Economic Phenomena Of Specialization And Diversification

Introduction In order to approach the question above, it is important to fully understand the economic phenomena of Specialization and Diversification, how do they apply to the city of London and why. While â€Å"Economic diversification is the process of structural transformation as resources are shifted out of primary sectors into secondary sectors† (Siegel B., Johnson T. 1995), this definition is only partially appropriate for our argument. Diversification involves the development and transformation of a variety of economic activities as opposed to the overwhelming development of a core strategic economic activity under Specialization. Under this context, the more diversified an economic system, the more competitive and resilient towards external factors it becomes. Perhaps â€Å"the most straightforward argument for the importance of diversification is that diversified economies are less vulnerable to economic shocks than specialized economies† (Kaulich F. 2012). On the other hand it is also true that in a globalized world, economic systems that specialize in the production of goods in which they have strong comparative advantages gain great benefits. A good example to support this statement is the case of London itself. We consider London as a successful case of economic specialization for the key role that it plays in the world economy as an international financial centre and business hub. Looking at either the employment share and GVA, the service sector is predominant in theShow MoreRelatedHow Globalization Affects Developing Countries?1504 Words   |  7 Pagesnumbers of products, services and consumers. This approach to competition is gained via diversification of resources, the creation and development of new investment opportunities by opening up additional markets, and accessing new raw materials and resources. 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