Transcript Industrial Landscapes

Industrial Landscapes
Least Cost Location Theory
Classification of Manufacturing Industries
1. Processing Industries
– Initial Processing Industries
• A single raw material.
• Eg. Dairy processing
– Complex Processing Industries
• More than one raw material
• Eg. Steel making
Classification of Manufacturing Industries
2. Fabricating Industries
– Assembly of a finished or semi-finished
product
– Eg. Automobile
Least Cost Location Theory
By Weber
Assumption
• Isotropic plain (uniform in culture, climate ,
economic and political system……)
• Ubiquitous resources are found everywhere
• Some resources are localized
• Transport cost is a function of weight and
distance
• Labour has a given pattern of distribution
Assumption
• Markets are fixed at certain specific point
• Perfect competition exists
• Industrialists are economic man
Building of theory
Material Index
Location Triangle
Location Polygon
Isotims
Isodapanes / Critical Isodapane
Varignon Frame
Effects of cheap labour and agglomeration
Material Index
• Material Index
eg. (To produce 10 tonnes cement)
Limestone
11.2 tonnes
Clay or shale
2.8
Coal
3.0
Gypsum
0.25
Total 18.25
--------------------------------------------Material Index = (18.25/10.00) = 1.825
Material Index
Material Index > 1.0 (weight-loss)
Materials oriented industry
Material Index < 1.0 (weight-gain)
Market oriented industry
Material Index = 1.0
Footloose Industry
Location Triangle
Location Polygon
Isotims – Cost surface
Isodapanes / Critical Isodapane
Varignon Frame
Effect of Cheap Labour
Having cheap labour
can save $16 additional
transport cost.
Firm will not be moved
to L1 but it will be
moved to L2
Effect of Agglomeration
Demerits
• Transport Costs
– Decline the importance of transport costs
– Stepping of Freight Rates
– Variations in the Transport Modes
Demerits
Stepping of Freight Rates
Demertis
Transport Rate for 3 main carriers
Demerits
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Isotropic plain is not our real world
Importance of other properties of raw materials
Market is not a fixed point
Perfect competition does not exist
A Static Model
Nature of Industries
Mobile nature of labour
Economic man
Merits
• Founder of modern industrial location theory
• Point out transport cost as a key factor to
determine industrial location
• Distinct ubiquitous and localized raw materials
• Distinct various orientations of different industries
• Conceptual instrument for understanding the
locational patterns of industries