Fragmentation (economics)
Encyclopedia
In economics
, fragmentation means organization of production
in which different stages of production are divided among different suppliers that are located in different countries. Now products traded between firms in different countries are components instead of final products. Final products may be sold to outside the region in which fragmentation happens (East Asia
n countries often sell their final products to Europe
and the USA for example). Producers in less developed countries get positions of production chain that add less value to final product. Their challenge is to "climb upwards" on transnational production chain. Production chains are often vertical hierarchies in which big multinational companies may be those who sell final products and set production standards for "lesser" producers. This kind of fragmentation is an important part of contemporary globalization
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Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, fragmentation means organization of production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
in which different stages of production are divided among different suppliers that are located in different countries. Now products traded between firms in different countries are components instead of final products. Final products may be sold to outside the region in which fragmentation happens (East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...
n countries often sell their final products to Europe
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
and the USA for example). Producers in less developed countries get positions of production chain that add less value to final product. Their challenge is to "climb upwards" on transnational production chain. Production chains are often vertical hierarchies in which big multinational companies may be those who sell final products and set production standards for "lesser" producers. This kind of fragmentation is an important part of contemporary globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
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