Linkage industries
HELLO AGAIN. As promised, I will begin this lesson with a question based on objectives 9, 10, 11, and 13 of Section 5 – Production. Consult the previous TWO lessons for possible responses to the question.
(a)(i) Define a small business. (2 marks)
(ii) Outline THREE functions of a small business. (6 marks)
(iii) Explain TWO problems experienced by small businesses in your country. (4 marks)
(b)(i) Outline ONE method of external growth of a business. (2 marks)
(ii) Explain TWO effects of the growth of a business. (6 marks)
Total : 20 marks
Let us now move to Objective 12 of Section 5. This objective states that students should be able to:
Outline the opportunities for and benefits of developing linkage industries.
An industry is made up of a number of firms producing broadly similar items or items that are connected to each other.
A linkage industry is an industry that is associated with or connected to other industries in such a way that the existence of one is dependent on the other, or it enhances the other’s production process. These industries are also referred to as ‘spin-off’ and ‘screwdriver’ industries. Some examples of linkage industries are:
■ Agriculture linked to tourism.
■ Bagasse linked to sugar cane refining.
■ Bauxite linked to aluminium.
■ Petrol (gas) linked to crude oil refining.
■ Agriculture linked to the canning industry.
■ Road building in Trinidad linked to the asphalt industry.
Can you think of other examples? Please add them to the list.
TYPES OF LINKAGES
Linkages are, first of all, INTERNAL (local) or
EXTERNAL (international) and, second, either BACKWARD or FORWARD.
Internal linkages are formed where all the industries that are connected exist within the same country. These industries are often sited near to each other. An external linkage is where one or more of the industries are located in another country, for e.g., the motor car assembly industry in CARICOM is linked to the motor car parts manufacturers all over the world. Internal and external linkages are also linked at different stages of production and, therefore, may be either backward or forward. A backward linkage exists when an industry OBTAINS raw materials from an industry that is closer to the raw material stage than itself, e.g., the biscuit industry obtains flour from the flour mill.
A forward linkage exists when an industry SUPPLIES another industry that is nearer to the marketing stage than itself, e.g., the agricultural industry supplies the tourist industry.
OPPORTUNITIES FOR THE FORMATION OF LINKAGES
There are many opportunities for the development of linkage industries, especially where there are idle raw materials, where there are large numbers of unemployed persons, and where relationships have developed between the various productive sectors, e.g., primary with secondary sectors. Also, because many of these industries are in close proximity to each other, linkages have been encouraged. However, with the development of transport, this has become a less important factor. In instances where knowledge can be shared, linkages are also formed.
BENEFITS OF LINKAGE INDUSTRIES
1. Resources are more efficiently used.
2. More unemployed persons are able to find work.
3. Investment, national income, and the standard of living increase.
4. Countries are able to save on imports and increase exports through items produced by linkages. This will improve the balance of payments of countries and boost their economic development.
5. Linkages can encourage large-scale production, which can meet local and foreign demand.
6. Innovation and new technology can be promoted through linkage industries.
7. Self-sufficiency and self-reliance are encouraged.
From your reading, you can add other advantages. I will now point out a few of the problems experienced where the formation of linkages is concerned.
The greatest problem is the acquisition of capital to develop linkage industries.
Secondly, access to foreign markets is not guaranteed. Thirdly, availability of local raw materials is limited in some cases, and these may have to be sought from abroad using scarce foreign exchange.
Again, you can add to these problems from your reading and previous knowledge.
Finally, consider this question:
(a) Define the term ‘industry’. (2 marks)
(b) Explain the term ‘linkage industry’. (2 marks)
(c) Explain the difference between an internal linkage and an external linkage. (4 marks)
(d) Give FOUR examples of linkage industries. (4 marks)
(e) Differentiate between a ‘forward linkage’ and a ‘backward linkage’. (4 marks)
(f) Discuss TWO benefits of linkage industries. (4 marks)
TOTAL: 20 MARKS
Next week, we will begin Section 6 – Marketing. Stay safe.