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

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.

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. These are the cost of raw materials, cost of distributing and transporting them and the finished product, labour costs and agglomeration/deglomeration economies. This makes Weber’s model a lot harder to apply to scenarios today, because there are so many more economical factors that will have effect.

No model is perfect and they all have their critics and Weber’s is no exception. Because it was founded almost 100 years ago, its relevance in present day industry may be hard to see. Primarily, the model no longer relates to modern conditions like intervention by governments. Government handouts or aids are often given to industry to entice them to setup or move elsewhere. A recent example is Sony’s move to South Wales, with several other manufacturers following since.

There have also been significant changes in transportation and communication. Improvements are so great that cost of transport is now so low that direct access to raw materials is less important because these can be cheaply transported across the globe for example the coal and steel trade between Europe and Brazil. This has also improved the mobility for labour so that industry is no longer confined to one area due to lack of labour anywhere else. In 1909 this would not have been the case.

Since 1909 there have been changes in the types of industry currently working. In the ...

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Since 1909 there have been changes in the types of industry currently working. In the North there is now much less emphasis on the direct processing of raw materials, and more focus on those involved in manufacturing and more recently the hi-tech industries. As a direct effect of this, companies have grown economically very quickly in a global market thanks to globalisation. There have been changes in the world economy and as a result markets for goods and services are increasingly globalised. Key resources, for example capital and know-how are free to move and where they locate now depends even more on the economic advantage of one region over another. 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. He also stated that the ubiquitous raw materials would be distributed evenly across the plain and the localised materials not. In reality, of course, this will never occur, not even in Weber’s time. These assumptions are not detrimental to the principal of the model because Weber would have know that these are only theoretical scenarios and stated them to be equal so that their effects are negligible. For this reason, the model is more successful because it doesn’t attempt to take into account.

Weber did however add conditions to his model, in the form of differentiating between the raw materials that primary industry would use. He distinguished the difference between what he called ubiquitous materials (water, clay, air) that could be found anywhere, and ‘pure‘ localised materials (coal, granite). Within this were weight gain and weight loss industries. Weight loss industries are those that manufacture products which have a resultant weight less than the raw materials used to produce them. This means that during the manufacturing process, some material is lost. These industries are then most likely to locate at the source of the raw materials – there’s no point in paying to transport material that will be left as waste post-production. With pure localised raw material however, they do not lose weight after processing. If a pure material gains mass on manufacture then it’s cheaper to move it rather than the finished product and so least-cost location will be at the market. Similarly, if the raw material is found all over the plain then transport is unnecessary as it is already found at the market.

These conditions allow Weber’s model to be more relevant to the manufacturing industry of today. It goes some way as to explain the current location of industry, but this is because these locations haven’t changed for decades. On the other hand, some manufacturers are beginning to move elsewhere to alternative locations often away from raw materials, market and labour. 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.