GEOG 2LE3 Lecture Notes - Lecture 19: Sweatshop, Open Cluster, Byrsonima Crassifolia
4 Jun 2018
School
Department
Course
Professor
Lecture 19 - Clusters
Weers Loatio Theor
• Alfred Weber (1868-1958)
• Why would a factory choose to locate in one region over another?
• He asked the question in the context of industrial growth in the goal fields of the Ruhr region of
Germany
• He developed a model to predict the location of manufacturing plans
• The theor of the Loatio of Idustries 99
Least-Cost Theory
Least cost theory = explains the location of manufacturing based on the desire to minimize
transportation and labour costs.
1) Transportation Costs
• Factories should locate where transportation costs are lowest
• This is the location where it would be least expensive to bring raw materials to the point
of produtio i.e. the fator ad distriute the as fiished produts to consumers.
2) Labour Costs
• Firms will move towards a source of cheap labour if the savings per unit of production
are greater than the increase in total transportation costs of producing the product in
those regions of cheap labour.
• Weber was interested in pinpointing the places where the savings from labour
outweighed additional transportation costs (cheap labour makes up for transportation
costs)
Global division of labour = Companies in the developed world take advantage of cheap labour in the
developing world.
• The gloal diisio of laour is a futio of apitaliss drie for profit i a apitalist eoo
by reducing costs
• The rise of Chia ad others as gloal aufaturig hus reflets the a lo produtio
osts a offset trasportation costs.
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Criticisms:
• It is an abstract model that unfolds on a featureless surface that bears little resemblance to real
places (isotropic plain).
• The model prioritizes transportation costs that are now a far less significant component of a
firs total costs.
Agglomeration Economies
- Agglomeration economies: cost-savings incurred through the clustering of economic activity
Economies of scale = savings a company realizes by producing large volumes of products
• External economies: saving a company realizes by making connection to other firms and
organizations (inter-frim transactions)
• Aordig to Weer, these eooies a eert a deiatioal pullig fore o least ost
location.
Why does the agglomeration of economic activity occur?
Because:
1. the co-location of manufacturers with suppliers reduces transportations costs
2. the growth of a skilled labour pool redues osts for firs to fid eploees ad for eploees
to fid jos
3. the emergence of a dedicated infrastructure and other resources and services reduces costs
4. face to face contact is vital in the transfer of information and enhancing the diffusion of ideas
Traded Interdependencies
-Co - location of suppliers, partners and customers reduces the transaction costs of:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
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