3. Location Theory
Attempts to explain the pattern of the
location of an economic activity in terms
of influential factors
4. The Location Decision (1)
Primary Industries
Because these deal with the extraction of
resources, primary industries must be
located where the resources are
5. The Location Decision (1)
Secondary Industries
less dependent on resource location
raw materials can be transported if profits
outweigh the costs of transportation
6. The Location Decision (2)
Alfred Weber: 1868-
1958
German
The Von Thunen of
economic geography
Least Cost Theory
Accounted for the
location of a
manufacturing plant in
terms of the owner’s
desire to maximize three
costs
7. The Location Decision (3)
Transportation (most important)
moving raw materials to factory and finished
goods to market
Labor
High labor costs reduce margin of profit
current economic boom on Pacific rim
Agglomeration
number of similar enterprises clustered in the
same area
Shared talents, services and facilities
when excessive, can lead to high rents, rising
wages, circulation problems
8.
9. Weber
Some argued that Weber’s model did not
adequately account for variations in costs
over time
Substitution principle: when one cost
decreases can endure higher costs in
another area (fixed vs variable costs)
Model suggests that one particular site
(point vs area) would be optimal but the
business could flourish in more than one
area
Taxation policies are not accounted for by
Weber
10.
11. Factors of Industrial Location
(1)
Transportation
Raw materials to factory and finished
products to market
steel plants along Atlantic seaboard because
iron shipped in from Venezuela
Europe’s coal and iron ore regions
Iron smelters built near coal fields
Japan’s colonial expansion into E Asia
(China/Korea) due to raw materials
European colonization for
resources, periphery to core
20. Piedmont: foot of the mountains;
from Italian pied (foot) monte (hill)
21.
22. Factors of Industrial Location
(1)
Transportation
highly developed industrial areas are places
that are served most efficiently by
transportation facilities
alternative systems
container systems, break of bulk
for most goods, truck is cheaper over shorter
distances, railroads cheaper over medium
distances, and ships cheapest over longest
distances
must consider loading/unloading, actual
transportation (cost of transportation
increases with distance at a decreasing
rate), and weight and volume
31. Factors of Industrial Location
(2)
Labor
a large, low-wage trainable labor force
will attract manufacturers
Japan’s postwar success based on skills
and low wages of workforce, low quality
high quantity initially
China emerged with large labor force
in 80’s
Taiwan and South Korea emerged to
challenge Japan in mid ‘90’s due to
cheaper labor
Four Tigers today
40. Factors of Industrial Location
(3)
Infrastructure
transportation, telephone, utilities, banks,
postal, hotel
China-inadequate local and regional
infrastructure
Vietnam-inadequate
power, water, transportation
41. Factors of Industrial Location
(4)
Energy
used to be much more important than
it is today
early British textile mills had to locate
near water power
rarely a problem today, except
industries needing a huge amount of
energy--- metal processing and
chemical industries may locate near
hydropower (TVA or Pacific
Northwest)
43. Other Factors
agglomeration
political stability
regional receptiveness to investment
taxation policies
environmental conditions (Hollywood)
44. Silicon Valley
High Tech Heaven, headquartered in San
Jose California, 50 miles south of San
Francisco
Stanford University
Silicon is main ingredient in computer
chip making
2nd most abundant element in Earth’s crust
(ubiquitous)
IBM, Netscape, Apple, Yahoo!, Intel, Sony,
Microsoft
