Industrial location weber and sargent theory

Indutrial Economics

1. Dr. Sunita Sukhija
Assistant Professor in Commerce
Govt. National College, Sirsa(HRY)

2. Plant location refers to the choice of the region where man,
materials, money, machines and equipment’s are brought
together for setting up a plant. A plant is a place where the
cost of the production is kept to low in order to maximise
gains. Selection of plant is very important because once
plant is located at a site then the organisationmust face the
pros and cons of that initial decision. There are three major
aspect of plant location. These are:
i. Region decision
ii. City or suburb decision
iii. Site decision

3. Plant location is one of the most critical decisions that
influences the success of an industry. The factors that
influences plant locations are as follows:
i. Nearness and accessibility to raw materials
ii. Nearness to market
iii. Availability of power
iv. Availability of labour
v. Availability of capital
vi. Transport and communication facilities
vii. Availability of soil, climate and topography
viii. Momentum of early start
ix. Political stability
x. State policy
Xi. Complementary industries
xii. Competing industries

4. Merits
i. Reputation of the place
ii. Availability of adequate capital
iii. Adequate supply of workers
iv. Increase in efficiency of workers
v. Use of modern technology
vi. Better research and development
facilities
vii. Growth of supplementary and
subsidiary industries
viii. Development of transport and
communication
ix. Increase in mutual corporation
among industries
x. Reduction in costs
Demerits
i. Fear of depression
ii. Unbalanced economic
growth of the country
iii. Lack of mobility of
workers
iv. Danger of
unemployment
v. Danger of attacks
vi. Decrease in the
efficiency of workers
vii. Defects of industrial
centres

5. AlfredWeberwasaGermaneconomist.AlfredWeberis
regardedasthefatheroftheoryoflocation.Hisbookthe
theoryoflocationIndustrieswaspublishedinitiallyin
Germanlanguagein1909.Histheoryisbasedondeductive
method.Hehasclassifiedthefactorwhichaffectplant
locationintotwobroadcategories-
1.Regionalfactororprimaryfactor
2.Secondaryfactor
Thefactorswhichinfluencetheregionaldistributionof
industrysignificantlyaretermedasregionalfactorsor
primaryfactors.Ontheotherhand,thefactorcausing
concentrationordispersalofindustriesaretermedas
secondaryfactors.

6. AccordingtoWeber,inthedeterminationoflocationofindustrial
unittherearetwoimportantcostsorfactors.Theseare:-
a)Costoftransportation
b)CostofLabour.
a)Transportationcosts:-Inordertomaketheanalysissimple,ithas
beenassumedthatotherfactorslikelabouretcarenon-existent.In
otherwords,thecostofotherfactorswillremainsameeverywhere.
Accordingly,industrieswillbelocatedataplacewherethecostof
transportationwillbeminimum.Here,transportcostincludesthecost
oftransportingrawmaterialfromthepointofsupplierororigintothe
pointofmanufactureandthecostoftransportingfinishedgoodsfrom
theplaceofmanufacture(Plant)totheplaceofconsumption,(Market).
Thecostoftransportationdependsuponfollowingfactors:
a)Weighttobetransported
b)Distancetobecovered

7. Weberhasdividedtherawmaterialintotwocategories:
a)Ubiquitousmaterial
b)Localisedmaterial
Ubiquitousmaterialsarethosewhicharenormallyfoundinabundance
inalmostalltheregions,suchaswood,soil,water,etc.Theseare
virtuallythefreegiftofnature.WhereasLocalisedrawmaterialisthose
whicharefoundatspecificplacessuchassugarcane,cotton,ironore,
coalandotheragricultureandmineralproducesormaterials.Further,
Weberhasdividedthelocalisedrawmaterialintotwocategoriesonthe
basisoftheirweightlosingnature.Theseare:
a)Purematerial
b)Grossmaterial
c)Costoflabour-Weberhasrecognisedthecostoflabourasthe
secondaryregionalfactordeterminingthelocationofindustrialunit.It
maybenotedthattillnowfactorscost(labourcost)wasconsideredto
beequaleverywhere.Itwasassumedthattheindustrywouldbelocated
atsuchplaceswheretransportcostswouldbetheminimum.

