By Kunal Upadhyay

The ideal location is that which permits the lowest cost in production and distribution cost.

An ideal location where all types of costs of business activities are the minimum.

Seasonal changesSeasonal changes Due to the seasonal change in regions

Cycling changesCycling changes Depression Recovery Prosperity Recession

Secular changesSecular changes Long term changes

Structural changesStructural changes Due to development of new resources & technology

Factors relating to productionFactors relating to production

Availability of raw materials Availability of labour supply Availability of power Transport facilities Financial facilities State control Labor laws and labor union Cost of land and building Suitable climate

Association with other IndustriesAssociation with other Industries Complementary Industries Competing Industries Rival firms in the same industries

Factors relating to sellingFactors relating to selling Nearness to market Population Fashion

Others factorsOthers factors Personal consideration Strategic factors Govt.

Alfred Weber, a German economist, presented a theory of location in 1909

In year 1929 his work translated into English Language

a theory of industrial location in which an industry is located where it can minimize its costs, and therefore maximize its profits.

Sources of raw materialSituation of market There is perfect market competitionAvailability of labours Interest rate, insurance cost and tax rate

are ignoredThe political, cultural and economics

system remains the same

the location the owner’s desire to minimize THREE categories of cost:

Transportation: Transportation: the site chosen must entail the lowest possible cost of A) moving raw materials to the factory B) finished products to the market

Labour: Labour: higher labour costs reduce profits, so a factory might do better farther from raw materials and markets if cheap labor is available (e.g. China – today)

Labour Cost IndexLocation weight

Agglomeration: Agglomeration: when a large number of enterprises

cluster (agglomerate) in the same area (e.g. city), they can provide assistance to each other through shared talents, services, and facilities (e.g. manufacturing plants need office furniture)