Rawstron’s Theory of Industrial Location
(Locational Cost Analysis Theory)
👤 Who was Rawstron?
E. M. Rawstron proposed a theory focusing on practical cost calculations in industrial location. His approach is grounded in geographical realism, avoiding abstract assumptions and highlighting real-world cost dynamics.
🔑 Core Idea: Location of Minimum Cost → Maximum Profit
Rawstron’s theory revolves around a simple yet fundamental economic logic:
💡 “Industries are established where total cost is minimum—because that is where profit is maximum.”
This means every location choice is an economic decision, based on calculating costs associated with various elements.
⚙️ Key Factors Considered
Rawstron emphasizes the following location-effective factors:
| Factor | Role in Location |
|---|---|
| Raw Material | Primary input, especially for extractive and processing industries |
| Market | Determines proximity for distribution and demand |
| Land | Availability and cost of suitable land (flat terrain preferred) |
| Capital | Availability of financial investment |
📜 Assumptions of the Theory
Rawstron’s theory makes three critical assumptions, shaping its scope:
- Mining is treated as an industry
- Thus, mineral-based industrial location is central to the model.
- Transport is significant only in context of industry
- Mainly for bringing raw materials and delivering finished goods.
- Transport cost is considered part of total production cost.
- Three types of pressures influence industrial location:
- Physical (natural resources, terrain)
- Economic (costs, profitability)
- Technological (skills, know-how)
📐 Three Core Principles of Rawstron’s Theory
Rawstron outlined three principles that determine industrial location:
1️⃣ Principle of Physical Restriction
- Natural geography controls industrial location.
- Emphasis on:
- Availability of minerals
- Favorable terrain (e.g., flat land for factories)
- Example: Iron and steel industries near mineral belts (e.g., Jamshedpur near iron-ore mines)
2️⃣ Principle of Economic Restriction
Divided into two core sub-concepts:
a. Cost Structure of Industry
- All expenses are considered → Labour, Transport, Raw materials, Marketing
- Each industry has a unique cost composition based on its nature.
b. Spatial Margins of Profitability
- Industries are only viable within a certain spatial area—outside of which, cost exceeds revenue.
- This is similar to Losch’s profitability zones, but based purely on cost dynamics.
📌 Hence, Rawstron’s model is also called the Locational Cost Analysis Theory.
3️⃣ Principle of Technical Restriction
- Technical knowledge is a prerequisite for industrial operation.
- Factors include:
- Availability of skilled manpower
- Access to modern machinery
- Cost of acquiring or importing technology
Example: High-tech industries like electronics or pharmaceuticals depend on technical ecosystems (e.g., Bengaluru).
🧠 Comparison with Other Theories
| Theory | Focus |
|---|---|
| Weber | Least transport cost |
| Losch | Maximum revenue/demand |
| Renner | Multi-factor approach (6 factors) |
| Rawstron | Least total cost approach considering geography, economy & technology |
🧱 Criticism of Rawstron’s Theory
- Limited role of market demand
- Focuses on cost minimization but neglects revenue generation side, unlike Losch.
- Simplification of complex regional variations
- Real-world economies have fluctuating prices, government incentives, policy zones, etc.
- Underplays role of agglomeration
- Doesn’t emphasize benefits of clustering like Weber or Renner.
🏁 Conclusion
🎯 Rawstron’s theory is a practical, cost-based approach—highlighting that industrial location is ultimately a business decision aiming to maximize profit by minimizing cost.
It offers:
- A realistic framework
- Clear parameters for location decisions
- Strong emphasis on geographical and economic factors