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. Multinational Corporation - MNC

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

    A practice used by different companies to reduce costs by transferring ...
  5. Globalization

    The tendency of investment funds and businesses to move beyond ...
  6. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  3. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  4. Economics

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  5. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  6. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  7. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  8. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  9. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  10. Professionals

    What's Human Capital?

    Human capital is a company asset, but it’s not listed on the balance sheet. Human capital is all of the creative skills and knowledge embodied in the employees of a company -- skills that bring ...

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center