8. According to Weber, location of industry is not only influenced by the regional
factors but by other factors. There are two broad categories of secondary factors.
These are:
a) Aglomerativefactors and
b) Deglomerativefactors
Aglomerativefactors are those which causes the concentration of industries at one
place. When industries concentrate at one place due to the regional factors, these
obtain several other benefits without making any individual effort. These benefits are
known as external economies. Therefore, external economies act as agglomerative
factors. The external economies relate to
a) Availability of machines and other technical components,
b) Availability of repair and replacement facilities
c) Availability of necessary skilled labourfor specific industries
d) Availability of organisedmarkets both for procuring raw materials and
distributing
finished products
e) Availability of better banking, insurance, transport and communication facilities
f) Momentum of early start
g) Development of ancillary industries, etc

9. Productiveactivitiescouldbedivideddependingonthe
natureofraw-materials,industryandmarket.Weber
considersthelocationforanindustryatmorethanone
place.AccordingtoWeber,asplitofproductioninto
severallocationswillbetheruleforproductiveprocess
whichcantechnicallybesplit.
LocationalCouplingmayalsooccurduetoconnection
throughmaterials.Weberalsoconceivedtheadvantagesof
settingupdifferenttypesofindustriesinthesamelocality.
Iftheby-productofanindustryhappenstobetheraw
materialofanotherindustry,thenthetwoindustriesmay
selectasingleplaceoflocation.

10. Weber has concentrated on only two elements of cost of
transportation weight and distance. In reality, there are several
other factors also influence the cost of transportation, such as
mode of transportation etc.
Weber has assumed that the centresof laboursupply are fixed.
At these assumptions are unrealistic. With increase in mobility of
labour, this assumption of labourcentreshas become
insignificant.
Weber has assumed that points of consumption are fixed and he
has calculated the cost of transporting goods from the point of
manufacture to the point of consumption, i.e. market.
Weber’s has classified the factors influencing plant location into
two parts-regional factor like transport cost and labourcost and
secondary factor agglomerative factor and deglomerativefactor.
Weber has classified the raw material into two parts-ubiquitous
and localised

11. Sargent Florence, an English economist, published his book
“Investment, Location and Size of plant” in 1948. He
scientifically studied the problem of industrial location. As
against the Weber’s theory of location of industries based on
deductive method, Florence theory of location is based on
inductive method backed statistical techniques. The relation of
an industry to an area is not so important as the relation of the
industry to the distribution of the occupied population as a
whole. Sargent Florence theory of industrial location is based
on two new concepts. These are:
• Location Quotient
• Coefficient of localisation

12. Locationquotientisanindex.Thisindexshowsthedegreeof
concentrationofanindustryinaparticularregionorstate.
AccordingtoP.GGadgilandP.L.Gidgil,”Theunderlyingidea
ofsuchanindexisthatlocationshouldbeconstruedasthe
degreeofdissimilaritybetweenthegeographicaldistribution
oftheindustryandthepopulationofthecountry.”
Inthisway,locationquotientreferstotheratioofthe(i)the
percentofallindustrialworkersinaparticularindustryfound
inaparticularregionorstate(ii)tothepercentageofall
industrialworkersinthatregionorstateThisindexmaybe
obtainedinanotherway.Thatis,bytakingthepercentageof
totalindustrialworkersinaparticularindustryfoundina
certainregionanddividingitbythepercentageoftotal
industrialworkersintheesameindustryinthecountry.

13. this is another statistical technique used by SargentFlorence to
study the problem of localisation.
This Co-efficient reveal the concentration tendency of an
industry. In other words, it is not related to the concentration of
an industry in a certain region, but it is related to the tendency
of concentration of an industry in a certain region in the
country. It is arrived at the following manners:
i. Percentage of workers in each region I relation to the total
workers in the country.
ii. Percentage of workers in a certain industry in each region in
relation to the total workers in the country in that industry.

14. a) The theory is based on inductive method.
b) Analysis has been done by applying statistical tools
c) The theory reveals the existing state of distribution of
industry in a country.
d) The theory shows the tendency of concentration of an
industry in a particular place.
e) The theory rests on the number of the workers employed
both in each region and throughout the country.
f) The theory is of great help in analysing the locational
dynamics in a country.

15. a. This theory simply explains the existing state of industries in
a country, but fails to explain the rationale of the distribution of
industries in different region in the country.
b. This theory fails to explain the impact of secondary factors on
the location of industry. In reality, at time, industry is located at
a particular place with due concentration of such factors.
c. This theory cannot act as a guide for the future location of
industries in a region.
d. This theory is silent on ideal location for new industries.
Perhaps, SargentFlorence accepts tacitly the theory of Weber
on the issue.
e. Location quotient is not a reliable index for measuring the
degree of concentration or dispersal of an industry in a certain
region because it is fully based on the number of workers.