Central place theory is a geographical theory that seeks to explain the size and spacing of human settlements. It rests on the notion that centralization is a natural principle of order and that human settlements follow it. Created by the German geographer Walter Christaller, the theory suggests that there are laws determining the number, size and distribution of towns. He was interested only in their functions as markets, thus excluding specialist towns such as mining settlements. He argued that population alone couldn’t measure the significance of a town.
Therefore the trade areas of these central places who provide a particular good or service must all be of equal size
The theory then relied on two concepts: threshold and range.
The result of these consumer preferences is that a system of centers of various sizes will emerge. Each center will supply particular types of goods forming levels of hierarchy. In the functional Hierarchies, generalizations can be made regarding the spacing, size and function of settlements.
The higher the order of the goods and services (more durable, valuable and variable), the larger the range of the goods and services, the longer the distance people are willing to travel to acquire them
Examples for low order goods and services are: newspaper stalls, groceries, bakeries and post offices. They are supported by a relatively smaller threshold population and demand. Examples for high order goods and services are: jewellery, large shopping arcades and malls. They are supported by a much larger threshold population and demand.
In the orderly arrangement of an urban hierarchy, seven different principal orders of settlement have been identified by Christaller, providing different groups of goods and services. Settlement are regularly spaced - equidistant spacing between same order centers, with larger centers farther apart than smaller centers. Settlements have hexagonal market areas, and are most efficient in number and functions.
The different layouts predicted by Christaller have K-values which show how much the Sphere of Influence of the central places takes in — the central place itself counts as 1 and each portion of a satellite counts as its portion:
According to the marketing principle K = 3, the market area of a higher-order place includes a third of the market area of each of the following size neighbouring lower-order places and each is located at the corner of a hexagon around the high-order settlement. Each high-order settlement gets 1/3 of each satellite settlement, thus K = 1 + 6×1/3 = 3.
However, although in this K = 3 marketing network the distance traveled is minimized, the transport network is not the most efficient, because the important transport links between the larger places do not pass through intermediate places.
According to K = 4 transport principle, the market area of a higher-order place includes a half of the market area of each of the six neighbouring lower-order places, as they are located on the edges of hexagons around the high-order settlements. This generates a hierarchy of central places which results in the most efficient transport network. There are maximum central places possible located on the main transport routes connecting the higher order center.
According to K = 7 administrative principle (or political-social principle), settlements are nested according to sevens. The market areas of the smaller settlements are completely enclosed within the market area of the larger settlement. Since tributary areas cannot be spilt administratively, they must be allocated exclusively to a single higher-order place. Efficient administration is the control principle in this hierarchy.
The validity of the central place theory may vary with local factors, such as climate, topography, history of development, technological improvement and personal preference of consumers and suppliers.
Economic status of consumers in an area is also important. Consumers of higher economic status tend to be more mobile and therefore bypass centers providing only lower order goods. The application of central place theory must be tempered by an awareness of such factors when planning shopping center space location.
Purchasing power and density affect the spacing of centers and hierarchical arrangements. Sufficient densities will allow, for example, a grocery store, a lower order function, to survive in an isolated location.
Factors shaping the extent of market areas:
Market area studies provide another technique for using central place theory as a retail location planning tool. The hierarchy of shopping centers has been widely used in the planning of "new towns". In this new town, the hierarchy of business centers is evident. One main shopping center provides mostly durable goods (higher order); district and local shopping centers supply, increasingly, convenience (lower order) goods. These centers provided for in the new town plan are not free from outside competition. The impacts of surrounding existing centers on the new town centers cannot be ignored.
As all of the satellite settlements are on transport links, this is a good example of a K=4 CPT model (although in this case it is K=4.5 due there being 7, not 6, settlements)