1. Why do industries have different distributions?
Ch.11 Industry

2. Geographical Costs
Industry seeks to maximize profit by minimizing production costs
Location of Industry is decided by 2 main costs; situation factors vs. site factors

3. Situation Factors Every manufacturer buys & sells
Minimize transportation costs
the farther something is transported, the higher the cost (locate near buyers & sellers)
Least cost analysis (see handout)

4. Location Theory Considers:
Weber’s Least Cost Theory of Industrial Location
Location Theory – predicting where a business will or should be located.
Location of an industry is dependent on economic, political, cultural features as well as whim.
Location Theory Considers:
Variable costs - energy, transportation costs & labour costs

5. Weber’s Least Cost Theory of Industrial Location
Alfred Weber, ( ) a German economists, published Theory of the Location of Industries in His theory was the industrial equivalent of the Von Thunen Model.
Manufacturing plants will locate where costs are the least.
Three Categories of Costs:
Transportation- *most important cost*-usually the best site is where cost to transport raw material and finished product is the lowest
Labour-high labour costs reduce profit-location where there is a supply of cheap, non-union labour may offset transportation costs
Agglomeration- (clustering of an industry) when a group of industries cluster for mutual benefit-shared services, facilities, etc.-costs can be lower – examples – Hollywood, Silicon Valley, NY/Wall Street (Finance Firms), Car Manufacturers
Technopole - A region of many high tech businesses (agglomeration) - Silicon Valley, CA
Deglomeration - The “unclumping” of similar businesses due to over crowding.

6. Location near inputs When cost to transport is high
copper & steel industries
bulk-reducing industry
Final product weighs less than its inputs

7. Copper Industry in North America
Fig. 11-9: Copper mining, concentration, smelting, and refining are examples of bulk-reducing industries. Many are located near the copper mines in Arizona.

8. Location Near Markets: cost to transport finished product is more
Bulk-gaining industries: gains weight /volume during production (Coca-Cola, Ford etc.)
Single Market Manufacturers: product sold primarily to one market
high-fashion clothing in NY, seats for Ford cars
Perishable Products: Delivery has to occur rather quickly (Toronto Star)
Other examples?

12. Mode of Transportation?
Ship, Rail, Truck, or Air?
Firms seek the lowest-cost mode of transport.
The cost per kilometer (mi.) decreases at different rates for each of the four modes, because loading and unloading expenses differ by mode of transportation.
Cost decreases at different rates for each of the four modes
Truck = most often for short-distance travel
Train = used to ship longer distances (1 day +)
Ship = slow, but very low cost per km/mile
Air = most expensive, but very fast
The mode(s) of transportation used is a function of speed and cost of delivery.

13. Many companies that use multiple transport modes locate at a break-of-bulk point, which is a location where transfer among transportation modes is possible.
Examples include seaports and airports

14. Site Factors Have become increasingly important
Helps explain importance of Japan and other Asian manufacturers
3 main factors : Land, labour, capital

15. Land
Suburban/rural locations now b/c of large amount of land needed (& cheaper)
Accessibility to energy resources (Aluminum industry)
Climate, cost of living, recreation, etc.

16. Labour
Labour-intensive industry: one that’s labour costs are high % of expense
Textile/Clothing: less skilled, low cost workers, LDC’s in Asia, change in location in US
NE → SE
“Right to Work” states (non-union)
Electronics: highly skilled, high wages, US: near university centers (NY, Mass, Cal)

17. LABOR AS A SITE FACTOR: MANUFACTURING WAGES The chart shows average hourly wages for workers in manufacturing in the 14 countries with the largest industrial production in 2010.

18. Capital
Availability to borrow money to expand or establish new factories (recently in LDCs)
Silicon Valley – California, ¼ of all capital in the US is spent on new industries there

19. Obstacles to Optimum Location
Location cannot always be explained by situation & site factors
Increase in footloose industries
Can locate anywhere
Executive’s knowledge & power
Personal preferences