Alfred Webers Least-Cost Model Background: Alfred Weber (30 july 1868- 2 May 1958) was a German economist,

sociologist and theoritician of culture whose work was influential in the development of modern economic geography. Alfred Weber first considered the problem of where to locate an industrial plant when the locations of its market and raw materials were fixed known.In this process, he developed LeastCost model of industrial location in 1929.

Basic Principal Of The Theory:

Alfred Weber tried to explain and predict the locational pattern of the industry at a macro scale.His theory emphasizes that firms seek a site of minimum transport and labour cost.

Assumptions: Alfred Webers major assumptions are :1. Fuels and raw materials used in production are fixed in location and not ubiquitous (available everywhere). 2. Markets are separate locations and the amount of product consumed in each is known. 3. The cost of transportation is the major cost in plant location. 4. The plant operates within a competetive market, so monopolistic advantage derived from location is of no consequence.

Analysis Of The Theory: On the basis of these assumptions Weber built his simplest model, the Locational triangle, which he used to find the location of minimum transportation costs for a factory. In this model transportation costs were considered a function of weight to be carried and distance to be travelled. The figure is shown belowz

C c

P b a a M2 y

M1 x

Here,

C= Point of consumption. M1= Source of material 1. M2= Source of material 2.

If C is the market or point of consumption and M1 and M2 are the most deposits of two necessary raw materials than the location of production is at point P where the cost of getting materials to the factory and the finished product to market is minimized. Each corner of the triangle exerts a pull on the point P, measured by the weight to be moved from or to that corner. In the above figure one unit of production needs x amount of material from M1 and y amount of the material from M2, with the final product of z to be moved to C. If a,b and c represent the distance between the known locations of C,M1 and M2, then the problem is to find that location P, which minimizes xa+yb+zc.

Alfred Weber formulated a theory of industrial location in which an industry is located where the transportation costs of raw materials and final product is a minimum. He singled out two special

cases. In one the weight of the final product is less than the weight of the raw material going into making the product. This is the weight losing case. In the other the final product is heavier than the raw materials that require transport. Usually this is a case of some ubiquitous (available everywhere) raw material such as water being incorporated into the product. This is called the weight-gaining case. These are illustrated below-

Figure 1 shows the situation in which the processing plant is located somewhere between the source and the market. The increase in transport cost to the left of the processing plant is the cost of transporting the raw material from its source. The rise in the transportation cost to the right of the processing plant is the cost of transporting the final product. Note the line on the left of the processing plant has a steeper slope than the one on the right.

Figure 2 shows the situation if the processing plant is moved closer to the source of raw material. Note that the transport cost of the final product delivered to the market is lower than in the previous location.

The transportation cost for the product delivered to the market will be lowest of all if the processing plant is located at the source of the raw material, as shown in Figure 3.

The weight gaining case is illustrated in Figures 4, 5 and 6. The optimal location of the processing plant in this case is at the market. Weber established that firms producing goods less bulky than the raw materials used in their production would settle near to the raw-material source. Firms producing heavier goods would settle near their market. The firm minimizes the weight it has to transport and, thus, its transport costs.

Factors : The point for locating an industry that minimizes costs of transportation and labour requires analysis of 3 factors.These are1. Material Index: The point of optimal transportation based on the costs of distance to the "material index" - the ratio of weight to intermediate products (raw materials) to finished product. 2. Labor: The labor distortion: sources of lower cost labor may justify greater transport distances and become the primary determinant in production. There are two types of laborA. Unskilled Labor Industries such as the garment industry require cheap unskilled laborers to complete activities that are not mechanized. They are often termed "ubiquitous" meaning they can be found everywhere. Its pull is due to low wages, little unionization and young employees. B. Skilled Labor- High tech firms require exceptionally skilled professionals. Skilled labor is often difficult to find.

3. Agglomeration and deglomeration: Agglomeration is the phenomenon of spatial clustering, or a concentration of firms in a relatively small area. The clustering and linkages allow individual firms to enjoy both internal and external economies. Auxiliary industries, specialized machines or services used only occasionally by larger firms tend to be located in agglomeration areas, not just to lower costs but to serve the bigger populations.

Deglomeration occurs when companies and services leave because of the diseconomies of industries excessive concentration. Firms who can achieve economies by increasing their scale of industrial activities benefit from agglomeration. However, after reaching an optimal size, local facilities may become over-taxed, lead to an offset of initial advantages and increase in PC. Then the force of agglomeration may eventually be replaced by other forces which promote deglomeration.

Limitation:

There are several limitations of the Webers Least-Cost model. These are1. The analysis is more descriptive. 2. Multiple markets are outside the scope of the theory.