The Location Spectrum

The Location Spectrum

The location spectrum of an economic activity is the set of requirements enabling it to be profitable. Profit is simply defined as what an output (a product\ or a service) fetches on a market compared to the total costs of the inputs required to provide it. Each activity has different requirements and therefore a related location spectrum which considers the involved combination of factors. They include:

  • Material inputs. What the activity requires as physical inputs, including energy, raw materials as well as the suitable amount of land (real estate) for its operations.
  • Non-material inputs. Relates to supporting conditions such as labor and capital requirements.
  • Outputs. The general market conditions generating the demand for the output. This involves who will consume the outputs generated by the economic activity, particularly at which location, quantity and frequency.

Evaluating a location spectrum helps identify the combination of specific location factors. Due to technological changes, the respective importance of inputs and outcomes can evolve. For instance, an activity highly dependent on low labor costs could change its location with automation, since it would reduce the importance of labor as an input.