Which statement about globalization is true?

Which statement about globalization is true?

• A. Global production is always centralized in the home country.
• B. Globalization reduces the flow of capital.
• C. Global trade rules are governed solely by one nation.
• D. Global firms may fragment production across locations to minimize costs.

Answer: (D)

Globalization enables firms to organize production as a globally dispersed network, choosing where to perform each step based on costs and capabilities. The statement that best reflects this is that global firms may fragment production across locations to minimize costs. By splitting components and activities across different countries, a company can tap into cheaper labor, specialized suppliers, favorable regulations, and proximity to key markets, which together lower total production and logistics costs and improve efficiency. This fragmentation is a hallmark of modern global supply chains and explains why production is often spread across multiple countries rather than kept in one home country. Other ideas don’t fit as well. Production isn’t typically centralized in the home country in today’s global economy; globalization encourages dispersion. Global capital flows have generally increased as firms invest across borders rather than shrink. And trade rules are not governed by a single nation alone; international institutions and many agreements shape how trade is conducted across borders.

Globalization enables firms to organize production as a globally dispersed network, choosing where to perform each step based on costs and capabilities. The statement that best reflects this is that global firms may fragment production across locations to minimize costs. By splitting components and activities across different countries, a company can tap into cheaper labor, specialized suppliers, favorable regulations, and proximity to key markets, which together lower total production and logistics costs and improve efficiency. This fragmentation is a hallmark of modern global supply chains and explains why production is often spread across multiple countries rather than kept in one home country.

Other ideas don’t fit as well. Production isn’t typically centralized in the home country in today’s global economy; globalization encourages dispersion. Global capital flows have generally increased as firms invest across borders rather than shrink. And trade rules are not governed by a single nation alone; international institutions and many agreements shape how trade is conducted across borders.