Advantages And Disadvantages Of International Fragmentation Of Production

International fragmentation of production refers to the spreading of production stages across the countries. Cutting up the value chain, the activities by which a company adds value at every step including production, marketing, and the provision of after-sales service, allow product-ion cost savings through cross country differences in factor prices, infrastructures, resources, market sizes, and institutional factors. The geographic dispersion of the value chain creates international production networks (IPNs) between countries where different stages of the production are located. IPNs can be done within a single firm or can involve many companies. Asian international production networks started by the changes of MNC’s strategies on international fragmentation of production in response to globalisation, changing of technology, and increasingly open trade and investment environments in Asian countries in the 1980s. In the 1990s, IPNs was fuelled because the opening of China which has emerged as a local centre for manufacturing assembly. There are important factors for countries to successfully integrate into the IPNs which are factor-cost advantages, economies of scale, thickness of markets, and low international trade costs. There are four phases of industrialisation based on current participation in production networks. First phase is getting into IPN which is attracting production blocks through efficiency-seeking FDI. Second phase is development of industrial