Present Day Manufacturing Industry

The main school of thought related to classical theory is brought about by Weber (1909). This theory is the most standard and simple belief of the choice for location of industry. Weberian belief is based upon the times in which they were created and adaptations have since been made. One of the main theorists that developed Weber's first idea was a man named D. N. Smith in 1971. Hoover also divided Weber's theory up to make it more realistic. 

Weber made his theory based on his own time and therefore it is difficult to transfer completely to the post-modern economy of today. As in real life situations there are many complications across many different areas Weber created some simplifying assumptions which make it easier to generalise from country to country or town to town for example. These assumptions are brought to universalise places with different circumstances. An example of these assumptions would be that the land is isotropic i.e. flat, which would mean that anybody can technically build anywhere (unless it is already built upon), therefore transport costs are equal. Other examples of his assumptions are that land is priced equally or that the population is spread equally. These assumptions are helpful in that they make each situation easier to understand. However, in having simplifying assumptions, there are weaknesses in themselves because they are less applicable to the real world. For example, there is never perfect competition and more than one mode of transport available.

The main debate is that classical theories are not transferable to the current age. This is mainly due to new factors changing the positions of where industries can locate. The main example of this is Government intervention, such as grants and subsidies. There are also improvements in transport lowering costs. Other improvements in technology help reduce costs such as processing raw materials. More recently, labour has become more mobile and commuting has become more frequent. Also, the there is increased complexity of industrial organisation, where more firms are becoming trans-national rather than singe-product.

Weber's simplifying assumptions make each country equal and does not take into account any differences between each countries industrial patterns and different stages of economic development.

Weber created a materials index, where it would help the firm choose where to locate depending on the weight and distance of the raw material and the market. This may have been simple but only applicable to primary processing or industries with a very high or low materials index. 

Later on in 1999, Dr. L. Crewe claimed that these classical location theories, namely Weber, are becoming less and less transferable to the real world. He did understand that Weber took into account labour costs, where the proximity to cheaper labour bay offset the costs of transport, and that agglomerate economies i.e. where several firms locate near each other to reduce costs of transport, help industries decide locations. But believes that Weber only took this understanding to a lower complexity than is required to actually understand how the real world works. It is also believed that Weber could not have known about the vast technological changes occurring throughout time to allow for. 

D. N. Smith (1971) took Weber's model a stage further saying that there is not just one specific point for location industry to reduce transport costs, but a point of maximum profit and an area of profit, where the margin may be different. He showed this by creating a space-cost curve. This showed the area for which an industry or firm can develop and have profit, but not necessarily maximum profit from Weber's optimum location (least cost location, LCL). He stated that firms very rarely locate at the maximum profit location due to lack of space or imperfect knowledge, therefore tend to establish at another point where the profit margin is above breaking-even point. 

Smith's theory is also based on rigid guidelines and do not necessarily take into account labour costs or agglomerate economies. His theory will work only if the owners of the firms are homo-economicus, i.e. all knowing and intelligent, but it is not always the case that they are aware of all the facts before deciding where to locate or may have personal reasons for their decision. 

People may not decide to locate their firm at the maximum profit location due to a number of factors. Firstly competition is major, in that there is limited labour and space, which may cause bid rent, land values and overall labour prices to rise. The government also comes into use here, because it offers incentives for certain things such as environmentally friendly movements, such as offering subsidies, grants or tax breaks. However, there are also disincentives that limit areas to develop, such as greenbelt legislation from 1944, SSSI's and AOAB's etc.