Globalization
Similarly, industrial activity is considered a secondary economic activity, and is also discussed as manufacturing. Industrial activity can be broken down further to include the following activities: processing, the creation of intermediate parts, final assembly. Today with multinational corporations, the three activities listed above may occur outside MDCs.
Weber's theory can explain some of the causes for current movement, yet such discussion did not come from Weber himself. Weber found industrial activity the least expensive to produce. Least cost location then implies marketing the product at the least cost to the consumer, much like retailers attempt to obtain large market shares today. Economically, it is explained as one way to make a profit; creating the cheapest product for the consumer market leads to greater volume of sales and hence, greater profits. Therefore, companies that do not take the time to locate the cheapest inputs or the largest markets would not succeed, since their product costs more to produce and costs the consumer more.
His theory has five assumptions. His first assumption is known as the isotropic plain assumption. This means the model is operative in a single country with a uniform topography, climate, technology, economic system. His second assumption is that only one finished product is considered at a time, and the product is shipped to a single market. The third assumption is raw materials are fixed at certain locations, and the market is also a known fixed location. The fourth assumption is labor is fixed geographically but is available in unlimited quantities at any production site selected. The final assumption is that transport costs are a direct function of weight of the item and the distance shipped.
In use with his theory he created the locational triangle. His triangle is used with one market and two sources of material. This illustrated that manufacturing that utilizes pure materials will never tie the processing location to the material site. Also industries utilizing high weight loss materials will tend to be pulled toward the material source as opposed to the market. Furthermore many industries will select an intermediate location between market and material. The last generalization is considered to be wrong because he never takes into account terminal costs and therefore is considered biased toward intermediate locations.
To further explore the location of firms Weber also created two concepts. The first is of an isotim, which is a line of equal transport cost for any product or material. The second is the isodapane which is a line of total transport costs. The isodapane is found by adding all of the isotims at a location. The reason for using isodapanes is to systematically introduce the labor component into Weber’s locational theory.
Weber has received much criticism. It has been said that Weber did not effectively and realistically take into account geographic variation in market demand, which is considered a locational factor of paramount influence. Also his treatment of transport did not recognize that these costs are not proportional to distance and weight, and that intermediate locations necessitate added terminal charges. Labor is not always available in unlimited quantity at any location and is usually quite mobile through migration. Plus most manufacturing plants obtain a large number of material inputs and produce a wide range of products for many diverse markets, so his theory doesn’t easily apply. Furthermore he underestimated the effect of agglomeration.
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