Fragmentation

AAA

DEFINITION of 'Fragmentation'

The use of different suppliers and component manufacturers in the production of a good. Fragmentation results in different companies producing component parts rather than the finished good, with the components being assembled as a final product elsewhere. Suppliers do not have to be located in the same geographical region.

INVESTOPEDIA EXPLAINS 'Fragmentation'

Fragmentation is often associated with globalization, as companies seek to use suppliers who are the most cost-effective, even if those companies are located abroad. For example, an airplane may have its wings manufactured in Germany, its electronics in Japan, its glass in China and its seats in Mexico. All the components are shipped to the United States, put together and sold as the final product.

RELATED TERMS
  1. Right-Shoring

    The placement of a business' components and processes in localities ...
  2. Low-Cost Producer

    A company that can provide goods or services at a low cost. In ...
  3. Globalization

    The tendency of investment funds and businesses to move beyond ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at ...
  5. Outsourcing

    A practice used by different companies to reduce costs by transferring ...
  6. patent attorney

    A lawyer with expertise in intellectual property law as it pertains ...
Related Articles
  1. What Is International Trade?
    Personal Finance

    What Is International Trade?

  2. Globalization: Progress Or Profiteering?
    Economics

    Globalization: Progress Or Profiteering?

  3. The Basics Of Tariffs And Trade Barriers
    Economics

    The Basics Of Tariffs And Trade Barriers

  4. What Are Economies Of Scale?
    Economics

    What Are Economies Of Scale?

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center