WEBER’S THEORY OF INDUSTRIAL LOCATION

Introduction:

 The principal aim of an industrial location

theory is to find out the economically best

location or optimal location which gives

maximum profits.

 The maximum profits can be obtained when

the costs are minimum and the revenues are

maximum. therefore., industrial location

theories can be classified into two groups-

A. least coast location theories

B. maximum revenue location theories

❑ Industrial location theory was first

propounded by a German location economist,

Alfred weber in 1909, in his book ‘uberden

standart der industrien’. It was later

translated into English in 1929, as ‘ The

theory of the Location of Industries’.

❑ Weber’s theory of industrial location is very

comprehensive and known as ‘Least Cost

theory’.

❑ He was the first one to analyse the general

regional factors of transport and labour costs

as primary factors, and the agglomeration

costs as secondary factors, influencing the

optimal location of the manufacturing

industries.

ASSUMPTIONS:

 Like other deductive theories, weber too offered

certain assumptions to analyse different cost

minimizing factors and processes and their impact on

industrial location.

1. The area is typically uniform or isotropic in form of

terrain or relief,climate,soils,economic

system,technology and distribution of population.

2. Manufacturing involves a single product at a time and the product is supplied to a single market.

3. Raw materials are not evenly distributed in space but a few known and fixed locations which are available at equal transportation cost throughout.

4. Markets are known and fixed at specific

places.

5. Labour is spatially fixed and immobile by

nature in general but is abundantly available

at particular wage level at particular places.

6. Transport costs are throughout equal,

increases with increasing linear distance and

weight of material.

7. Transportation route is the shortest distance

to destination.

8. There is perfect market competition.

9. Each commodity has uniform demand and

price.

The Perfect Competition is a

market structure where a large

number of buyers and sellers are

present, and all are engaged in the

buying and selling of the

homogeneous products at a single

price prevailing in the market.

IMPORTANT TECHNICAL TERMS:

1) Ubiquitous materials (Ubiquities): raw material used for

manufacturing which are available everywhere . Such materials

does not affect the selection of location. eg. Air, Sunlight

2) Localized materials- coal, gold, petroleum,and other minerals

3) Pure materials- which does not loose their weight in processing.

Eg: cotton, cotton yarns, etc

4) Gross materials : materials that loose weight during processing.

Eg. Sugercane, sugerbeet, bauxite ore, iron ore,etc.

5) Location weight- per unit weight of raw material + per unit

weight of finished products

6) Material Index: it indicates that location should be near market

or near raw material. Calculated as, Total localized materials

used/the weight of product.

7) Isodapane: according to Weber, it is a line joining the places

(points) having same transport cost per unit manufactured good.

DESCRIPTION OF THE THEORY:

Weber’s industrial Location theory

is analysed in two conditions-

1. Case of one raw material and one

market point, and

2. Case of two or more raw material

sources and one market point.

POSSIBILITIES OF THE LOCATION OF THE

INDUSTRY:

1. If ubiquitous material is used- there is no cost

of raw material so industry can be established

anywhere near market because there is no

transport cost of finished goods too.

2. If pure materials are used- industry may be

established at (i) the source of raw material (ii)

at market point (iii) at any point between raw

material and market. Total transport cost will

be equal in all these cases.

3. If gross materials are the raw material then

industry must be located near weight loosing

raw materials. Lighter finished products can be

transported al lower cost to market.

POSSIBILITIES IN THIS CASE-

1. If both raw materials are ubiquitous, it is advantageous

to set up factory near market. In this case transport

cost of raw materials and finished goods becomes zero.

2. if both raw materials are pure,it is advantageous to set

up the factory at market centre. Raw materials will be

brought to factory and there will be no transportation

cost on finished products. Thus transportation cost will

be minimum.

3. if industry uses both pure and ubiquitous materials

then, factory should set up near market. Transport cost

of pure and its finished goods will be same and

ubiquitous materials and its finished products has no

transportation cost. So, total transportation cost will be

minimum at market location.

4. If both raw materials are gross materials then, it

becomes difficult to find best location for industry.

Weber designed ‘locational triangle’ to solve this

problem

Market-consumption point(C)

 One gross raw material source (A)

 Other gross raw material source ( B), in 

this case establishing industry at any of 

these three location is not advantageous .

 So, Optimal location has to be at any point 

within this triangle made by A,B,C.

If weight of finished good is less than

raw materials then location will be

closer to raw materials .

Eg: Iron and steel industry

If weight of finished good is more

than raw materials then location will

be closer to market.

Eg. Bakery factory

IMPACT OF LABOUR AND AGGLOMERATION

ON THE LOCATION OF INDUSTRY

Weber’s industrial location theory is primarily 

based on least cost of transport of raw materials 

and finished goods, but Weber gives much 

importance to Impact of labour source and 

agglomeration of industry in a particular region.

(A) IMPACT OF LABOUR:

 Acc. To Weber, labour is concentrated at some 

definite places and different places have different 

labour cost. In order to save labour cost, the 

industry should be relocated away from the point 

of the least transport cost.

 Isodapane is the line joining those points where 

increased transport costs are balanced by labour

movement cost savings.

(B) IMPACT OF AGGLOMERATION

❑ Agglomeration economies develop when a firm

produces items in mass or when many firms

cluster together in the same location.

It significantly influences the location of the

industries.

❑ Due to effect of agglomeration one may move to

place where the profit or advantage of

agglomeration will be more than the additional

increase in transport cost dur to deviation from

the least cost location.

EVALUATION OF THE THEORY:

 This theory explains some basic influences on the 

location of industries, but it has been criticised

mainly because of its assumptions and changed 

circumstances related with technology,transport

system ,etc.

1.Most of the assumptions made by weber are not 

realistic. Single market point is unrealistic as well 

as transport cost do not increase proportionately 

with distance and weight.

2.Weber has concentrated mainly on the transport 

costs and has ignored the costs employed with 

production process.

3. Weber has concentrated much on minimizing 

costs and has given least emphasis on revenue.

4. Socio-cultural and political influences has

also been ignored by Weber, which are also a

deciding factor for setting up industries.

5. Weber’s single product, one firm, single

market centre, etc has been now replaced by

multi-product, multi-national corporations and

companies, import of raw materials from long

distance by sea routes have now become

common, unlike hi days early 20th century.