Locational Theories

LOCATIONAL FACTORS: the WHY of the WHERE

SITUATION FACTORS-relative location

  • Proximity to INPUTS-raw materials
    • Copper: A bulk-reducing industry-from BIG…..to little
    • Mining, concentration, and smelting processes use inputs that weigh more than the final product and must be located close to the resource.
    • Steel: A bulk-reducing industry
    • Coal and Iron Ore combine to make steel and are inputs that are heavier than the final product, so they must be located close to the resource!
  • Proximity to MARKETS-consumers
    • Bulk-gaining industries-little…….BIG
    • Fabricated metals
    • Beverage production
    • Single-market manufacturers - JIT production (Just-In-Time)-cars
    • Perishable products-dairy, fruits, veggies, newspapers
  • Ship, Rail, Truck, or Air?
    • Firms seek the lowest-cost mode of transport, but which of the four alternatives is cheapest changes with the distance that goods are being sent.
    • The farther something is transported, the lower the cost per kilometer or mile.
    • Longer distance transportation is cheaper in part because firms pay workers to load goods on and off vehicles, whether the material travels 10 or 10,000 miles!
    • Trucks – short distance delivery because of the ease in quickly loading and unloading. GREAT for one day deliveries.
    • Trains – used to ship to destinations further out than a day’s travel. Trains take longer than trucks, but don’t require “rest”.
    • Ships – long distance cost is very low. A lot slower than land based travel.
    • Air – MOST EXPENSIVE FOR ALL DISTANCES. Usually, small bulk, high value packages.

SITE FACTORS-absolute location

  • Labor
    • Labor-intensive industries-need lots of workers
    • One in which wages and other compensation paid to employees constitute a high percentage of expenses.
    • EXAMPLE – The TEXTILE industry & locally Maquiladoras!!!
    • The workforce will come from NIC labor to bring the cost down!
  • Land
    • Rural sites-cheap land
    • Large, one story buildings are the best layout for the factories and the rural area gives them the space needed so they can sprawl!
    • Environmental factors-land gives for cheap/free
    • Access to electricity is a big part of the decision on a location.
    • EXAMPLE: Aluminum industry needs A LOT of electricity so they produce by dams to take advantage of the cheaper hydroelectric power.
  • Capital-investors
    • A location may be chosen because that is where the lenders or investors are located!
    • EXAMPLE: The US motor-vehicle industry is in the Midwest because the banks were more apt to give them money than the eastern banks.

LOCATIONAL THEORIES: the WHY of the WHERE

What decisions do businesses make about where to locate factories?

1909 German ECONOMIST - Alfred Weber

  • LEAST COST THEORY
    • TRANSPORT
    • Getting raw materials to a factory and getting finished products to the market
    • Weight matters in the cost!
    • Shipping types matter in the cost!
      • Ship, rail, truck, or air?
    • Remember bulk-reducing and bulk-gaining industries?
    • LABOR
    • The wages and salaries of employees
    • Can you think of an industry that needs A LOT of workers or that needs a skill specific worker?
    • AGGLOMERATION-a glob of businesses
    • The spatial grouping of businesses in order to share costs
    • Can you think of businesses that may share the same type of customers?
    • The GOAL of the least cost theory: locate your business WHERE you can minimize transportation costs & maximize agglomeration economies

Now let’s try our hand at applying the Weber theory to our city of Frisco! :)