Key Issue # 3:Business Services & Settlements

• EVERY settlement in an MDC provides CONSUMER SERVICES to people in the area & the area surrounding

• NOT all settlements of a given size has the same # & types of BUSINESS SERVICES

• BUSINESS SERVICES disproportionately CLUSTER in a handful of settlements

• Individual settlements specialize in particular BUSINESS SERVICES

World Cities

• Prior to modern times, virtually all settlements were RURAL

• Providers of CONSUMER SERVICES met most of the needs of farmers in village

• A handful of urban settlements provided BUSINESS & PUBLIC SERVICES as well as some CONSUMER SERVICES with large market areas

Ancient World Cities• WHEN: Urban settlements date from the beginning of

documented history in the Middle East & Asia (Fertile Crescent)– Oldest documented Ur (Iraq) 3000 BC

• COMPACT, surrounded by a WALL, TEMPLE at center (ziggurat), surrounded by residential areas containing a dense ntwk of narrow winding streets & courtyards

– Evidence indicates urban settlements were well planned• Houses arranged in a regular pattern (walls/streets laid out first, public

buildings (temples, palaces) in the center, cemeteries beyond the wall. House sizes varied but similarly designed, built around a center courtyard with room for extended family

• WHERE: Diffused ? To Egypt, China & South Asia (Indus Valley). Or these may be individual hearths.

• Then diffused to the rest of the world

Ur, in modern day Iraq, was one of the earliest urban settlements. The ziggurat, or stepped temple, was surrounded by a dense network of residences.

Athens, Greece

The hilltop site of the Acropolis, t 500 BC, still dominates the skyline of modern Athens. Largest city-state in Greece (100,00) Developed from trading ctrs. Into city-states, offering PUBLIC SERVICES, (govt, military, etc)

Athens, Greece

The hilltop site of the Acropolis, dating to about 500 BC, still dominates the skyline of modern Athens.

Medieval World Cities

• After Rome fell came a retreat to rural life• Urban Life began to revive in 11th c.

– Feudal lords established new urban settlements• Gave residence charters to establish independent cities in exchange for

periodic military service• Urban dwellers (freed from serfdom) began expanding trade

– Trade was enhanced by new roads & more use of rivers– 14th c. Europe covered by dense ntwk of small market towns serving the

needs of particular lords.• Largest Medieval European Urban settlements served as power

centers for lords & church leaders, & major market ctrs– Major PUBLIC SERVICESPUBLIC SERVICES occupied palaces, churches etc. arranged

around a central market square– Usually surrounded by walls – Dense & compact within these walls shops/houses were nestled into the

side of the walls & large buildings• Before 19th c. world’s largest citieslargest cities were in AsiaAsia, NOT Europe

– 5 most populous cities: Baghdad, Constantinople, Kyoto, Changan & Hangchow

Brugge, Belgium

Brugge was a major portport & wool manufacturing center from the 12th c. It is marked by squares (plazas) surrounded by public buildings.

Carcassonne, France

Medieval European cities such as Carcassonne, in southwestern France, were often surrounded by walls for protection.

Paris

Paris was originally surrounded by walls which were expanded to include new neighborhoods as the city grew.

Modern Modern world cities– Several emerged where a high % of world’s business is

transacted & political power is concentrated

–MULTIPURPOSEMULTIPURPOSE—

Centers of BUSINESS SERVICES

Stand at the top of Central Place HierarchyCentral Place Hierarchy in the provision of CONSUMER SERVICES

Many also serve as PUBLIC-SERVICE centers

– New form of transportation & communicationNew form of transportation & communication were expected to reducereduce the need for CLUSTERING economic activities in large cities (telegraph, telephone, computer, R.R., trucks)

– there has been somesome decentralization, (manufacturing), but modern inventions have REINFORCED not decreased the primacy of world cities in the global economy

Business Services in world cities CLUSTERING of BUSINESS SERVICES is a product of the Ind. Rev

