The Value of Classical Location Theory in Explaining the Location of the Manufacturing Industry Today

In this article I will look at how relevant and important the classical location theory was during the time Weber put it forward and how relevant the theory is in today's world. It is always important to realise that these ideas put forward are theories and not statements or fact. They are seen to be opinions, hypotheses, assumptions and only speculations. A theory is not necessarily always based on facts and is not required to be consistent with true depictions of reality. The main focus of this essay will be on the location of manufacturing industries; these are industries which are industries which focus on the process of making up products.

In 1909, Alfred Weber put forward his theory of classical location in which he tried to explain the location of industries, which is also known as the lowest-cost location(LCL) model. A model is a simplified structure of reality, they are theoretical frameworks which may be difficult to observe in the real world. Models generally concentrate on a limited number of factors to explain a distribution, feature or process. Using assumptions and trends at that time he predicted that industrialists would locate their factory at the least cost location. This is in the cheapest area where the manufacturing and transportation costs of the product is lowest. As industrialists acted rationally and that their main aim was the maximisation of profits, this is where they would locate. However, the types of industry and factors affecting location have changed over time. Weber's theory no longer relates to conditions in modern times, for example the current influence of government intervention.

Globalisation can also have an affect on the location of manufacturing industries. Although, it is true that no firm has ever moved its production out of the United Kingdom because of globalisation. Many firms, have moved their production facilities out of the Uk to reduce costs by finding sources of cheap labour, which is globalisation. Also, sources of cheap labour can now be seen as more important than transport costs, when Weber's theory focuses largely on transport costs. Technological advances in processing raw materials and larger consumption demands also have led to mass production and less need to pay attention to Weber's theory.

Other theories also contradict the classical location theory, such as behavouralist and structuralist theories. These suggest that industrial location has more to do with the way in which individuals understand how to use the environment and how that influences our behaviour. An example of this is James Dyson, who founded his company in his home town of Malmesbury, in Wiltshire. Structuralist theories suggest that location has more to do with changes in the national and world economy and the need to preserve profits. Case studies which highlight the factors affecting the location of manufacturing industries include the already mentioned Dyson and also Sony.

As always in a theory, assumptions must be made in order to simplify the real world and Weber made many of these. While assessing the value of classical location theory it is important to realise that these assumptions are just to simplify and are not facts, which is partly why its value has declined over the years. Weber stated that there was always flat land, transport systems in all directions, a stable climate and a single cultural, political and economic system in every location.

Obviously this is not the case and all of these factors vary in each location, meaning that a manufacturing industry would not give this theory much attention when choosing its location. This is because there are changes over time in prices for everything and they are not fixed, price can also change from location to location. Also Weber's assumption that transport systems are in every direction and at the same costs is also wrong. Many varied transport systems mean that there are a wide range of costs for transport i.e. Cargo ship prices differ from trucks, trains and transport by air. Other assumptions that Weber made included the idea that there was perfect competition which existed over the plain. This meant that no single manufacturer could influence prices and that the best site would then be the one with the minimal production costs. This is because revenue would be similar across the plain and the least-cost location could easily be seen. This is a basic misconception as perfect competition is unreal today. Markets now vary in size and change over short periods of time and decsions by industrialists may not always be rational.

Perfect competition now rarely exists as there are a large number of competing firms. Suppliers face highly elastic demand curves and any rise in price will lead to a large fall in demand and total revenue. Also as mentioned before there is an increasing element in government intervention in industries today. In the early 1980s, the government set up enterprise zones where unemployment and the state of the environment posed serious problems. In an enterprise zones, firms located within it are exempt from rates, received 100 per cent capital allowances on industrial and commercial property.

Weber however did face problems while explaining the location of industry back in the early 19^th century and these factors affect the value of the theory today. While Weber developed his theory, the Industrial Revolution was in progress and there were rapid developments in rail and road transport. Also major changes in energy supple with the development of electricity, this and the other factors mentioned would of hindered Weber while he developed the theory as they can greatly affect location of industry.

There are now other factors affecting the location of manufacturing industries today. These include the theory of behaviouralism, this being the theory that economic decisions concentrate on the individuals and the psychology of their decision making. An example of a firm that has set up that cooperates with this theory is Dyson. As previously mentioned James Dyson set up his business in his hometown, which has nothing to do with transport costs, location of raw materials or the local markets. Other similar examples of this include M.Michelin locating in a remote area in France (Auvergne) which is an extremely long distance from his need for imported rubber and another example is Laura Ashley's clothing factory in Newtown, Wales.

In 2001, James Dyson had to act on soaring manufacturing costs in United Kingdom, something which is not recognised in Weber's theory. These rising manufacturing costs included labour costs which had doubled in the last 10 years due to the need to pay higher wages in the area around Swindon at a time of very low unemployment. Dyson decided to move part of his production line into Malaysia where costs were lower. There were other factors that influenced the move which the classical location theory does not highlight as they were not valid in the early 19^th century so therefore the value of the classical location theory can be reduced further. Dyson believed that the strong pound outside the eurozone, the global recession and the need to be to supply chains meant that the new location was essential. Dyson also made this move to help increase his profit margin to improve his current research and development department in order to keep his company at the top of the chain. Dyson's expansion to Malaysia did succeed as he was on course to double his profits, therefore justifying his decision.

