A U.S. company imports raw materials from Africa, has manufacturing facilities in China, and uses a company in India for assembly. This company is benefiting from location economies.
The study of location-choice methods employed by businesses in monopolistically competitive environments is known as the economics of location. An economics of location approach is compatible with businesses manufacturing similar or identical items, in contrast to a product differentiation strategy, where businesses differentiate their products to draw customers.
In order to identify the precise geography of opportunity, Location Economics models spatial econometric data to identify the prospects for a company to thrive within an industry based on the location of factors like the division of labor, number of customers, competition and distribution of goods within a business ecosystem.
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