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 consumers Site factors: related to the costs of factors of production inside the plant Land, labor, capital

Situation factors

Basic Concepts of Spatial Interaction Complementarity: There must be some form of Supply and Demand Caused by variations in world resources Transferability: Factors = the Cost of moving a particular item and the ability of the item to bear the cost Intervening Opportunity - Alternative origins and destinations that arise between two points Spatial Diffusion - the way that things spread through space and over time

Least Cost Theory 1909 Alfred Weber’s model – owners of manufacturing plants seek to minimize costs through: 1) Transportation, and 2) labor 3) agglomeration

Least Cost Theory Weight-losing case: Copper industry: final product weighs less than raw materials; 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 The plant should be close by.

Least Cost Theory Bulk-reducing industry (steel is too) Where should the concentration plant be in relation to the mine and the customer? The plant should be close by.

Least Cost Theory Soft drink bottling Empty cans or bottles Syrup concentrate Water =finished product Bulk-gaining industry (fabricated metals – cars, refrigerators) Where should the bottler be located in relation to the can manufacturer and the customer? Since water is easily available – then close to the customer

Least Cost Theory What cost should be the “least” possible?

Perishable Products Must locate near market But not an issue of bulk-reducing or bulk-gaining

Labor Intensive Industries Textiles Jewelry Toys Sawmilling and planing Footwear

Energy Intensive Industries Aluminum Fertilizer Cement 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. http://www.bbc.co.uk/bitesize/standard/geography/settlement/industrial_location/revision/1/

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 Hotelling’s Model Least Cost Theory Manufacturing plants will locate where costs are the least (least cost theory) Theory: Least Cost Theory Costs: Transportation, Labor, Agglomeration Hotelling’s Model Location of an industry cannot be understood without reference to other industries of the same kind. Theory: Locational interdependence Losch’s Model Manufacturing plants choose locations where they can maximize profit. Theory: 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 customers.

Losch’s Model: Zone of Profitability

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 agglomeration.

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 compression) 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 Sciences)

Formal economy Informal economy