Why is industry/manufacturing located where it is?

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• Why is industry/manufacturing located where it
  is?
• Begin theory. Now!

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The Paris Basin is the Industrial base of France.
Rouen (above) is at the head of navigation point
on the Seine River.
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Location Theory
Alfred Weber

• 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
  labor costs
• Friction of distance-increasing distance
  increased time cost

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Location Models

• Webers Model-The Least Cost Theory
• Alfred Weber, (1868-1958) a German economists,
  published Theory of the Location of Industries in
  1909. His theory was the industrial equivalent of
  the Von Thunen Model.
• Manufacturing plants will locate where costs are
  the least.
• Categories of Costs
• Transportation-the most important cost-usually
  the best site is where cost to transport raw
  material and finished product is the lowest
• Labor-high labor costs reduce profit-location
  where there is a supply of cheap, non-union labor
  may offset transportation costs
• Agglomeration-when a group of industries cluster
  for mutual benefit-shared services, facilities,
  etc.-costs can be lower
• Deglomeration-when excessive agglomeration
  offsets advantage-eastern crowded cities

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Webers Least-Cost Theory
One of his core assumption is that firms will
chose a location in view to minimize their costs.
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The Basics

• Alfred Weber formulated a theory of industrial
  location in which an industry is located where
  the transportation costs of raw materials and
  final product is a minimum.

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In one the weight of the final product is less
than the weight of the raw material going into
making the product. This is the weight losing or
BULK-REDUCING industry. Ex Copper
production steel production
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BULK-GAINING

• In the other the final product is heavier than
  the raw material that require transport.
• Usually this is a case of a raw material such as
  water being incorporated into the product.
• This is called the weight-gaining or BULK
  GAINING industries.

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• What happens when a variety of materials is
  needed for the production?
• Production point moves closer to the heaviest raw
  material to balance transportation costs.

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ENERGY SOURCE??

• The availability of an energy supply is another
  factor in the location of industry, but the
  factor used to be much more important than it is
  today.
• The early British textile mills were site-tied
  because they depended on falling water to drive
  the looms.
• Today, power comes from different sources and
  can be transmitted or transported over long
  distances.
• Exceptions occur when an industry needs very
  large amounts of energy, for example, certain
  metallurgical and chemical industries.

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Location Models

• Hotellings Model-Harold Hotelling (1895-1973)
  this economist modified Webers theory by saying
  the location of an industry cannot be understood
  with out reference to other similar
  industries-called Locational Interdependence
• Loschs Model-August Losch said that
  manufacturing plants choose locations where they
  can maximize profit. Theory Zone of
  Profitability

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• How has Industrial Production Changed?

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How has Industrial Production Changed?

• Fordist dominant mode of mass production during
  the twentieth century, production of consumer
  goods at a single site.
• Post-Fordist current mode of production with a
  more flexible set of production practices in
  which goods are not mass produced. Production is
  accelerated and dispersed around the globe by
  multinational companies that shift production,
  outsourcing it around the world.

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Time-Space Compression

• Just-in-time delivery
• rather than keeping a large inventory of
  components or products, companies keep just what
  they need for short-term production and new parts
  are shipped quickly when needed.
• Global division of labor
• corporations can draw from labor around the
  globe for different components of production.

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Modern Production
Outsourcing moving individual steps in the
production process (of a good or a service) to a
supplier, who focuses their production and offers
a cost savings.
Offshore Outsourced work that is located
outside of the country.
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Nike (A Light Industry)-Headquartered in
Beaverton, Oregon, Nike has never produced a shoe
in Oregon. Beginning in the 1960s, Nike
contracted with an Asian firm to produce its
shoes.
Skopje, Macedonia-The swoosh is ubiquitous, but
where is the shoe produced? Nike has a global
network of international manufacturing and
sales.
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Outsourcing vs. offshoring wage growth?
Maquiladora Part 2
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New Influences on the Geography of Manufacturing

• Transportation-intermodal connections where air,
  rail, truck, ship and barge connect-eases flow of
  goods-e.g. container shipping Break of Bulk
  points.

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New Influences on the Geography of Manufacturing

• Regional and global trade agreements-WTO,
  Benelux, European Union, NAFTA, MERCOSUR, SAFTA,
  CARICOM, ANDEAN AFTA, COMESA, etc. goal to ease
  flow of goods by eliminating trade tariffs or
  quotas
• Energy-coal was replaced by natural gas oil
  after WW II-transported by pipeline or tanker

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• Europe-despite North Sea Oil-still must import
• Mexico Canada oil and natural gas
• U.S. uses 27 if oil 37 of natural gas
  produced in the world. Dependent on imported oil
  Impact of the Bakken???
• OPEC Saudi Arabia, Kuwait, Iraq, Russia large
  oil reserves

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• Deindustrialization
• a process by which companies move industrial
  jobs to other regions with cheaper labor, leaving
  the newly deindustrialized region to switch to a
  service economy and work through a period of high
  unemployment.

Abandoned street in Liverpool, England, where the
population has decreased by one-third since
deindustrialization Liverpool Detroit
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The Rust BeltvsThe Sun Belt
Flow of population.
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THE END