– Factories operated by large corporations formed to minimized the liability to any 1 owner– Board of Dir. (far away) make key decisions RE: what & how much to make, & what to charge– Support staff also far away account for the flow of $ & material to & from the factory (done in

offices in cities)

• World Cities offer many financial services to these businesses = Centers of Finance

– Attract HQ of major banks, insurance co. & specialized financial inst. ---- corporations obtain & store funds for expansion

– Shares of corporations are bought & sold on the stock exchanges (located in world cities)

– Getting the info fastinfo fast is essential in order to buy & sell shares– Lawyers, accountants, etc. CLUSTERCLUSTER in world cities, provide advice to

major corp. & financial Institutions.– Ad. Agencies, marketing firms, etc. concerned w/ style & fashion

locate in world cities to help corp. anticipate changes in taste & to help shape those changes

– Transp. serv. converge on world cities. (busy harbors & airports) lie at the junction of rail & hwy ntwks

Consumer Services• Due to size world cities = large MARKET AREASMARKET AREAS• Larger # of retailers than even the size would indicate• Disproportionately large # of wealthy people live in

world cities– Luxury & highly specialized products are especially likely to

be sold here– Leisure services of national significance are especially likely

to cluster in world cities, in part b/c they require large thresholds & large ranges & they have so many wealthy patrons

• Offer cultural services– Plays, night clubs, restaurants, bars, concerts, operas,

museums, libraries, concerts, sporting events

Public servicesPublic services

• World Cities may be centers of national or international political power.

• MOSTMOST are capitals: contain mansions/palaces/ national leg./courts/govt. offices/bus./Offices for doing business w/ govt./trade assc./labor unions / prof. org.

• EX. NY, Brussels, Paris, London, Tokyo

Hierarchy Hierarchy of Business Services• 4 levels4 levels of cities that play a major role in the

provision of producer & other business services– Atop the HIERARCHY are a HANDFULHANDFUL of world

cities that can be subdivided into 3 groups3 groups :Dominant, Major, Secondary

• Next major role in global business service economy are REGIONAL COMMAND & CONTROL CENTERSREGIONAL COMMAND & CONTROL CENTERS, specialized producer-service centers, & dependent centers

• Differences also exist among cities w/in ea. level• Other cities– some with large population– play

less important roles in the provision of business services

Hierarchy of World Cities

London, New York, and Tokyo are the dominant world cities in the global economy. Other major and secondary world cities play lesser roles.

World cities (w.c.)

Top of the HierarchyTop of the Hierarchy• Most closely integrated into the global economic system b/c

they are the CENTER CENTER of the flow of info & capitalinfo & capital• BUSINESS SERVICES (law, banking, ins., accntng, & adv.)

concentrate disproportionatelyconcentrate disproportionately lrg #s in W.C. – LONDON, NEW YORK, TOKYO

• Each is the largest of its region & the world’s most important stock exchanges operate in these three cities

2nd tier= Chicago, LA, Wash DC, Brussels, Frankfurt, Paris, Zurich– Only 2 of the 9 are in LDCs Sao Paulo & Singapore– Major corp. & banks may have their HQ in these world cities vs. London,

NY, Tokyo

3rd tier= of secondary world cities– 4 in No. Am.: Houston Miami, San Fran., Toronto– 5 in W. Europe: Berlin, Madrid, Milan, Rotterdam, Vienna– 4 in Latin America: Buenos Aires, Caraa, Mexico City, Rio de Janeiro– 1 in Africa: Johannesburg– 1 in So. Pac. : Sydney

Business Service Cities in the U.S.

Below the world cities in the hierarchy of U.S. cities are command & control centers, specialized producer-service centers, and dependent centers.

