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
8. The Location Decision (3)
Labor
High labor costs reduce margin of
profit
current economic boom on Pacific rim
9.
10. The Location Decision (3)
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
11. 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
12.
13. Factors of Industrial
Location (1)
– Raw Materials
• resources involved in manufacturing
• steel plants along Atlantic seaboard
because iron shipped in from Venezuela
• Europe’s coal and iron ore regions
– Iron smelters built near coal fields
14.
15. Factors of Industrial
Location (1)
– Raw Materials
• Japan’s colonial expansion into E Asia
(China/Korea) due to raw materials
• Japan’s cheap labor allowed them to
purchase and transport goods from other
locales (substitution principle)
• European colonization for resources,
periphery to core
21. 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
22. 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
