Weber and Industrial Location

TheoryIndustrial Activity and Geographic Location

Economic Geography

• Economic geographers investigate the reasons behind the location of an economic activity

Location Theory

• Attempts to explain the pattern of the location of an economic activity in terms of influential factors

The Location Decision (1)

• Primary Industries– Because these deal with the

extraction of resources, primary industries must be located where the resources are

The Location Decision (1)• Secondary Industries

– less dependent on resource location

– raw materials can be transported if profits outweigh the costs of transportation

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

The Location Decision (3)

Transportation (most important)moving raw materials to factory and

finished goods to marketLabor

High labor costs reduce margin of profit

current economic boom on Pacific rim

Agglomerationnumber of similar enterprises

clustered in the same areaShared talents, services and

facilitieswhen excessive, can lead to high

rents, rising wages, circulation problems

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

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

http://www.epa.gov/sectors/sectorinfo/sectorprofiles/ironsteel/map.html

Piedmont: foot of the mountains; from Italian pied (foot) monte (hill)

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

World’s largest container ship

Intermodal Facility: Portland, Oregon

Greenville?

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

Factors of Industrial Location (2)

–Labor• 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

Greenville?

Factors of Industrial Location (3)

–Infrastructure• transportation, telephone,

utilities, banks, postal, hotel

• China-inadequate local and regional infrastructure

• Vietnam-inadequate power, water, transportation

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)

Map showing location of chemical manufacturing facilities.

Other Factors

• agglomeration• political stability• regional receptiveness to

investment• taxation policies• environmental conditions

(Hollywood)

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