Alfred-Weber-Least-Cost-Theory

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1、Alfred Weber German during 1940s -Least-Cost Theory Assumption that owner of plant would try to minimize 3 categories of variable costs:1) Transportation most important2) Labor 3) Agglomeration phenomenon of spatial clustering or concentration of firms in a relative small area. These share cost of l

2、ocating there. Thus, costs may go down. Deglomeration occurs when companies and services leave because of the diseconomies of industries excessive concentration. Weber concluded two types of manufacturing industries: 1) Materialoriented 2) Market-orientedMaterial-oriented Raw materials really heavy

3、or bulky or perishable so locate industry near source of raw material.Market-oriented Processing increases perishability like bakeries processing may add bulk or weight auto industry weight-gain so located near market.Material Index = The point of optimal transportation based on costs of distance to

4、 the “material index” the ratio of weight to intermediate products (raw materials) to finished product. Other things to take into account = Cost of land, availability of land, Assume land may not be available transportation factor access to labor market political border may exist between locations t

5、ariffs, local taxes or government regulation. Absence or presence of environmental constraints may affect this.Linkages between firms may localize manufacturing in areas of industrial agglomeration where common resources such as skilled labor or multiple suppliers of product inputs such as auto comp

6、onent manufacturers are found.These principles are generalized statements about locational tendencies of industries. Their relative weight varies among industries and firms.Significance varies depending on extent to which economic considerations opposed to political or environmental constraints dict

7、ate locational decisions.Raw materials:Only a few industries at early stages of production cycle use raw materials directly from farms or mines. Most manufacturing plants based on further processing and shaping of materials already treated by earlier stage of manufacturing located elsewhere.The more

8、 advanced the industrial economy of nation the smaller is the role played by truly raw materials in its economic structure. For industries where unprocessed commodities are primary input-source and characteristics of raw materials upon which theyre based important.Quality, amount, or ease of mining

9、or gathering of resource may be locational determinant if cost of raw material is major variable and multiple sources of primary material are available.Raw materials may attract industries that process them when theyre bulky, undergo great weight loss in processing or highly perishable.Copper smelti

10、ng and iron ore beneficiation examples of weight (impurity) reducing industries localized by their ore supplies. Pulp, paper, and sawmills found in areas within or accessible to timber. Fruit and vegetable canning, etc are different but comparable - examples of raw material orientation.Reason Its ch

11、eaper and easier to transport to market a refined or stabilizing product than one filled with waste material or subject to spoilage and loss. Multiple raw materials might dictate intermediate plant location.Least Cost may be determined by the spatially differing costs of accumulating several inputs.

12、 Ex. Steel mills at Gary, Indiana or Cleveland werent based on local raw material sources but on minimization of total cost of collecting at a point the needed ore, coking coal, fluxing material inputs for production process. Steel mills East coast were localized where important ores were unloaded f

13、rom ocean carriers, avoiding expensive trans-shipment costs.Great Lakes, and coastal locations similar in this way.Power Supply: For some industries, power supplies that are immobile or low transferability may attract activities dependent upon them. Like early Industrial Revolution when water power

14、sites localized textile mills and fuel (first charcoal then coking coal) drew iron and steel industry.Metallurgical industries became concentrated in coal-rich regions like Midlands of England, Ruhr district of Germany.Massive charges of electricity are required to extract aluminum from its processe

15、d raw material alumina (aluminum oxide).Electrical power accounts for 30 40% cost producing aluminum and is major variable cost influencing plant location in the industry. Industries may be located far from raw material sources but close to cheap power ex hydroelectricity.Labor: Labor is spatial variable affecting location decisions and industrial development. Traditionally 3 different considerations price, skill, amount of labor were considered to be determinant singly or in combination. Now increasingly important consideration is Labor Flexibility implying more highly educ

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