Command & Control CenterCommand & Control Center (C & C)• 2nd level of cities • Contains HQs of many lg corp., well developed

banking facilities, & concentrations of other BUSINESS SERVICES (incl. insurance, accounting, advertising, law, & public relations)

• Include Educational, medical & public institutions • 2 levels of C & C centers can be id’d

regional centers – Atlanta, Baltimore, Boston, Cincinnati, Cleveland, Columbus,

Denver, Indianapolis Kansas City, Minneapolis, New Orleans, Philadelphia, Phoenix, Portland, St. Louis & Seattle

sub regional centers– Biloxi, Birmingham, Charlotte, Des Moines, Jackson,

Jacksonville, Little Rock, Memphis, Nashville, Oklahoma City, Omaha, Richmond, Salt Lake City, Shreveport, Spokane, & Syracuse

Specialized Producer-Service Centers

• 3rd Level

• Offer a more narrow & highly specialized variety of services– One group of these cities specializes in the

management & R & D activities related to specific industries (motor vehicles: Detroit; Steel: Pittsburgh; office equipment: Rochester; Semi conductors: San Jose)

– Second group, specialize as centers of govt & education, notably state capitals that also have a major universities (Albany, Lansing, Madison)

Dependent Centers• 4th level • Provide relatively unskilled jobs & dependent on

decisions made in the world cities, regional command & control centers & specialized producer-service

• 4 sub types of dependent ctrs can be id’d in US– Resort, retirement, residential ctrs: Las Vegas, Fort

Lauderdale, Orlando, CLUSTERED IN SW– Manufacturing ctrs: Buffalo, Chattanooga, Erie, Rockford,

CLUSERD in the old NE manufacturing belt– Industrial & military ctrs: Huntsville, Newport News, &San

Diego; CLUSTERED IN S & W– Mining & industrial ctrs: Charleston W Virginia., Duluth,

(mining areas)

Economic BaseEconomic Base of settlementsA Settlement’s distinctive economic structure derives from its • BASIC INDUSTRIES;

– export primarily to consumers outside the settlement

• NON BASIC INDUSTRIES: – enterprises whose customers live in the same settlement,– essentially CONSUMER SERVICES

• Community’s unique collection of basic industries defines its ECONOMIC BASE– Important b/c exporting by the basic industries brings $$ to the

local economy, thus stimulating the provision of more non basic CONSUMER SERVICES. >>> attracting new workers who bring their families. >>> adding CONSUMER SERVICES to meet the needs.

THUS a new basic industry stimulates establishment of new Consumer Services (ex. Stores) BUT… a new nonbasic (supermarket) service will not induce construction of a new basic industry

Identifying a settlements basic industry• Compute % of community’s workers working in each type of

business• Compare it to the % of all workers in the country in that

industry• If % is much higher in the local community, then that type of

business is a basic economic activity

Classifying a settlements basic industry

• Each type of basic activity has a different spatial distribution– Some = high % of workers working in a particular sector that is

higher or lower than the national average (1-mining, 2- manufacturing, 3- service)

Specialization of Cities in Different Services• Basic Economic Activity are in business, consumer or public services

– Steel- was Cleveland & Pittsburgh now hlth serv– Computing/data processing- San Jose & Boston– Military Activity- Knoxville, Albuquerque, Huntsville– Public services- dispersed around the country b/c areas usually include ST.

capital, lg university, or military base.– Consumer service (entertainment/recreation)-Atlantic City, Las Vegas, Reno – Business Services- concentrated in lg metropolitan areas – Chicago, LA, NY,

San Francisco• While population of cities in S & W has grown more rapidly recently,

cities in the N & E have expanded their BUSINESS SERVICES more rapidly. Once manufacturing ctrs they have moved more aggressively to restructure their economic bases to offset sharp drops in manf. jobs– EX Baltimore was Steel; now medical research center

Economic Base of U.S. Cities

Cities that have a high proportion of their labor force engaged in the specified economic activity shown.

