3. Location Theory
• Location Theory – predicting
where a business will or
should be located.
• Location of an industry is
dependent on economic,
political, cultural features as
well as whim.
• Location Theory Considers:
– Variable costs-energy,
transportation costs & labor
costs
– Friction of distance-increasing
distance =increased time &
cost
4. Location Models
Weber’s Model-The Least Cost Theory
Alfred Weber, (1868-1958) a German economists, published Theory of
the Location of Industries in 1909. His theory was the industrial
equivalent of the Von Thunen Model.
Manufacturing plants will locate where costs are the least.
Three Categories of Costs:
Transportation-the most important cost-usually the best site is where
cost to transport raw material and finished product is the lowest
Labor-high labor costs reduce profit-location where there is a supply
of cheap, non-union labor may offset transportation costs
Agglomeration-when a group of industries cluster for mutual benefit-
shared services, facilities, etc.-costs can be lower
Deglomeration-when excessive agglomeration offsets advantage-
eastern crowded cities
5. Weber's Location Triangle
•
• Alfred Weber's work (1909) is considered to have established the foundations of modern
location theories. One of his core assumption is that firms will chose a location in view to
minimize their costs. This involves a set of simplifications, namely that location takes place in
an isolated region (no external influences) composed of one market, that space is isotropic
(no variations in transport costs except a simple function of distance) and that markets are
located in a specific number of centers. Those conditions are quite similar to those behind
Von Thunen's agricultural land use model elaborated almost one hundred years earlier. The
model also assumes perfect competition, implying a high number of firms and customers,
small firm sizes (to prevent disruptions created by monopolies and oligopolies) and a perfect
knowledge of market conditions, both for the buyers and suppliers. Several natural resources
such are water are ubiquitous (available everywhere) while many production inputs such as
labor, fuel and minerals are available at specific locations. According to Weber, three main
factors influence industrial location; transport costs, labor costs and agglomeration
economies. Location thus imply an optimal consideration of these factors.
6. Weber's Location Triangle
•
• Solving Weber's location model often implies three stages; finding the least
transport cost location and adjusting this location to consider labor costs and
agglomeration economies. Transportation is the most important element of the
model since other factors are considered to only have an adjustment effect. To
solve this problem, Weber uses the location triangle within which the optimal is
located. The above figure illustrates the issue of minimizing transport costs.
Considering a product of w(M) tons to be sold at market M, w(S1) and w(S2) tons
of materials coming respectively from S1 and S2 are necessary. The problem
resides in finding an optimal factory location P located at the respective distances
of d(M), d(S1) and d(S2). Several methodologies can be used to solve this problem
such as drawing an analogy to a system of weights and pulleys (Varignon's
solution) or using trigonometry. Another way preferred among geographers,
particularly with GIS, is to use cost surfaces which are overlaid.
7. M= market
P= place of industry
S1=raw materials
S2 = raw materials
Measured in tons –
Triangle is not the same as the
Weber’s Location Theory
because of the lack of labor and
agglomeration cost
8. Location Models
• Hotelling’s Model-Harold
Hotelling (1895-1973) this
economist modified Weber’s
theory by saying the location of
an industry cannot be
understood with out reference to
other similar industries-called
Locational Interdependence
• Losch’s Model-August Losch said
that manufacturing plants choose
locations where they can
maximize profit. Theory: Zone of
Profitability
10. Major Industrial Regions of the
World before 1950
• First manufacturing belts were
close to raw materials & good
transportation
• In addition to raw materials
other factors: relative location,
political situation, economic
leadership, labor costs &
education and training.
• Four primary industrial regions
were Western & Central
Europe, Eastern North America,
Russia & Ukraine and Eastern
Asia
12. Western and Central Europe
• Europe’s coal deposits stretch across northern France,
north central Germany, northwestern Czech Rep. &
southern Poland.
• Colonial Empires gave France, Britain, Belgium, Netherlands
& later Germany capital for industrial development.
• Germany-The Ruhr & the Westphalian coal field, Saxony
near Czech Rep. Silesia, now part of Poland.
• Germany is still the leader producer of coal & steel and is
Europe’s major industrial power.
• European Coal and Steel Community was the predecessor
of the European Union.
13. Manufacturing Centers
in Western Europe
• The manufacturing centers
in Western Europe extend
in a north-south band from
Britain to Italy.
• The are centered on coal
fields and iron ore deposits
and cross roads of
transportation.
14. Western and Central Europe
• The Ruhr, a small tributary
to the Rhine, became the
leading industrial region of
Europe
• Saxony and its cities of
Leipzig & Dresden became
known for cameras, textiles
and ceramics.
