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Market
When a company is building a plant, they must take into consideration the location of raw materials and the market for the product.
Weber’s Least Cost Theory
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Market
Weber’s Least Cost Theory
Weber made certain assumptions regarding location.
2. Transportation costs are the same throughout the triangle.
3. The area in the triangle has similar cultural and economic values.
4. Labor is infinitely available at any production point in the triangle.
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Market
If you have a weight gaining industry, it will make sense to have your factory location closer to your market in order to minimize freight costs.
Weber’s Least Cost Theory
A weight gaining industry is one in which the finished product weighs more than the inputs.
Bottling plant
Inputs are sugar, syrup, bottles, caps
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Market
If you have a weight reducing industry, it will make sense to have your factory location closer to your market in order to minimize freight costs.
Weber’s Least Cost Theory
A weight reducing industry is one in which the finished product weighs less than the inputs.
Steel, aluminum, copper
Heavy ore is needed to produce steel or aluminum.
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Market
When a company is building a plant, they must take into consideration the location of raw materials and the market for the product.
Weber’s Least Cost Theory
“Brick bunny” Built of bricks and feathers,
If two inputs are not similar, this will affect the location of production.
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RM2
Market
When a company is building a plant, they must take into consideration the location of raw materials and the market for the product.
Weber’s Least Cost Theory
Another critical location is labor. This is the most expensive cost, however, is transportation which is the easiest to control.
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Market
When a company is building a plant, they must take into consideration government taxing policies.
Weber’s Least Cost Theory
Substitution principle