Business Services in LDCsSpecialize in 2 distinctive types of BUSINESS SERVICES

1. Small countries (ex. island/microstates): exploit niches in the circulation of global capital by offering offshore financial services

offer 2 important functions in the global circulation of capital 1) low or nonexistent taxes 2) bank secrecy laws

Caymans, Br. Virgin Islands, Isle of Man, Monaco, Belize Panama, Liechtenstein, Andorra, Gibraltar, New Zealand, US Virgin Islands, etc

2. Peripheral regions: Back-office function or Business-Process Outsourcing (BPO)

Incl. processing ins. claims, payroll, transcription, routine clerical, billing inquiries, shipment & claims, technical inquiries related to installation, repair, operation

Select LDC attract these jobs 1) low wages 2) better educated 3) English Fluency. India, Malaysia, Philippines

* considered menial labor in MDC attracts educated in LDC

Distribution of Talent & Cultural Diversity

Talent: measured by combo of:

the % of people in the city with college degrees, % employed as scientists or engineers, & % employed as professionals or technicians.

Cultural Diversity:3 measures were employed:

1. # of cultural facilities per capita, 2. % of gay men & 3. a “coolness” index (combo’d % of pop. in 20s, # of bars & nightlife places per capita, & # of art galleries per capita)

• Not equally distributed among cities– Talented are attracted to the cities w/ the most job op’s. & financial incentive. >>>

Clustering of talent in only SOME cities (PATTERN)– Clustering seems to have a > relationship to cultural rather than economic factors

• WHY important for a city, b/c they are responsible for promoting economic innovation, likely to start new business & infuse the local economy with fresh Ideas

Cities with High

Talent Levels

Cities with high levels of talent (measured by % of scientists, professionals, and college-educated).

Cities with High Diversity

Cities with high levels of diversity (measured by cultural facilities, % gay population, and a coolness index).

Key Issue #4: Why do Services Cluster Downtown (CDB)

Clustering of Services

• In the past, services of ALL types clustered in the center of the city, (downtown) CBD

Pattern Change!!

• Recently, Services, especially retail, have moved from the CBD to Suburban locations

Central Business District (CBD)

• Most visibly distinctive area of most cities

• Usually old part of town, often original

• Compact – (< 1% of the urban land area) containing a lg

% of the shops, offices & public institutions)

CBD of

Charlotte, NC

Charlotte’s CBD is dominated by retail & office buildings (service). Public & semipublic buildings are also in the downtown area.

Charlotte, North Carolina

Retail Services in the CBD3 Types: Require accessibility to everyone in the region

1. Shops with HIGH THRESHOLDS– Dept. stores used to cluster w/in the CBD (100% Corner) – NOW, more likely located in a suburban Mall environment (CBD rent is > & range is <)

2. Shops with LONG RANGE– Very specialized w/ customers who go infrequently. CBD is central & therefore >

preferred to wider area– Expensive stuff: jewelry, fur, designer cloths & cars etc.– Many are moving to malls unless the CBD combo’s entertainment w/ shopping

(Staple Ctr, the Block, Harbor Place : Baltimore)

3. Shops that serve people who work in the center– Lunch shoppers: shoe repair, office supplies, computers, clothing, dry cleaning, photocopying, etc.– NOT moving; Growing

Outside No. Am. CBDs are > likely to have supermarkets, bakeries, butchers, open limited times

Patterns of Change• Shops that appeal to nearby office workers are growing in

the CBDs – The # of CBD offices require more services & – the # of actual workers has increased

• Patrons of CBD shops, then tend more & more to be CBD employees who shop at lunch

• So… the total volume of sales in CBD areas has been stable, but the pattern of demand has changed– less dept. stores & more shops that cater to special needs

Redevelopment Revival

• Cities attempting to revive the CBD & older neighborhoods try promenade style shopping areas– a “mall” style of shopping– Shopping Streets reserved for peds = very common in

Europe

Business Services & the CBD

• Offices CLUSTER in the center for accessibility.

