How do Location Theories explain Industrial Location?

Location Theory• Location Theory –

predicting where a business will or should be located.

• Location of an industry is dependent on economic, political, cultural features as well as whim.

• Location Theory Considers:– Variable costs-energy,

transportation costs & labor costs

– Friction of distance-increasing distance =increased time & cost

Location ModelsWeber’s Model-The Least Cost TheoryAlfred Weber, (1868-1958) a German economists, published Theory of

the Location of Industries in 1909. His theory was the industrial equivalent of the Von Thunen Model.

Manufacturing plants will locate where costs are the least.

Three Categories of Costs:

Transportation-the most important cost-usually the best site is where cost to transport raw material and finished product is the lowest

Labor-high labor costs reduce profit-location where there is a supply of cheap, non-union labor may offset transportation costs

Agglomeration-when a group of industries cluster for mutual benefit-shared services, facilities, etc.-costs can be lower

Deglomeration-when excessive agglomeration offsets advantage-eastern crowded cities

Weber's Location Triangle

•

• Alfred Weber's work (1909) is considered to have established the foundations of modern location theories. One of his core assumption is that firms will chose a location in view to minimize their costs. This involves a set of simplifications, namely that location takes place in an isolated region (no external influences) composed of one market, that space is isotropic (no variations in transport costs except a simple function of distance) and that markets are located in a specific number of centers. Those conditions are quite similar to those behind Von Thunen's agricultural land use model elaborated almost one hundred years earlier. The model also assumes perfect competition, implying a high number of firms and customers, small firm sizes (to prevent disruptions created by monopolies and oligopolies) and a perfect knowledge of market conditions, both for the buyers and suppliers. Several natural resources such are water are ubiquitous (available everywhere) while many production inputs such as labor, fuel and minerals are available at specific locations. According to Weber, three main factors influence industrial location; transport costs, labor costs and agglomeration economies. Location thus imply an optimal consideration of these factors.

Weber's Location Triangle•

• Solving Weber's location model often implies three stages; finding the least

transport cost location and adjusting this location to consider labor costs and agglomeration economies. Transportation is the most important element of the model since other factors are considered to only have an adjustment effect. To solve this problem, Weber uses the location triangle within which the optimal is located. The above figure illustrates the issue of minimizing transport costs. Considering a product of w(M) tons to be sold at market M, w(S1) and w(S2) tons of materials coming respectively from S1 and S2 are necessary. The problem resides in finding an optimal factory location P located at the respective distances of d(M), d(S1) and d(S2). Several methodologies can be used to solve this problem such as drawing an analogy to a system of weights and pulleys (Varignon's solution) or using trigonometry. Another way preferred among geographers, particularly with GIS, is to use cost surfaces which are overlaid.

M= marketP= place of industryS1=raw materialsS2 = raw materials

Measured in tons – Triangle is not the same as the Weber’s Location Theory because of the lack of labor and agglomeration cost

Location Models• Hotelling’s Model-Harold

Hotelling (1895-1973) this economist modified Weber’s theory by saying the location of an industry cannot be understood with out reference to other similar industries-called Locational Interdependence

• Losch’s Model-August Losch said that manufacturing plants choose locations where they can maximize profit. Theory: Zone of Profitability

Losch’s Model-Zone of Profitability

Major Industrial Regions of the World before 1950

• First manufacturing belts were close to raw materials & good transportation

• In addition to raw materials other factors: relative location, political situation, economic leadership, labor costs & education and training.

• Four primary industrial regions were Western & Central Europe, Eastern North America, Russia & Ukraine and Eastern Asia

Western and Central

Europe

Western and Central Europe• Europe’s coal deposits stretch across northern France,

north central Germany, northwestern Czech Rep. & southern Poland.

• Colonial Empires gave France, Britain, Belgium, Netherlands & later Germany capital for industrial development.

• Germany-The Ruhr & the Westphalian coal field, Saxony near Czech Rep. Silesia, now part of Poland.

• Germany is still the leader producer of coal & steel and is Europe’s major industrial power.

• European Coal and Steel Community was the predecessor of the European Union.

Manufacturing Centers in Western Europe

• The manufacturing centers in Western Europe extend in a north-south band from Britain to Italy.

• The are centered on coal fields and iron ore deposits and cross roads of transportation.

Western and Central Europe• The Ruhr, a small tributary

to the Rhine, became the leading industrial region of Europe

• Saxony and its cities of Leipzig & Dresden became known for cameras, textiles and ceramics.

• Destruction of WW II-German factories were rebuilt-competitive edge over older factories of North America

The American Manufacturing Belt• America’s manufacturing belt

extends from the Northeast coast to Iowa and from the St. Lawrence Valley to the Ohio & Mississippi Rivers.

