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Assess the value of classical location theory in explaining the location of manufacturing industry today.

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Introduction

Nick Dunn What is meant by the term optimal location? The optimal location for an industry is the point of lowest total cost. This total is a sum of cost distances from resources and market. Labour costs are now more important than transport and distribution costs, for example the car manufacturer Daewoo. The vehicles can be made 8,000 miles away and shipped to the UK and still be sold at a lower price than a Rover made only 100 miles away. The shipping distribution costs for industry of this scale are very low, but finding a pool of cheap and suitable skilled labour requires a particular location to be used. Assess the value of classical location theory in explaining the location of manufacturing industry today. Alfred Weber devised his theory of industrial location in 1909, using assumptions and trends at that time. He stated that the location of industry is dictated by the cost of the area i.e. industry will locate first in the lowest cost areas. 'Low cost' in an accumulation of all the economical factors affecting an industry. Weber claimed that only four factors affected the production costs. ...read more.

Middle

Transnational corporation's decisions about the location of functions have resulted in the emergence of 'world cities', for example improved telecommunications has had the effect of concentrating information processing and control in centres away from actual production e.g. New York, London, Tokyo, Los Angeles and Hong Kong. Each country evolves its own industrial patterns and may be in different stages of economic development for example the North/South divide. One of Weber's assumptions was that there would be perfect competition over the plain therefore no monopolies exist and so revenue would be similar across the plain. In a multi-national monopolised environment the whole globe can be considered the 'plain'. Weber assumed all industry would be on an economic equal footing, but because each country develops at its own pace, this cannot be true. For this reason Weber's model can be flawed because its assumptions may not always be valid in today's' industrial environment. There are basic misconceptions in Weber's original assumptions elsewhere also. For the model to work in principal it requires that there is an isolated state with flat relief, a uniform transport system in all directions, uniform climate and a uniform cultural, political and economical system. ...read more.

Conclusion

Large manufacturing businesses do not provide a significant source of future new jobs, mainly due to automation and suchlike. These changes in the actual nature of manufacturing industry are something that Weber's model can be forgiven for not accounting for. * Market access (mainly near USA, Europe) * Technology (internal factors determine what is important) * Exchange rates / tax (especially on property, differential taxes) * International orientation * Human resources (low labour costs, made to measure skills) * Universities (good R&D capabilities) * Qualitative factors (i.e. non cost issues such as labour, housing) * Incentives (can be effective but very costly) * Easy environmental requirements * Supply capability (e.g. special skills, information, prestige, production costs * Industry self regulation * Transport Costs * Land Costs * Capital Costs * Labour Skills (general and industry specific) * Labour pools * Labour Regulation * Business Regulation * Research & Development Assets * Education & Training Assets * Supplier Industries * Local Customers (private or government) * Local Tax Burdens * Neighbourhood Amenities (residential prices & quality, schools, safety) * Urban Amenities (culture, architecture & urban design, entertainment) * Environmental Amenities (air and water quality, parks, outdoor recreation) * Site/Building Availability (size, location, timing). * * * * ...read more.

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