Location Models

Location, Location, Location
Site vs. Situation
• Situation factors: involve transporting
materials to and from a factory
– Minimize cost of transporting inputs to
the factory & finished goods to the
• Site factors: related to the costs of
factors of production inside the plant
– Land, labor, capital
Situation factors
Basic Concepts of Spatial
1. Complementarity: There must be some
form of Supply and Demand
Caused by variations in world resources
2. Transferability: Factors = the Cost of
moving a particular item and the ability
of the item to bear the cost
3. Intervening Opportunity - Alternative
origins and destinations that arise
between two points
4. Spatial Diffusion - the way that things
spread through space and over time
Least Cost Theory
Alfred Weber’s model –
owners of manufacturing
plants seek to minimize costs
– 1) Transportation, and
– 2) labor
– 3) agglomeration
Least Cost Theory
– Weight-losing case:
final product weighs less than raw
location closer to source
– Copper industry:
• only 0.7% of mined is copper,
• rest is waste (gangue)
• Then concentration process (crush,
grind, mix, filter, dry) results are
about 25% copper
• Then smelting to reduce impurities
Least Cost Theory
– Bulk-reducing industry (steel is
– Where should the concentration
plant be in relation to the mine
and the customer?
Least Cost
• Soft drink bottling
Empty cans or bottles
Syrup concentrate
=finished product
• Bulk-gaining industry (fabricated metals –
cars, refrigerators)
• Where should the bottler be located in
relation to the can manufacturer and the
Least Cost Theory
• What cost should be the “least”
Perishable Products
• Must locate near market
• But not an issue of bulk-reducing or
Labor Intensive Industries
Sawmilling and planing
Energy Intensive Industries
Pulp and paper
Footloose Industries
• Micro-chip
• Software design
Match up the industry to its location
A - Tastygrub Co. Ltd - make pies and sandwiches for city centre offices.
Need to be near market so that food is fresh.
B - Clothes-U-Like Ltd - make fashion clothes. Use large number of
unskilled workforce and need good transport links to their markets.
C - Modern Steel Works - export a lot of their finished products. Need to
be close to raw materials to keep the costs down.
D - Chemclear Inc. - burn chemical waste. Need to be far away from
towns because of danger.
A - A small modern industrial estate will be cost effective for a small company
and it is next to the main road into town. Handy for its market.
D - Miles away from major towns. Not many people live nearby therefore less
people at risk if there is a problem.
C - Main raw materials nearby and deep water for imports and exports by
ship. Also has main road to market nearby.
B - Several large housing estates to provide a labour force and has excellent
communication links to wider markets.
Always remember that these locational factors can and do change over time.
The most important factor for many heavy industries was access to raw
materials, however many modern industries have components which are
much easier to transport, giving them much more choice of location.
These are called Footloose Industries.
Break-of-Bulk Points
• The location where transfer among
transportation modes is possible
• Costs rise each time cargo has to be
loaded and unloaded
– Ship
– Rail
– Truck, or
– Air
Site factors
Location Models
Weber’s Model
Manufacturing plants will
locate where costs are
Hotelling’s Model
the least (least cost
Location of an industry
cannot be understood
without reference to
other industries of the
Least Cost Theory
same kind.
Costs: Transportation,
Labor, Agglomeration
Losch’s Model
Manufacturing plants
choose locations where
they can maximize profit.
Zone of Profitability
Hotelling’s Model
• Harold Hotelling (1895-1973)
• Locational Interdependence
• Originally locate near customers – but will
gravitate to each other to maximize profits
• The costs for some customers will be
greater if the 2 sellers cluster – further to
walk. Also fewer customers aware of
service. But can’t move for fear of losing
Losch’s Model: Zone of
• Since location is not determined in
isolation – A supplier must take into
consideration a competitor’s location.
Location will be affected by
examining the (Losch’s) Zone of
Profitability. The result is
Changing Markets
• Outsourcing
• New international division of labor
– Moving industry to low-cost labor
• Just-in-time Delivery
• Post-Fordist system – more flexible,
less mass produced (time-space
• deindustrialization
• High tech corridors – area designated by
local or state government to benefit from
lower taxes and higher technology
infrastructure (Silicon Valley)
• Technopole – area planned for high tech
where agglomeration built on synergy
among tech companies occur (from Dulles
Airport – DC has AOL, MCI, Orbital
• Formal economy
• Informal economy