1. Part 3

2. Location Theory
• 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

3. Location Models
Weber’s 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.
Three 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

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

5. Losch’s Model-Zone of Profitability

6. Major Industrial Regions of the
World before 1950
• First manufacturing belts were
close to raw materials & good
transportation
• In addition to raw materials
other factors: relative location,
political situation, economic
leadership, labor costs &
education and training.
• Four primary industrial regions
were Western & Central
Europe, Eastern North America,
Russia & Ukraine and Eastern
Asia

7. Western
and Central
Europe

8. Western and Central Europe
• Europe’s coal deposits stretch across northern France,
north central Germany, northwestern Czech Rep. &
southern Poland.
• Colonial Empires gave France, Britain, Belgium, Netherlands
& later Germany capital for industrial development.
• Germany-The Ruhr & the Westphalian coal field, Saxony
near Czech Rep. Silesia, now part of Poland.
• Germany is still the leader producer of coal & steel and is
Europe’s major industrial power.
• European Coal and Steel Community was the predecessor
of the European Union.

9. Manufacturing Centers
in Western Europe
• The manufacturing centers
in Western Europe extend
in a north-south band from
Britain to Italy.
• The are centered on coal
fields and iron ore deposits
and cross roads of
transportation.

10. Western and Central Europe
• The Ruhr, a small tributary
to the Rhine, became the
leading industrial region of
Europe
• Saxony and its cities of
Leipzig & Dresden became
known for cameras, textiles
and ceramics.
• Destruction of WW II-
German factories were
rebuilt-competitive edge
over older factories of North
America

11. The American Manufacturing Belt
• America’s manufacturing belt
extends from the Northeast
coast to Iowa and from the
St. Lawrence Valley to the
Ohio & Mississippi Rivers.
• New England & New York-
light manufacturing New York
with its large market has a
huge skilled & semi-skilled
labor force.
• Philadelphia & Baltimore
with heavy industry-iron ore
was smelted in tidewater
steel mills

12. The American Manufacturing Belt
• NYC Port is a break-of-bulk
(cargo shifted from one
mode of transport to
another) center.
• Buffalo on Lake Erie grew
after the Erie Canal was
finished-early 19th cent.
• Interior nodes-Pittsburgh,
Cleveland, Detroit, Chicago-
Gary, Milwaukee, St. Louis &
Caterpillar manufacturing plant in
Cincinnati-Appalachian coal Aurora, Illinois
& Mesabi iron ore-autos,
bulldozers, harvesters, &
appliances

13. Major Manufacturing Regions of North America

14. Major Deposits of Fossil Fuels in North America

15. Open Pit Coal Mine in southern Illinois
Coal train moving across Montana is 1½
miles long. It carries barely a day’s fuel
for a large power plant. The US burns
over 1 billion tons of coal a year-has the
world’s richest coal deposits-enough to
last 250 years.