Transcript Weber’s model of industrial location
Weber’s model
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Content
Introduction Finding out the least cost location Material index Cost profile Location triangle Drawing isodapanes Application KcmcALGeo.
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Weber’s model of industrial location
Cost minimization approach
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Seeking for the least cost location Average cost Price/ revenue A B C
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Assumptions
• Presence of an isotropic plain • Natural resources are either ubiquitous or localized • Transport system is uniform • Labour is at fixed points and of different wages • Markets are at fixed points and demand is unlimited
Assumptions
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• Perfect competition exists, the price of a particular goods is identical.
• Industrialists are economic men, trying to minimize their costs or maximize profits.
• Apart from transport cost, labour cost and agglomeration economies, all other factors are not considered.
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The three locational factors
• Transport cost • labour cost • agglomeration economies
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Steps of finding out the least cost location
• Step 1: find out the least transport cost site • Step 2: consider if the production unit will move to a cheaper labour cost site • Step 3: consider if the production unit will move to a site where agglomeration economies are available
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Total transport cost equals to
Cost of moving raw materials to the production unit/
procurement cost Plus
Cost of moving finished products to the market/
distribution cost
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Step 1 Seeking for the least transport cost site
Raw material market
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Groupings of raw materials
ubiquitous localized pure gross
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Method 1 Working out of the material index(MI ) Weight of raw material MI = Weight of finished product
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Material index of sugar milling: 7 tonnes of sugar cane = 1 tonne of raw sugar 7
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Material index of beer manufacturing 10 tonnes of wheat 100 tonnes of beer = 0.1
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Material index of manufacture of cloth: 10 tonnes of yarn 10 tonnes of cloth = 1
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M.I. Greater than 1 Material-oriented Weight-loss industry
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M.I. Small than 1 Weight-gain industry Market oriented
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M.I. Equal to 1
No weight-gain nor weight loss industry
Footloose location
R
Where is the least cost location ?
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M
R KcmcALGeo.
Where is the least cost location
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Total transport cost M
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Where is the least cost location
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R M
Tapering freight structure
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Distance
Stepped freight rate
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distance
Different transport rates
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Road Rail Sea distance
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Locating at a transshipment point
Total transport cost R Transshipment location M
Summing up
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• Freight rate varies from goods to goods • Freight rate tends to taper off with increasing distance • Freight rate varies among different transport means • Transshipment point offers additional advantage
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Weber’s locational triangle
M RM1 50km X 50km RM2
RM3 (3 units)
Using the Varignon frame
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(2 units) M RM1 (1 unit) * Centre of gravity RM2 (2 units)
Drawing isodapanes
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Lines of Total transport cost R * R (8) (9) (10) (11)
Where is the least cost location?
M *M
Labour saving at L1 & L2 is $3
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L1 ($?) .
L2 ($?) .
T($8) Rm2 * $9 $10 $11
Which is the critical isodapane ?
* Rm2
If F 1 & F 2 locate side by side, production cost declines by $4
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Where will F 1 and F 2 be moving to?
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F 1 ($8) ($10) ($12) .
F 2 ($8) $10 $12
Which are the critical isodapanes?
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Applicability of Weber’s model To what extent the model represents the reality?
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Assumption 1: an isotrophic plain, uniform physical and human settings Reality: it rarely exists in the real world
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Assumption2: uniform transport system, freight rate is directly proportional to weight and distance of haulage.
Reality: it rarely exists, freight rate tends to taper off with increasing distance.
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Assumption 3: labour is at fixed points and with different rates Reality: labour is more mobile and with different skill levels
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Assumption 4: markets are at fixed points, perfect competition exists.
Reality: they exist as an area, monopoly likely occurs.
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Assumption 5: industrialists are economic men, profit maximizers.
Reality: it is hard for them to have complete knowledge, they tend to be a satisfizer.
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Assumption 6: apart from transport, labour and agglomeration economies, other factors don’t vary spatially.
Reality: land price, government policy, technology and behavioral factors become increasingly significant in industrial location. http://www.yahoo.com/