This theory is based on the ‘least cost principle’ which is used to account for location of a manufacturing industry. The theory is based upon a single, isolated country with homogeneous conditions. Some of the natural resources in this setting are found everywhere, while some have fixed locations. The workforce has fixed locations. Transportation costs, in this situation, are a function of cargo weight and the distance. Demand is uniform throughout for all products, hence, there is uniform price for all products at all locations.
The theory claims that the costs will get influenced by transportation costs, labour costs and by the agglomeration factor.
Role of Transportation Costs:
1. A one market, one raw material condition gives rise to three situations.
(i) Raw Material Available Everywhere:
The best location in this situation is the market, as that will simply eliminate the transportation costs for the manufacturing unit.
(ii) Raw Material Fixed, And Pure:
The manufacturing unit, in this case, should be located either at the market or at the source.
(iii) Raw Material Fixed And Gross (I.E. It Loses Weight On Processing):
The best location will be at source.
2. A one market, two raw materials (R1, R2) condition gives rise to four situations.
(i) Both R1 and R2 are found everywhere: here, the best location will be at the market, as in that case, lowest transportation costs would prevail.
(ii) R1 is fixed, R2 is found everywhere, both are pure: the best location would be at the market, because then, transportation charges for R1 only will have to be paid.
(iii) Both R1and R2 are fixed and pure: the best location will be at the market, because in that case lowest aggregate transportation charges will prevail.
(iv) Both R1 and R2 are fixed and gross: this is a complex situation, for which Weber introduced the “locational triangle”. Two raw materials—R, and R2—and market (M) form the three modes of this triangle. The transportation charges are a product of the cargo weight and the distance carried by transportation. Thus, a pull is being exerted on the location by each of these three modes. It is seen that the weight-losing manufacturing processes like iron smelting tend to be located near the source of raw materials, while the weight-gaining ones like baking tend to be located near the market (Fig. 10.25).
Role of Labour Costs To determine the role of locational pattern of labour force on manufacturing location, Weber’s locational triangle is placed in concentric pattern of rising transportation costs outwards from the centre (Fig. 10.25). It is assumed that the labour force is dispersed outwards and the distance from the centre represents savings on account of labour costs decrease and a point (L) comes where the savings on labour cost overcome the handicap of rising transportation costs. This is a more profitable location than ‘F which is the lowest transportation cost location.
Role of Agglomeration:
The coming together or agglomeration of industries offers cuts in production costs if two or more industries operate in the same location (Fig. 10.25).
Evaluation of Weber’s:
Theory Weber’s theory which revolves around transportation costs misses the point that the freight rates may not always be directly proportional to the distance. These rates may not also be similar for raw materials and finished goods.
Weber, in his theory, seems to have over-emphasized the supply factors while ignoring the demand factors. Still, credit must be given to Weber for laying bare the fact that transportation costs are the most fundamental factor in deciding the location of the manufacturing industry.