Top 10 advantages of Industrial estates
The following are some of the advantages due to industrial estates.
1. Economies of scale: Units located in an industrial estate can adopt centralized buying and selling. The requirement of all the members for raw materials and components can be pooled together and bulk purchases made. Such bulk purchases would be eligible for quantity discounts resulting in lower costs. Similarly in the case of sales, the produce of members can be pooled together and sold. This would reduce selling costs to a great extent. This kind of centralized buying and selling would enable member units to enjoy scale economies.
2. Economies of Agglomeration: Agglomeration refers to the benefit of reduced production costs because of concentration of industries. The benefits from agglomeration are:
- availability of skilled labor.
- presence of repair, maintenance and service facilities.
- availability of components.
- presence of financial institutions.
3. Benefits of inter-relatedness: The finished product of one unit might be the raw material for another unit. Since the units are located close by, it results in savings in transportation costs for the purchaser and assured market and reduced selling cost for the seller.
4. Low investment: Since the government provides land for setting up industrial estates at affordable costs, the initial investment is less. Industrialists can acquire assets on hire-purchase or on lease and can benefit from higher output.
5. Availability of infrastructure: The infrastructural facilities such as electricity, water, roads, telecom etc., are readily available in industrial estates. Entrepreneurs need not spend their time and money to get electricity connection, water supply and telephone connection. Therefore production can commence immediately without any wastage of time and resources
6. Availability of support facilities: Apart from the basic infrastructure, banks, post offices etc., are located in industrial estates. This facilitates business transactions to a great extent.
7. Mutual cooperation: The units in an industrial estate can cooperate among themselves and undertake joint research. Such research can be for exploring new markets, new sources of supply of raw materials, better processes etc., They can share best practices relating to quality standards, TQM, TPM, ISO standards etc. Such co-operation would benefit all the member units.
8. Focus on business: The initial investment is low and all the basic and supporting infrastructural facilities are readily available. Therefore entrepreneurs can focus their full attention on the business and concentrate on its growth.
9. Increased employment opportunities: Industrial estates create more employment opportunities and increase the mobility of labor. Since many of the units are labor intensive, there are opportunities for both skilled and unskilled workers.
10. Development of backward areas: Industrial estates provide employment to the local youth. With their development a host of facilities such as banks, post offices, insurance companies, housing, schools, health care facilities come up. This results in the development of backward areas and balanced regional development.