Weber s model
Sponsored Links
This presentation is the property of its rightful owner.
1 / 41

Weber’s Model PowerPoint PPT Presentation


  • 384 Views
  • Uploaded on
  • Presentation posted in: General

Weber’s Model. Industrial Location. Locational Model. What is a model? Simplified representative / common key features. Weber’s Model. Aim: find out the optimum location of a factory Optimum location = least cost location Assumptions isotropic surface / uniform plain

Download Presentation

Weber’s Model

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Weber’s Model

Industrial Location


Locational Model

  • What is a model?

    • Simplified

    • representative / common key features


Weber’s Model

  • Aim: find out the optimum location of a factory

  • Optimum location = least cost location

  • Assumptions

    • isotropic surface / uniform plain

    • different labour cost at different locations but labour is not mobile

    • single mode of transport and transport cost is direct proportion to distance and weight


Weight of localized raw materials

Weight of finished product

  • perfect competition(same product, same quality, same price)

  • entrepreneurs are economic rational (minimize cost)

  • resources (raw materials)

    • ubiquitous (everywhere)

    • localized (fixed)

    • pure (no weight change)

    • gross (weight loss)

Material index=


Procedures for finding optimum location

  • Stage 1 - Least Transport Cost

  • Stage 2 - add in Labour Saving

  • Stage 3 - add in Agglomeration Economies


$

$

R.M.

distance

Market

Pure raw material

Situation 1

One market and Single raw material

Total transport cost

Distribution cost

Assembly cost


$

$

$

$

R.M.

R.M.

distance

distance

Market

Market

Weight loss material

Weight gain material


Market

100 km

100 km

100 km

RM1

RM2

Situation 2

One market and Two raw materials

Both RM1 and RM2 are localized and pure


RM2

Optimum location

RM3

RM1

Market

The Varignon frame

RM1 + RM2 + RM3 Product

2kg 3kg 0.5 kg 1 kg


$30

$25

$20

Stage 2 - add in Labour Saving

2 sets of isotim

assembly cost

+

distribution cost

Total transport cost

Isodapane


Stage 2 - add in Agglomeration Economies


Exercise

  • Assembly cost

  • A=land (114)x$1x4 +lake (160+120)x$0.5x4 = $1016

  • B=lake (120+120)x$0.5x2+land (176)x$1x4 = $944

  • C=lake (120+160)x$0.5x2 + land(114)x$1x2 = 508

  • M= lake (120+120)x$0.5x2+land (118)x$1x2 + land (176)x$1x4+ land(118)x$1x4

  • =$1652


Exercise

  • Distribution cost

  • A to M = lake (120+120)x$0.5x1+land (118)x$1x1=$238

  • B to M = land (118)x$1x1=$118

  • C to M = land (176)x$1x1+land(118)x$1x1=$294


Exercise

  • Total Transport Cost

  • A = $1016+$238=$1254

  • B = $944+$118=$1062

  • C = $508+$294=$802

  • M=$1652+$0=$1652


Optimal Location


Unrealistic assumptions

Important factors neglected

Criticism


Unrealistic assumptions

uniform plain

transport cost

labour mobility

economic man

Single market

competition

Important factors neglected

profit

diseconomies

technology

institutional factors

behavioural factors

Criticism


Labour

  • Spatial mobility of labour

  • industrial mobility of labour

  • structure of labour cost - wages, holiday, fringe benefit, training cost

  • other than cost, quantity and quality


Labour Intensity Ratio

Scatter diagram=Scattergram

shows correlation of 2 variables


dependent variable

Scatter Diagram

a

b

Independent variable

Best fit line

Y=ax+b


positive correlation


Negative

correlation


No correlation


Weber’s idea

Freight rate

Real world

Haulage cost

Terminal cost

Distance

Transport cost/freight rate

  • Structure of transport cost


Freight rate

Real world

Distance

Taper off rate

Diminishing marginal transport cost


$

$

R.M.

distance

Market

Effect of Taper off rate

Assembly cost

Distribution cost


Road/truck

Rail

Freight rate

Water

Distance

Different modes of transport


Comparison


Break of bulk/Transhipment point

  • A point where there is a need to change mode of transport due to

  • physical reason - port

  • artificial - national boundaries


$

$

R.M.

distance

Market

Transhipment point

Distribution cost

Assembly cost


Impact of technology

Production technology

use less amount of raw materials and/or power

use of substitutes (raw materials or power) e.g. use of scrap in iron and steel industry

Transport technology

lower freight rate

refrigeration

standardization(use of containers)

Automation - less labour and skilled labour


Impact of Information technology

  • What are the uses of computers and internet in manufacturing?

  • Computer aided design CAD

  • Computer controlled production

  • Computer controlled logistics

    • getting raw materials, products to market

  • e-business / e-commerce

    • buying raw materials, sale of products

  • e-recruitment


Impact of Information technology

  • Impact on getting raw materials?

  • Impact on seeking labour?

  • Impact on mobility of capital?

  • Impact on transportation and logistics?

  • Impact on market?

  • Impact on industrial location?


Impact of information technology

  • Information about price and supply of raw materials is widely spread

  • More information for labour to seek employment

  • Recruitment and online interview over internet

  • Information on job vacancies is widely spread

  • Decrease the reluctance of labour to migrate to othre countries

  • Increases mobility of labour

  • Increase demand for skilled labour

    TNCs shift to countries with cheap labour


Impact of information technology

Promotion of world trade

Better monitoring of investment

Mobility of capital is greater

Lean production method and Just-in-time production is possible

Industries may be shifting away from sites closed to raw materials and power resources or nodal points of transportation as the influence of transport cost is diminishing

Better flow of market information


Impact of technology

  • Information technology

    • With the ease of making foreign investment, it may become more and more popular to set up new factories in other countries, especially in the less developed countries, for the sake of lowering the production cost with cheaper land and labour

    • Decrease the need to move industries to other countries for labour with special skills

    • Development of Transnational corporations / cross-border production is more common

    • Clustering / agglomeration of industries


Locational change

  • Declining importance of traditional factors

  • relative importance of other factors rise

  • more flexible / footloose

  • importance of research and development

  • market / large urban centres

  • Cross-border production / international division of labour / TNCs


Behavioural Factors

  • Not all decision-makers are economic rational

  • perception , knowledge and information

  • satisficers rather than optimizers

  • psychic income

  • advantages :

    • lower rent because of weaker competition

    • reduce over-concentration-pollution, etc.

    • provide employment to inferior areas


Institutional Factors

Causes

Strategic reasons

Economic reasons

Political reasons

Social reasons

Ways

provision of infrastructure

provision of land

redistribution of population


Favourable terms of trade

e.g. Shenzhen Special Economic Zone

tax holiday / concession rate

land use planning / zoning

protection of local industries

e.g. tariff, quota

Anti-pollution laws and traffic control regulations


Lean production / Just in Time


  • Login