduce the need for clustering of services in large citiesExample: the Railroad in the 19th century or motor vehicle in the 20th centuryIn some cases opposite

18. Hierarchy of Business ServicesBusiness services in world citiesClustering of business services in the modern world city is a product of the Industrial RevolutionWorld cities attract the headquarters of banks, insurance companies, and specialized financial institutionsShares of major corporations are bought and sold on the stock exchanges, which are located in world citiesLawyers, accountants, and other professionals cluster in world cities to provide advice to major corporationsAdvertising agencies, marketing firms, and other services concerned with fashion and style also locate in world citiesConsumer services in world citiesBecause of large size, world cities have retail services with extensive market areasBut they may have even more retailers than large size alone would predictA disproportionately large number of wealthy people live in world citiesLeisure services of national significance cluster in world citiesExample: concerts, plays, professional sporting eventsContain largest libraries and museums

19. Hierarchy of Business ServicesPublic services in world citiesWorld cities are centers of national or international political powerMost are national capitals, often contain:Palaces, mansions for heads of stateImposing structures for national legislatureCourtsOffices for government agenciesAlso clustered in world cities are offices for groups having business with the governmentForeign embassies, labor unions, etc. Exception!!!New York City is unlike other world cities, it is not the nation’s capitalHome to the world’s major international organizations, the United Nations, it attracts thousands of diplomats and bureaucrats

20. Hierarchy of Business ServicesFour Levels of Business servicesWorld CitiesDominantLondon, NYC, TokyoEach is largest city in one of three main regions in developed worldMajorChicago, L.A., D.C., Brussels, Frankfurt, Paris, Zurich, Sao Paulo, SingaporeSecondaryHouston, Miami, San Fran, TorontoBangkok, Bombay, Hong Kong, Manila, Osaka, Seoul, TaipeiBerlin, Madrid, Milan, Rotterdam, ViennaBuenos Aires, Caracas, Mexico City, Rio de JanerioJohannesburg, SydneyCommand and Control centersContain headquarters of large corps, well developed banking facilities, etc.Two divisions: regional, subregionalSpecialized Producer-service centersOffer more narrow and highly specialized variety of servicesOne group specializes in management and R&D activities related to specific industriesExample: motor vehicles- Detroit, Steel- Pittsburgh, semi-conductors- San Jose, CASecond group specializes as centers of government and educationNotably state capitals that also have a major universityExample: Albany, NY; Raleigh-Durham, NC; Columbia, SCDependent centersThese provide relatively unskilled jobs and depend for their economic health on decisions made in world cities, regional command and control centers, and specialized producer-service centersFour sub-types in United StatesResort, Retirement, and Residential CentersManufacturing centers, Military centersMining centers

21. Business Services in LDCsIn the global economy, LDCs specialize in two distinctive types of business services:Offshore financial servicesProvide two important functionsTaxesTaxes on income, profits, and capital gains are typically low or non-existentCorporations have incorporated in an off-shore center also have tax-free exemption regardless of nationality of ownersU.S. loses an estimated $70 billion in tax revenue each yearPrivacySecrecy laws can help evade disclosure in home countriesCan protect assets from malpractice suits or divorceCan hide illegal activitiesExample: Cayman IslandsBack-office functionsKnown as business-processing outsourcing (BPO)Include processing insurance claims, payroll management, transcription work, etc.Also includes centers for responding to billing or technical inquires LDCs attract BPO because:Low wagesAbility to speak English

22. Economic Base of SettlementsA settlement’s distinctive economic structure derives from its basic industriesBasic Industryexport outside of settlementCan be identified by computing the % of community’s workers employed in different types of businessesThe % of workers employed in a particular industry in a community is then compared to the % of all workers in the country in that industryIf % is much higher in the local community, then that type of business is a basic economic activityNon-basic Industrycustomers live in same communityEconomic baseunique collection of basic industries defines its baseImportant because exporting by the basic industries brings money into the local economyStimulates the provision for more non-basic consumer services for the settlementThat attracts new workers, who bring more familiesThat brings more consumer services to meet new needs

23. Economic Base of SettlementsSpecialization of Cities in Different ServicesSettlements in the U.S. can be classified by their type of basic activityEach type of basic activity has a different spatial distributionConcept of basic industries used to be referred to as manufacturingIn post-industrial America, increasingly the basic economic activities are in business, consumer, or public servicesExamples:Business ServicesGeneral business : large metro areas such as L.A., NYC, and ChicagoComputing and data processing: Boston and San JoseHigh-tech: Austin, Orlando, Raleigh- DurhamManagement-consulting: D.C.Consumer ServicesEntertainment and Recreation: Atlantic City, Las Vegas, RenoMedical Services: Rochester, MinnesotaPublic ServicesState capitalsLarge UniversitiesMilitary bases

24. Economic Base of SettlementsDistribution of TalentIndividuals possessing special talents are not distributed uniformly among citiesSome cities have a higher % of talented individuals than othersCorrelation found between the distribution of talent and the distribution of diversity in the largest U.S. cities