Industrial Locations

Location TheoriesLocation Theories

Locations of Economic Activities

PrimaryPrimary Economic Activities draw from the land Economic Activities draw from the land and therefore are located and therefore are located where the resources arewhere the resources are located.located.

SecondarySecondary Economic Activities have become Economic Activities have become less less dependent on resource location.dependent on resource location. Due to: Improvements in transportations and Due to: Improvements in transportations and

communications. (time-space compression)communications. (time-space compression)

Location Theories

A large part of A large part of economic geography economic geography focuses focuses on Location theory:on Location theory: Predicting where businesses will or should Predicting where businesses will or should

be located.be located. Location theories Location theories assume thatassume that decision decision

makers ultimate goal is to make makers ultimate goal is to make as much as much profit as possible.profit as possible.

Location Consideration

When choosing a location businesses take into When choosing a location businesses take into consideration:consideration:

1.1. Variable costs:Variable costs: energy supply, transport energy supply, transport expenses, labor costs, etc.expenses, labor costs, etc.

2.2. Friction of Distance: The increase in time Friction of Distance: The increase in time and cost that comes with increasing distance.and cost that comes with increasing distance.

The further a raw material must be shipped The further a raw material must be shipped to the factory the greater the friction of to the factory the greater the friction of distance.distance.

Location ModelsWeber’s Model

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