Not only does the behaviouralist theory contradict Weber's, but there are also structuralist explanations for the location of manufacturing industries. Structuralism is the theory that structures in societies rather than individual action drive economic and social change. It explains that location is driven by changes in the national and the world economy. Also it states that the factors that affect the location of large transnational corporations, such as Toyota, are not the same as the factors that explain the location of a smaller, owner-managed company. This is clearly illustrated by the case of Dyson. The method of location used by Sony, which is also a major transnational corporation (TNC) shows the complex set of both political and economic factors involved in the selection of new locations or sites in the world where transport cost significance has reduced. The method shown in the Sony case study also shows the differences in the type of labour required at different stages of the production process, which differs to assumptions made in the classical location theory.

The Sony case study, like Dyson, also highlights that classical location theory is flawed. The Sony corporation started production in Tokyo, Japan in 1955 and it did not take them long to branch out overseas. It took only five years before the Sony Corporation of America established itself in an abandoned factory in Manhattan, New York. Sony's key to survival and success in its busy market is innovation in product designing, as Sony markets some of the world's most distinctive technological products. Sony set up the now most popular of their manufacturing plants in Park Ridge, New Jersey, and in 1972 they became the first Japanese company to establish a television manufacturing plant in the United States. During this time, California was the preferred location as it was the most accessible for components shipped from Japan and the availability of labour. Therefore, Sony did not use the location of raw materials or their market when determining the location of this plant. They focused on transporting the materials from Japan and where was ideal to pick from a larger pool of possible employees. Sony located in San Diego as there was a strong yen on the West Coast which was more ideal for finance, meaning the closer to Japan the better for this and also less distance for goods to be shipped.

The next step for Sony was to find a suitable location to retrieve components ready to be transported to the manufacturing plants. Sony decided Tijuana which is the largest city of the Mexican state of Baja California, situated on the US - Mexico border adjacent to its sister city of San Diego, California. Due to Tijuana's proximity to Southern California and the US border and its large, skilled, diverse and relatively inexpensive workforce it is an attractive city for foreign companies such as Sony to establish extensive industrial parks composed of assembly plants.

The rapid growth in Sony's market led to the search for a suitable location for another production plant in the United States. While determining the new site, Sony focused on identifying the prefered region, city and the cite within that city or sub-region. Sony needed a site that would provide adequate suppliers of especially glass for their televesion screens and also skilled labour and other factors including flat land and accessibility. The choice of this region was determined on the fact that the main market was in the east of the country, main suppliers of ideal materials in Ohio and Pennsylvania and energy costs were lower than in California. When looking for desired sites, Sony executives checked the suitablility of Kentucky. This is where the structuralist theory comes into place as they decided against Kentucky as they didn't serve beer on a Sunday, this is a cultural factor that affected their decision. Also, Sony would determine the choice of site mainly on the following three issues. They would look for flat land compared to the more hilly Pennsylvania, have an adequate water supply and sewerage facilities and also rail access for workers.

Finally, Sony decided on locating their new manufacturing plant in Pittsburgh, this was not originally desirable as it was seen as a 'decaying' steel city. However, state support was vey good and there was a large supply of skilled labour. The choice of site was chosen to be a disused factory at Mount Pleasant in Westmoreland county. This factory was previously owned by Volkswagen and the Chrysler corporation. This site was desirable ad it was accessible due to rail links alongside and energy costs were cheaper compared to neighbouring counties. The site also had Sony's desired sewerage capacity with a 3.5 million litre per day facilities and it also had a floor thickness of 5m, which is ideal for holding heavy machinery or products. Therefore, the Sony case study illustrates that the classical location theory does have some relevance but only very little and its value has reduced over time.

After assessing the value of the classical location theory in explaining the location of manufacturing industry today by looking at its assumptions, its criticisms and case studies that relate to it I have made a conclusion. My conclusion is that the classical location theory was once quite relevant in locating manufacturing industries, especially when it was developed by Weber in the early 19^th century. However, over time his theory has become less relevant due to an increasing number of different factors and the factors he believed were essential are now less imperative when looking at location. Such as improved technologies now give less need to locate near raw materials and also varying transport costs now exist, with which Weber's theory is based on them being in uniform everywhere. The Dyson and Sony case studies have shown that behaviouralist and structuralist reasons for locating are now more popular than before and that Locating is more complex than Weber's theory. The case studies have shown that the value of the theory has decreased as technologies have become more advanced, governments now have developed and provide more input and globalization has taken off. Although, geographers Bradford and Kent in 1977 stated that although Weber does overemphasize on transport costs and leaves gaps in understanding the system as a whole, that he has not yet been superseded or bettered. They believe that "Others have added important principles which, taken together with those of Weber, help to explain a much more complex industrial world". The site also had Sony's desired sewerage capacity with a 3.5 million litre per day facilities and it also had a floor thickness of 5m, which is ideal for holding heavy machinery or products.