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Alfred Weber's Least Cost Theory: Determining Industrial Locations, Lecture notes of Decision Making

Alfred Weber's Least Cost Theory is a decision-making model that helps determine the best location for a manufacturing plant based on the cost of raw materials, labor, transportation, and agglomeration or deglomeration. This theory uses assumptions such as uniform plain, one finished product, and fixed labor and market locations to identify the points of least cost using isotim and isodopanes.

What you will learn

  • How does transportation impact the location of an industry according to Weber's Theory?
  • What are the four factors that determine spatially variable costs in Weber's Theory?
  • What are the assumptions of Alfred Weber's Least Cost Theory?
  • What is the role of labor in Weber's Least Cost Theory?
  • How does agglomeration or deglomeration affect the location of an industry according to Weber's Theory?

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Unit 6: Day 3 Weber’s
Locational Theory
Journal 55:
Describe Rostow’s or Wallerstein’s
Development Theories using a
graphic organizer.
Homework:
-Map Quiz #9 Friday 4/21
-Unit 6 HW and Test Thursday 4/27
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Download Alfred Weber's Least Cost Theory: Determining Industrial Locations and more Lecture notes Decision Making in PDF only on Docsity!

Unit 6: Day 3 – Weber’s

Locational Theory

Journal 55:

Describe Rostow’s or Wallerstein’s

Development Theories using a

graphic organizer.

Homework:

  • Map Quiz #9 – Friday – 4/
  • Unit 6 HW and Test – Thursday – 4/

Essential Questions:

What is Weber’s Least Cost Theory?
What are the assumptions of Weber’s Theory?
What are the Four Factors based upon
Weber’s Theory?
How do weight-gaining and weight-losing
scenarios compare?

Weber’s Least Cost Theory

Least-Cost Theory

 The Least Cost theory was developed to resolve the
problem of opposing locational pulls.
 Which is also used to determine whether a product is
weight-gaining or weight-losing.
 Therefore, it aids in determining where a processing
plant will be located to maximize profits and minimize
costs.
  • The theory that an industry will be located were the transportation costs of raw materials and the final product is at the least.
  • A Decision making model of the best location of a particular industry given the material, amount shipped and transport costs.
 Determines industrial location of the manufacturing
plant.

Least-Cost Theory  Weber devised a technique involving isotim and isodopanes.  This helps to identify the points of least cost.  The isotim lines connect the points of equal transport cost.  Where R or S stand for Raw Materials  M stands for Market http://peo ple.hofstra .edu/geotr ans/eng/c h7en/conc 7en/weber locationtri angle.html

Assumptions of Weber’s Model  Uniform/Isotropic Plain: Operates in one country with an uniform plane and equal transportation paths.

  • topography
  • climate
  • Technology
  • economic system  One finished product is considered at a time.  The product is shipped to a single market location.  Transportation cost may vary as they are a function of the weight of the items shipped and the distance they are shipped.
  • Example: Heavy and Far (cost lots of moolah!)

Assumptions… continued  Labor has a fixed cost…

  • Labor not mobile.
  • It’s available in unlimited quantities.
  • There is labor at any production site selected.  The product has equal desire in the plane and equal opportunity to purchase the product.  The raw materials are:
  • At a fixed location
  • Which is known  Market location where consumption occurs…
  • At a fixed location
  • Which is also known

Transportation  The location of the industry will be located in an area where it ensures the cost will be lowest for:

  • Moving raw materials to the processing location
  • Moving finished products to the market  Costs of transportation are affected by distance the product is shipped and the weight of the product when being shipped.  There are also cases where a company has more than 1 mode of transportation.  This is known as break-in-bulk locations.
  • Example: San Francisco, California
  • Methods of Transport: Ports, Rail, Air, Highway

Labor  Considered the most expensive factor for LCT.  The profits of a company are reduced as the cost of labor increases, and vice versa.  In some cases an industry may perform better farther away from the market and raw materials, due to the availability of cheap labor.

 Higher labor costs reduce profits, can affect
location of industry, regardless of raw material
and market locations.
  • Example: Outsourcing textiles overseas

Agglomeration

 Agglomeration : the concentration of businesses in
one particular area.
 It occurs when there is a demand for services that the
population needs (school, hospitals, grocery stores).
 They provide assistance to each other through shared
talents, and services. Typically results in lower prices!
 When a large number of companies cluster in the
same area and can assist each other through shared
talents, services and/or facilities.
  • Example: Research Triangle Park
  • Example: Michigan Auto Industry and PA steel industry

Deglomeration

 When an agglomerated region becomes too clustered
or too crowded from cumulative causation (think
positive feedback loop), then there are negative
effects.
  • Pollution, Traffic, Lack of Resources or Labor
 Industries choose to move away from each other
called deglomeration.
  • Essentially it is the “unclumping” of factories due to the negative effects and higher costs of industrial overcrowding.
 Markets can also become oversaturated with a
particular industry forcing businesses to relocate or
shut down.

Weight-Gaining and Weight-Losing  Weight-Gaining

  • The finished product(s) weight is more than the raw materials
  • Cost for shipping the finished product are greater than that of the raw materials.
  • Industry location would be the closest to the market!
  • Industry is said to have a market orientation.  Weight-Losing (Also known as bulk-reducing)
  • The finished product(s) weight is less than the raw materials
  • Therefore, it cost more to ship the raw materials than to ship the finished product.
  • Industry location would be the closest to the source of raw materials!
  • Industry is said to have a material orientation.

Weight-Losing

Scenario

Location 2  In this situation the processing location has been moved closer to the source.  This caused the cost of shipping the final product to be reduced, greatly.  However, the cost of shipping the raw materials to the plant is still not the least it could be.

Location 3  In this situation the processing location is located at the source of the raw materials.  And the cost of shipping has again been reduced from the previous situation.  Therefore, the best location for the plant would be at the source of the raw materials.