• Despite technological advances many businesses still prefer a face to face transaction -trust building

• Proximity of Professional Colleagues is important to: law, finance, journalism, banking & advertising

• Temporary employment service are also proximity dependent

Faneuil Hall, Boston

Faneuil Hall Marketplace was originally built in 1742 and was renovated in the 1970s into a popular retail center.

Dublin, Ireland

Retail services in Grafton Street, Dublin.

European cities have retained consumer services in the CBD.

High Land Costs in the CBD• CBD center’s accessibility = extreme competition for the

limited sites available >>> Very High Land Value• Tokyo’s CBD = world’s most expensive land. $125,000 per sq.

meter due to severe shortage of “build able” land. • REDEVELOPMENT is changing this

Conversely,• Populations of most U.S. CBD’s averaged a 10% > thruout

the 90s & the pace is increasing• Downtown living = attractive to people w/out kids in school

(young professionals or empty nesters)– Attracted by the entertainment, restaurants, museums, nightlife

clustered downtown & have no need for quality schools

2 distinctive characteristics follow GREATER land costs

1. CBD land is used more intensively– Creates 3 dimensional character, pushing UP & DOWN

– DOWN: Parking, shopping, transportation, wiring, delivery– UP: (Skyscrapers) Shops at ground level, offices, hotels &

residences higher

2. CBD some activities are excluded– High rents & land shortage discourage 2 principal activities

manufacturing & residential often replaced by tourism– Many poor people used to live downtown but Push & Pull factors

changed that– Pull to the suburbs- lgr homes/yrds/modern schools– Push from the CBC- higher rents & limited space

European CBDs

• Less dominated by Commercial consideration

• Retail & office function, low rise buildings, narrow streets

• Regulations+efforts to preserve historic core limit vertical growth • Most prominent structures (often Churches/palaces) located

in public squares / road junction / hilltops

• Renovations cost more $$$$$ than new construction

• NO PLACE for new construction if the CENTER location is to be maintained

• Rents are MUCH more in European cntrs than in US cntrs

London, England

St. Paul’s Cathedral, designed in 1673, dominates the skyline of central London

Suburbanization of Businesses

• Businesses have moved to the suburbs

WHY?

– Manufacturers (2ndary) select peripheral location (land cost is less)

– Service (tertiary) providers have moved b/c their customers have moved

Suburbanization of retailing• Suburban residential growth >>> CHANGE in traditional

retailing patterns– From small neighborhood shops in housing areas & CBD shopping for other

product TO suburban shopping (> 5% rate yearly since WWII)• CBD sales stagnated as suburban residence live too far to shop

there so, small corner shops have been “zoned” out• Retailing has increasingly concentrated in planned suburban

shopping malls (varied sizes) (think Irvine Spectrum/The Block)• Supermarkets replace corner shops• Larger malls contain dept stores & specialty shops

– Generous parking (FREE)– Location near key road junction / interchanges for hwys– Some malls are elaborate entertainment centers

• Key to a successful large shopping mall is the inclusion of 1 or more ANCHOR stores– Smaller shopping ctrs anchor supermarket or discount stores

Retail Centers in Atlanta

Most shopping malls in Atlanta and other cities are in the suburbs.

The ideal location is near an interchange on an interstate highway beltway circling the city.

Suburbanization of factories & offices

• Factories & warehouses have migrated to suburbia for MORE space, CHEAPER land & better truck ACCESS– Modern factories & warehouses demand more land for more

efficient operations (single level)– Suburban locations facilitate truck shipments with good access

to main hwys & no central city traffic• Industries increasingly receive inputs & distribute products by truck

• Offices that don’t require face to face contact are moving to suburbs– cheaper rents, closer to workers (who moved to suburbia)– Low wage workers do have more trouble for lack of public

transportation

“Daily Urban Systems”

The Commerce Department divided the US into “daily urban systems” with functional ties, especially commuting to the nearest metropolitan area.