Opening In your notebooks, identify the locational considerations of the following industries (consider resources, markets, labor, etc.): 1.Automobiles 2.Paper 3.Designer Clothing 4.Software Development 5.Fast Food Restaurants

Industrial Location Models Why do industries locate where they do?

The Goal of Business Profit –Profit = Revenues – Costs Businesses make money either by increasing revenue or reducing costs Geographers ask: Where can businesses locate so that costs are minimized?

Alfred Weber Theory on the Location of Industries, 1909 –German economist Each manufacturing plant has to ship resources to the plant and finished goods to the market –Theoretically, there must be a point in space at which these transport costs will be minimized

Weber’s Model

Firms are either market oriented or resource oriented –Market-oriented firms Costs of transporting finished product are greater than the material inputs –Resource-oriented firms Costs of transporting material inputs are paramount –Some resources are ubiquitous Available everywhere

Harold Hotelling, 1929 Locational Interdependence Ice cream vendors on beach –At first at opposite sides of beach –Eventually, next to each other Can’t understand location without looking at competitors

August Lösch, 1940 One problem with Weber’s model is it ignores the cost and availability of labor The Spatial Margin of Profitability model looks at total costs and total revenues at a variety of locations Result: A range of points at which profits can be maximized

Other Considerations Transport Characteristics –Not equal in all directions –New technologies Agglomerations –Concentrations of industry –Can make some things cheaper –Urban areas

Other Considerations Local Incentives –Some locations will offer incentives (e.g., tax breaks, subsidies) that make up for transport costs Labor –Labor costs vary over space –Outsourcing