• Destruction of WW II-
German factories were
rebuilt-competitive edge
over older factories of North
America
15. The American Manufacturing Belt
• America’s manufacturing belt
extends from the Northeast
coast to Iowa and from the
St. Lawrence Valley to the
Ohio & Mississippi Rivers.
• New England & New York-
light manufacturing New York
with its large market has a
huge skilled & semi-skilled
labor force.
• Philadelphia & Baltimore
with heavy industry-iron ore
was smelted in tidewater
steel mills
16. The American Manufacturing Belt
• NYC Port is a break-of-bulk
(cargo shifted from one
mode of transport to
another) center.
• Buffalo on Lake Erie grew
after the Erie Canal was
finished-early 19th cent.
• Interior nodes-Pittsburgh,
Cleveland, Detroit, Chicago-
Gary, Milwaukee, St. Louis &
Cincinnati-Appalachian coal
& Mesabi iron ore-autos,
bulldozers, harvesters, &
appliances
Caterpillar manufacturing plant in
Aurora, Illinois
19. Open Pit Coal Mine in southern Illinois
Coal train moving across Montana is 1½
miles long. It carries barely a day’s fuel
for a large power plant. The US burns
over 1 billion tons of coal a year-has the
world’s richest coal deposits-enough to
last 250 years.
23. The Former Soviet Union
• Moscow developed light industry in the last days of the
Tsars and St. Petersburg focused on machinery, optics,
medical equipment, shipbuilding, chemicals & textiles
• Soviets emphasized heavy industry-established Nizhni
Novgorod (southeast of Moscow) as the “Detroit of the
Soviet Union”
• WW II Soviets shifted industries east to protect them from
the German advance-Volga area & Urals
• Ural Mountains provided metallic ores:copper, iron, nickel,
chromite, bauxite, etc.
• Siberia coal and iron remained important
• Kuzbas, Krasnoyarsk and Lake Baykal region served by
Trans-Siberian Railroad-impressive coal, timber & water
resources
25. Eastern Asia-China• Japan built steel mills in
Dongbei (Manchuria)
during its occupation in
WW II
• From 1949 until 1969
Soviet planners helped
the China industrialize
• Tonghua Iron & Steel is
subsidized and
operated by the
Communist Party.
• Built in 1958, it employs
29,000 workers-China
produces 30% of the
world’s steel
26.
27. Eastern Asia-China
• Shanghai recently beat out
Rotterdam as the busiest
port in the world.
• China has many jobs that or
outsourced or moved
offshore.
• Northeast is China’s rust
belt with many state-run
inefficient factories.
• Dalian, Shanghai, Zhuhai,
Xiamen & Shenzhen- smog-
choked cities jammed with
people-rapidly changing
with new construction &
renewal
28. Eastern Asia-China• Shenyang on the Liao
River became the
“Chinese Pittsburgh”
with machine-making
and steel production.
• Shanghai & Chang River
district is the 2nd largest
industrial region of
China-rail cars, ships,
books, food & chemicals
• Enormous labor force,
low daily wages, few
restrictions have
attracted foreign
companies to China’s
Special Economic Zones
Coal=65% of China’s energy &
Consumption could double in 20 years
31. Eastern Asia-Japan• ½ the US population, size of
California, limited resources,
yet remarkable industrial
growth-Meiji Restoration
1860s
• Kanto Plain includes Tokyo-
Yokohama-Kawasaki metro
areas=2nd biggest
megalopolis on earth-
produces 20% of Japan’s total
goods
• Kansai District, Kobe-Kyoto-
Osaka triangle is the 2nd area-
steel, chemicals, autos,
shipbuilding & textiles
The Imperial Palace in
Tokyo
32. After WW II, Japanese industry
recovered quickly due to its
large supply of cheap, highly
skilled labor
33. • Japan rapidly
industrialized in
the late 19th cent.
• Due to a lack of
resource, Japan
acquired colonies
on the Asian
mainland at the
expense of China.
• In the 1930s
militarists
dominated the
government &
began a policy of
further expansion.
36. South Asia-India
• Blessed with large coal
deposits, metallic
minerals such as iron
ore and a vast labor
force, India is growing by
8% year.
• Despite rapid
industrialization it still
remains agrarian and
underdeveloped due to
a poor infrastructure-
over 50% of India’s crops
rot in the field due to a
lack of transportation
37. South Asia-India
• The Bihar Steel Mill in India
produces high quality steel at a
low price-the down side-low
pay, few environmental
restrictions=pollution.
• India’s service sector is also
growing very rapidly.
• The Delhi Call Center at right is
typical of the the outsourcing
done by many Western firms.
• India has millions of low paid
blue-collar workers and
millions of white collar, high
tech. workers
