Access to Market

The single most important factor in deciding where an industry is located is whether a market exists for what it produces. A market is not just a place where goods are sold — it is defined by people who both want the product and have the money to buy it. Without that combination of demand and purchasing power, no industry can survive.

A small, remote population offers only a tiny market. The size and value of a market depend on two things: the number of people and their purchasing power. This is why the developed regions of Europe, North America, Japan, and Australia form enormous global markets — their populations have very high purchasing power. At the same time, the densely populated regions of South and South-east Asia also provide large markets, not because individual incomes are as high, but because the sheer number of people creates massive aggregate demand.

Some industries operate on a scale that transcends regional boundaries. Aircraft manufacturing, for example, has a truly global market — a handful of companies sell planes to airlines all over the world. Similarly, the arms industry also sells its products across national borders, with governments and militaries as customers worldwide. …