Industrial Landscapes

Least Cost Location Theory

Classification of Manufacturing Industries

1. Processing Industries– Initial Processing Industries

• A single raw material.

• Eg. Dairy processing

– Complex Processing Industries• More than one raw material

• Eg. Steel making

Classification of Manufacturing Industries

2. Fabricating Industries– Assembly of a finished or semi-finished produc

t– Eg. Automobile

Least Cost Location Theory

By Weber

Assumption

• Isotropic plain (uniform in culture, climate , economic and political system……)

• Ubiquitous resources are found everywhere

• Some resources are localized

• Transport cost is a function of weight and distance

• Labour has a given pattern of distribution

Assumption

• Markets are fixed at certain specific point

• Perfect competition exists

• Industrialists are economic man

Building of theory

Material Index

Location Triangle

Location Polygon

Isotims

Isodapanes / Critical Isodapane

Varignon Frame

Effects of cheap labour and agglomeration

Material Index

• Material Index

eg. (To produce 10 tonnes cement)

Limestone 11.2 tonnes

Clay or shale 2.8

Coal 3.0

Gypsum 0.25 Total 18.25

---------------------------------------------

Material Index = (18.25/10.00) = 1.825

Material Index

Material Index > 1.0 (weight-loss)Materials oriented industry

Material Index < 1.0 (weight-gain)Market oriented industry

Material Index = 1.0Footloose Industry

Location Triangle

Location Polygon

Isotims – Cost surface

Isodapanes / Critical Isodapane

Varignon Frame

Effect of Cheap Labour

Having cheap labour can save $16 additional transport cost.

Firm will not be moved to L1 but it will be moved to L2

Effect of Agglomeration

Demerits• Transport Costs

– Decline the importance of transport costs– Stepping of Freight Rates– Variations in the Transport Modes

Demerits

Stepping of Freight Rates

Demertis

Transport Rate for 3 main carriers

Demerits

• Isotropic plain is not our real world• Importance of other properties of raw materials• Market is not a fixed point• Perfect competition does not exist• A Static Model• Nature of Industries• Mobile nature of labour• Economic man

Merits

• Founder of modern industrial location theory• Point out transport cost as a key factor to

determine industrial location• Distinct ubiquitous and localized raw materials• Distinct various orientations of different industries• Conceptual instrument for understanding the

locational patterns of industries