• New England & New York-light manufacturing New York with its large market has a huge skilled & semi-skilled labor force.

• Philadelphia & Baltimore with heavy industry-iron ore was smelted in tidewater steel mills

The American Manufacturing Belt• NYC Port is a break-of-bulk

(cargo shifted from one mode of transport to another) center.

• Buffalo on Lake Erie grew after the Erie Canal was finished-early 19th cent.

• Interior nodes-Pittsburgh, Cleveland, Detroit, Chicago-Gary, Milwaukee, St. Louis & Cincinnati-Appalachian coal & Mesabi iron ore-autos, bulldozers, harvesters, & appliances

Caterpillar manufacturing plant in Aurora, Illinois

Major Manufacturing Regions of North America

Major Deposits of Fossil Fuels in North America

Open Pit Coal Mine in southern IllinoisCoal train moving across Montana is 1½ miles long. It carries barely a day’s fuel for a large power plant. The US burns

over 1 billion tons of coal a year-has the world’s richest coal deposits-enough to

last 250 years.

Manufacturing Centers in Eastern Europe and Russia

Major Manufacturing Regions of Russia

The Former Soviet Union• Moscow developed light industry in the last days of the

Tsars and St. Petersburg focused on machinery, optics, medical equipment, shipbuilding, chemicals & textiles

• Soviets emphasized heavy industry-established Nizhni Novgorod (southeast of Moscow) as the “Detroit of the Soviet Union”

• WW II Soviets shifted industries east to protect them from the German advance-Volga area & Urals

• Ural Mountains provided metallic ores:copper, iron, nickel, chromite, bauxite, etc.

• Siberia coal and iron remained important• Kuzbas, Krasnoyarsk and Lake Baykal region served by

Trans-Siberian Railroad-impressive coal, timber & water resources

Major Manufacturing Regions of East Asia

Shanghai SteelMill

Eastern Asia-China• Japan built steel mills in Dongbei (Manchuria) during its occupation in WW II

• From 1949 until 1969 Soviet planners helped the China industrialize

• Tonghua Iron & Steel is subsidized and operated by the Communist Party.

• Built in 1958, it employs 29,000 workers-China produces 30% of the world’s steel

Eastern Asia-China• Shanghai recently beat out

Rotterdam as the busiest port in the world.

• China has many jobs that or outsourced or moved offshore.

• Northeast is China’s rust belt with many state-run inefficient factories.

• Dalian, Shanghai, Zhuhai, Xiamen & Shenzhen- smog-choked cities jammed with people-rapidly changing with new construction & renewal

Eastern Asia-China• Shenyang on the Liao River became the “Chinese Pittsburgh” with machine-making and steel production.

• Shanghai & Chang River district is the 2nd largest industrial region of China-rail cars, ships, books, food & chemicals

• Enormous labor force, low daily wages, few restrictions have attracted foreign companies to China’s Special Economic Zones (SEZs)

Coal=65% of China’s energy & Consumption could double in 20 years

Shoe factories in Guangdong Province China

A Dormitory for Workers in Dongguan, China

Eastern Asia-Japan• ½ the US population, size of California, limited resources, yet remarkable industrial growth-Meiji Restoration 1860s

• Kanto Plain includes Tokyo-Yokohama-Kawasaki metro areas=2nd biggest megalopolis on earth-produces 20% of Japan’s total goods

• Kansai District, Kobe-Kyoto-Osaka triangle is the 2nd area-steel, chemicals, autos, shipbuilding & textiles

The Imperial Palace in Tokyo

After WW II, Japanese industry recovered quickly due to its large supply of cheap, highly skilled labor

• Japan rapidly industrialized in the late 19th cent.

• Due to a lack of resource, Japan acquired colonies on the Asian mainland at the expense of China.

• In the 1930s militarists dominated the government & began a policy of further expansion.

At left-Kamikaze pilots bow before the

Emperor

• Right-the ruined Japanese landscape after WWII

South Asia-India

• Blessed with large coal deposits, metallic minerals such as iron ore and a vast labor force, India is growing by 8% year.

• Despite rapid industrialization it still remains agrarian and underdeveloped due to a poor infrastructure-over 50% of India’s crops rot in the field due to a lack of transportation

South Asia-India• The Bihar Steel Mill in

India produces high quality steel at a low price-the down side-low pay, few environmental restrictions=pollution.

• India’s service sector is also growing very rapidly.

• The Delhi Call Center at right is typical of the the outsourcing done by many Western firms.

• India has millions of low paid blue-collar workers and millions of white collar, high tech. workers