Location Location Site vs Situation Situation factors involve

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

4 Basic Concepts of Spatial Interaction 1. Complementarity: There must be some form of Supply and Demand Caused by variations in world resources 2. Transferability: Factors = the Cost of moving a particular item and the ability of the item to bear the cost

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: • • 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

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

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?

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

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

Labor Intensive Industries • • • Textiles Jewelry Toys Sawmilling and planing Footwear

Energy Intensive Industries • • Aluminum Fertilizer Cement Pulp and paper

Footloose Industries • Micro-chips

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

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