Economies of agglomeration

As agglomeration effects, the effects of compaction areas or agglomerations referred to in the regional economy. This may be agglomeration economies or agglomeration disadvantages.

In the Business Administration agglomeration refers to the accumulation of various companies, typically at one location (so-called location agglomeration ). These agglomeration leads to agglomeration effects.

In the Study of commerce in particular the Land Evaluation with agglomeration effects of the stationary retail trade deals. From an operational perspective is about the attractiveness, understood the appreciation of a (micro) site, which results from the spatial agglomeration of trade and service enterprises in a location as agglomeration advantage. From single operational point of view the increase in sales of a commercial operation or business is referred to as agglomeration advantage is due to the proximity to shops with a similar range. ( For details on the so-called agglomeration law see below)

Regional Economics

Agglomeration advantages

Benefits arising from the spatial agglomeration of physical capital, companies, consumers and workers.

Specifically these agglomeration leads to

  • Low transport costs
  • A great (local) market
  • A large supply of labor and thus the increased chance of supply and demand for labor, particularly for specialists, quickly compensate (matching, lower search costs ).
  • The accumulation of knowledge and human capital leads to knowledge spillovers between firms.

Agglomeration disadvantages

The disadvantages of agglomerations are to be mentioned

  • Strong environmental pressures
  • High land prices
  • Bottlenecks in public goods ( eg poor / overburdened infrastructure )
  • Corruption
  • Lack of reserve areas

Business Administration

Spatial clusters of companies generally lead to an increase in the attractiveness of the site. In particular, they can lead to agglomeration economies in the form of savings. Three types of savings are to be distinguished:

  • Economies of scale (Operating) internal savings ( lower unit costs)
  • (Operating) external economies by spatial concentration of similar businesses
  • External savings by spatial concentration of different types of businesses

Study of commerce

For commercial businesses and their customers the spatial agglomeration of industry and non-industry companies in the same rule also means an increase in the attractiveness of the site. This is particularly evident at the One -stop shopping in retail stores. Since the agglomeration effects of the industry and the customers are dependent, they can be accented differently: While the location agglomeration of several similar grocery stores tends to favor a tough price war (so-called limit pricing), the location agglomeration of shoe stores promotes the attractiveness of their enlarged "marketplace ". The reason is - at least in the retail sector - in product related purchasing behavior: In so-called shopping goods the customer wants to be able to compare from a wide selection, while the daily consumer goods (convenience goods ) to be procured quickly and without special search effort.

From the empirical observation that the immediate neighborhood of two same sector retail stores for both companies does not have to be a disadvantage, but the two companies provides an added revenue, which can be even further increased due to the appearance of additional industry- the same companies, because their common "marketplace" for consumers to attractiveness and transparency wins, a law was proposed in the Study of commerce: the so-called agglomeration law. K. Behrens BC called this law "law of agglomeration in retail with associated requirements " and Richard L. Nelson "Rule of Retail Location". For first two adjacent industry like retail establishments in the jointly generated more revenue than using a formula has been shown computable. Accordingly, the composite based on the location More sales ( agglomeration effect) depends on three factors, which are determined by measuring ( 1 / 3 ) and customer survey ( 2 ) determine that he will take to

1 directly proportional to the degree of the customer exchange ( turnover shares of buying in both stores customers )

2 is directly proportional to the ratio of plan purchases to total purchases in both shops and

3 indirectly proportional to the ratio of sales to sales of the larger to the smaller business.

A generality of this " law " is controversial. In particular, is critical to note that a) the local sales success of neighboring plants of the same industry also depends on other factors and b ) can be promoted by industry third parties or new business models. A reliable forecast of the extent to which (or if ever) generate added revenue for each new provider supervening same industry enterprises is certainly not possible. However, the agglomeration law of retailing has both the location theory and urban planning and mercantile practice of site selection and optimization stimulated ( arcades, shopping center, shopping centers, community department stores and malls communities, neighborhood communities).

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