1. Weber and Industrial
Location Theory
Industrial Activity and Geographic
Location

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

3. Location Theory
• An economic activity is categorized
according to:
– Purpose
– Relationship to natural resources
– Complexity
– Primary, secondary, tertiary,
quaternary, quinary
• Location theory attempts to explain
the location pattern of an economic
activity in terms of the factors
that influence that pattern

4. The Location Decision
• Primary Industries
– Because these deal with the
extraction of resources, primary
industries must be located where
the resources are

5. The Location Decision
• Secondary Industries
– less dependent on resource
location because raw materials can
be transported to distant
locations to be converted into
manufactured products if profits
outweigh the costs of
transportation

6. The Location Decision
• Establishing a model for the
location of a secondary
industry is difficult because
the location depends on:
– Human behavior and decision making
– Cultural, political and economic
factors
– Intuition or whim

7. The Location Decision
• Models must be based on
assumptions and economic
geographers must assume that:
– Decision makers are trying to
maximize their advantages over
competitors
– Profit maximization
– Variable costs must be taken into
account (energy supply, transport
expenses, labor costs)

8. The Location Decision
• 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

9. The Location Decision
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

10. Weber
• Sparked spirited debate among
economic geographers
• 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
• 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 the model

11. Factors of Industrial
Location
–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
• Japan’s colonial expansion into E Asia
dependencies (China/Korea)due to raw
materials available
• Japan’s cheap labor allowed them to
purchase and transport goods from other
locales (substitution principle)
• European colonization for resources,
periphery to core

12. Factors of Industrial
Location
–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
• pre-NAFTA US and Mexico

13. Factors of Industrial
Location
–Transportation
• highly developed industrial areas are
places that are served most effectively by
transportation facilities
• efficiency
• 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

14. Factors of Industrial
Location
–Infrastructure
• transportation, telephone,
utilities, banks, postal, hotel
• China-inadequate local and
regional infrastructure
• Vietnam-inadequate power,
water, transportation

15. Factors of Industrial
Location
–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)

16. Other Factors
• agglomeration
• political stability
• receptiveness to investment
• taxation policies
• environmental conditions
(Hollywood)