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Industrial Location (cont'd)

Thursday, March 15, 2012 11:47 AM

Other important theories exist concerning the location that is deemed most suitable for an Industry. The theories that we choose to focus on are those by A. Losch and D. Smith. Losch suggested that demand was the most important variable affecting location in the same way that Weber suggested transport cost is the most important variable. Losch have some of the same assumptions as weber, in terms of Isotrophic plain, the distribution of population, singular market. The arrangement of the plant and the surrounding areas would resemble the arrangement for central places and their hinterland. See Central Place Theory Diagram but plant would act as the central place. D Smith (1971) suggested that an activity/ industry does not need to be located in the least Cost location as proposed by A. Weber. Smith rather suggest that there was a margin of profit or area where profits for an activity would be generated. (This value would range from break even to the max @ the L.C.L.). Smith suggested that man was not always an 'economic being' in his decision making; as man was a satisfier at times not wanting to make a maxium return / from his endeavours. Smith actually accepted most of theories proposed by Weber except man being an economic being. He agreed with Weber's view on population, resources market and isotrophic plain.

Revenue/ Profit Loss Loss


Optimum Location Max Distance Smith built on the ideas proposed by Weber but in his era transport cost was not a function of weight and distance (due to variety of transport available and innovations in transportation). Also, Smith may have been hinting at the fact that Transport cost is not as major a factor as Weber. Also, it seems that it is good to note that the cost of production is not the same in all areas.

Changes to Manufacturing Industries 'Traditional' Manufacturing industries have the following characteristics: Typically oriented to raw material or market sites Typically labour was semi-skilled mainly and few skilled Segmented operations with most of value adding occuring in country of origin of operators of company. Tended to be located in L.C.L area in several cases.

Present / Contemporary Industries

Several industries are NOT located in /at their L.C.L in the strictest sense or in terms of traditional factors. Labour Cost have shown significant differences across the world; so the same quality of labour can be found at cheaper rates across the world. Thus OUTSOURCING; OFFSHORING The rise of LABOUR ORIENTED ACTIVITIES Arrangement of the stages of production has changed to horizontal linkages and even new forms of production (models) E.G. Just In Time Production