Examine the changing importance of transport costs on the location of industry

Authors Avatar

Examine the changing importance of transport costs on the location of industry. (20)

You only need to open up a newspaper to realise that the location of industry is changing. Just this week it was announced that Cadbury-Schweppes are closing their Bristol factory, initially cutting 700 British jobs, but with plans to make 8000 redundancies across the group. They are relocating the factory in Poland, despite having very few sales there – the largest profit is made from UK sales (20% of its total profit excluding the Adams merger).

Transport costs are becoming less and less important in today's market. For an average product transport usually makes up less than 5%of its wholesale price, this is minuscule compared to labour cost, and the importance of having the right kind of labour.

A cause for this dramatic decrease in cost of transport is an increase in transport volume and a strong transport network. The increase in volume means that a vast container ship can carry hundreds of containers instead of a few tens, thus decreasing the cost-per-container. The strong transport network is manifested as a network of well-maintained roads in both MEDCs and to a lesser extent, LEDCs. Thus, companies tend to site their manufacturing facilities near motorways, airports, which contributes to agglomeration of industries of similar type.

In 1907 Weber theorised a model explaining that the location of industry was based mainly on transport costs (but partly on agglomeration economies and labour costs). Weber explained that an entrepreneur would situate their factory in the “least cost location” in order to achieve “profit maximisation”, Weber theorised that transport costs were equal to weight x distance that the product would have to be transported. Weber explained that when a product lost mass during production (for example the extraction of iron from iron ore) then the factory would be situated near the source of raw material because in this location it was cheapest to transport the goods – you weren't transporting material that was going to be thrown away. In contrast, if the product was to gain mass during production (for example the brewing industry) if the entrepreneur was to achieve profit maximisation, they would be to have the factory near the market, because then you aren't transporting the excess weight where it need not be transported since water is ubiquitous (found everywhere in theory).

Join now!

This model has proved to be quite accurate in the past, with breweries being found in every town (for example Archers in Swindon), and iron and steel industry-related factories being found in south Wales where iron ore was being extracted. However more recently anomalies have started appearing. Entrepreneurs are choosing amenity rich locations (such as the M4 corridor) instead of locations that would make sense to Weber's LCLs (least cost location).

In the UK over the last 100 years transport has become easier and cheaper to use because of the implementation of better transport links (trains, motorways, cheap air ...

This is a preview of the whole essay