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 market

The Location Decision (3)

LaborHigh labor costs reduce margin of

profitcurrent economic boom on Pacific

rim

The Location Decision (3)

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)

–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

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

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

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