Question

I need to answer a question about International Economic( text book by Robert Carbaugh). At least 200 words.

What does geographic fragmentation really MEAN (Ch. 1, page 5)?

Answer 1

Globalisation has resulted in many economic activities being concentrated in least cost regions. This implies that production of a particular good does not really concentrated in one particular Nation in modern economies but in a number of countries where different parts are produced according to the different cost and input combinations. In this sense geographic fragmentation is the distribution of various economic activities related to the production of a particular good which is determined by the relative cost combinations of the activities concerned. Take an example of an iPhone.

Allof its parts are manufactured in a total of 27 companies located in different parts of the world including South Asia as well as East Asia. Similarly there many automobile manufacturers who assemble different Automobile parts that are produced in different countries.

Thishas been successful in reducing the overall cost of production because one single nation does not have a comparative advantage in one particular product but in different parts of the same product. In the terminology of business, business support services are now being increasingly sent to economically cost-saving regions while they are being separated from the downstream Industries that are concentrated in main regions. Even in one particular country production of a commodity involves a series of related activities that are conducted in different regions within the same nation. The product may be sold by one industry or one particular form but its components can be produced in other industries by other firms.