1. Location, Location, Location

2. Site vs. Situation
Situation factors: involve transporting materials to and from a factory
Minimize cost of transporting inputs to the factory & finished goods to the consumers
Site factors: related to the costs of factors of production inside the plant
Land, labor, capital

3. Situation factors

4. Least Cost Theory (1909)
Alfred Weber’s model – owners of manufacturing plants seek to minimize three costs:
1) Transportation, and
2) labor

5. Bulk-reducing industry (steel is too)
Least Cost Theory (1909)
Weight-losing case: final product weighs less than raw materials; location = source
Copper industry: only 0.7% of mined is copper, rest is waste (gangue)
Then concentration process (crush, grind, mix, filter, dry) results are about 25% copper
Then smelting to reduce impurities
Bulk-reducing industry (steel is too)
Where should the concentration plant be in relation to the mine and the customer?
The plant should be close by.

6. Bulk-gaining industry (fabricated metals – cars, refrigerators)
Soft drink bottling
Empty cans or bottles
Syrup concentrate
Water
=finished product
Bulk-gaining industry (fabricated metals – cars, refrigerators)
Where should the bottler be located in relation to the can manufacturer and the customer?
Since water is easily available – then close to the customer

7. Perishable Products Must locate near market
But not an issue of bulk-reducing or bulk-gaining

8. Labor Intensive Industries
textiles

9. Energy Intensive Industries
Aluminum

10. Footloose Industries
Micro-chips

11. Break-of-Bulk Points
The location where transfer among transportation modes is possible
Costs rise each time cargo has to be loaded and unloaded
Ship
Rail
Truck, or
Air

12. Site factors

13. Labor-intensive Industry
Labor-intensive industries: Ex. Textiles – less-skilled, low wages
6% of dollar value but 14% of employment
Land
Factors to consider: Climate,Topography, Low-cost energy sources
Capital

14. Location Models Weber’s Model Hotelling’s Model Least Cost Theory
Manufacturing plants will locate where costs are the least (least cost theory)
Theory:
Least Cost Theory
Costs: Transportation, Labor, Agglomeration
Hotelling’s Model
Location of an industry cannot be understood without reference to other industries of the same kind.
Theory:
Locational interdependence
Losch’s Model
Manufacturing plants choose locations where they can maximize profit.
Theory:
Zone of Profitability

15. Hotelling’s Model Harold Hotelling (1895-1973)
Locational Interdepedence
Originally locate near customers – but will gravitate to each other to maximize profits
The costs for some customers will be greater if the 2 sellers cluster – further to walk. Also fewer customers aware of service. But can’t move for fear of losing customers.

16. Changing Markets Outsourcing New international division of labor
Moving industry to low-cost labor
Just-in-time Delivery
Post-Fordist system – more flexible, less mass produced (time-space compression)
deindustrialization

17. High tech corridors – area designated by local or state government to benefit from lower taxes and higher technology infrastructure (Silicon Valley)
Technopole – area planned for high tech where agglomeration built on synergy among tech companies occur (from Dulles Airport – DC has AOL, MCI, Orbital Sciences)

18. Formal economy
Informal economy