This section summarizes conceptual issues from Global value chain (GVCs) literatures that are relevant to paper’s objectives. It provides the overview of global value chain theory, and the most important concepts.
Nowadays, the globalization of economy is increased, products of one country can be consumed in other foreign countries. According Gereffi and Fernandez-Stark (2016), the evolution of GVCs has an important role in global trade, production and employment and how developing countries firms, producers and workers can access into the global economy by linking firms, workers and consumers. Especially, in developing countries, the ability to effectively joining into GVCs is a vital condition for development. It also believed a chance for
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Therefore, “GVC governance refers to the content and the management of these decisions across all suppliers and sub-suppliers, the strategies behind the decisions taken and management methods chosen to implement them, and the systems through which their outcomes are monitored and reacted to” (Gibbon et al, 2008). Understanding governance as well as how a value chain is controlled facilitates firm/organization entry and development within global economy (Gereffi and Fernandez-Stark, 2016). There are five typology governance structures in the GVC analysis: markets, modular, relational, captive, and hierarchy and these can change and affect opportunities and challenges for economic and social upgrading (Gereffi and Fernandez-Stark, …show more content…
Value chain upgrading includes economic upgrading and social upgrading. Economic upgrading is defined as “the possibility for (developing country) producers to move up the value chain, either by shifting to more rewarding functional positions or by making products that have more value added invested in them and that can provide better returns to producers” (Gibbon and Ponte, 2005: 87–88). Within the GVC framework, four types of economic upgrading identified that are process upgrading (applying better technology/ reorganizing activities to produce more efficiently), product upgrading (moving into more sophisticated products), functional upgrading (changing their position in the chain), and chain upgrading (firms move into new but often related industries) (Gereffi and Fernandez-Stark, 2016). Social upgrading is “the process of improvement in the rights and entitlements of workers as social actors, which enhances the quality of their employment” (Barriento, Gereffi and Rossi, 2011). It can be divided into 2 components: measurable standards and enabling rights. Measurable standards include standards of working hours, safety, health, wages, regular contracts, social protection, number of women employed, unionization… and enabling rights include Non-discrimination, freedom of
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Gereffi’s more recent research with Joonkoo (2005) sees the evolution of the Global Commodity Chains approach into the theory of Global Value Chains. This new approach encompasses much of Smith et al’s criticisms of Global Commodity Chains. The new theory links the concept of value in chains with the global organization of industries. It incorporates governance as a key influence on the chain and sees the hybridization of producer and buyer driven chains.
Valaskakis, K. (1998). The challenge of strategic governance: Can globalization be managed? Optimum, vol. 28, no. 2, pp. 26-40.
The external environment has been analysed in previous sections, Appendix E lists internal capability and resources of Burberry by using porter’s value chain model, the VRIO framework will also be used to test whether the brand adds value by such activities or not.
Nowadays, Globalization is a main trend for the world economic. The world’s economy has become fully integrated. There are no barriers and borders to trade around the world.
Product differentiation – by offering different products, services, or product features, the company can charge higher prices, or appeal to different audiences. Use of IS have enabled new products and services, that increase the levels of convenience in using existing products and services. By acquiring PayPal, eBay greatly enhanced the ease with which customers can pay for their products. Google keeps an innovative approach towards search engines, by introducing Google Maps, Google Translate and others, which improves the ease of usage. Using online live chatting systems and social networks contributes to understanding of customers. It also adds value and improves customers’ stickiness to website (Booth, Roberts, and Sikes 2011)
Gereffii, G. (1994) introduced the concept of “supply” or “producer” driven and “buyer” driven commodity chain in identifying the different structure or organization of the GVCs. In producer driven chain, because of the technical knowhow and technology there will be a large lead firm being the influential one. The return is mainly boosted by scale economies. Its product specifications are very sensitive and interest in the protection of the knowledge, trust and relationships are very key in this kind of GVCs. Most of the time this GVCs are vertically integrated and have high barrier to entry of new actors/firms. The business relationships built here are mostly long lasting. Best examples of producer driven VCs are semi-conductor or the pharmaceuticals industries.
Globalization is an important contemporary phenomenon and it is difficult to avoid the trend. Its development as well as make people recognize each other's lives in an interdependent global village. Therefore, globalization encourages people to care about many global equity issues such as peace, justice, environmental protection. Like many phenomena, there are both sides of pros and cons in globalization. Globalization can create new opportunities for the expansion of international trade, and enhance global commodity circulation and improve cultural exchange (Krier, 2001). It is beneficial to the development of integration with the global economy. Emphasizing efficiency in terms of globalization
Value chain analyses a firm 's internal activities such as planning, production, and development, packaging and distribution so as to create value for clients. The function of the value chain is to identify the sources for cost reduction along with quality improvement. It means value chain is used to identify the strong and weak points, positive and negative points, the scope of improvement; in a nutshell, the advantages and disadvantages of the activities taking place in the system. The value chain is also called as a strategic analysis tool and it is a well-known concept in business management industry.
Value chains are essential elements of successful businesses, and how to gain a competitive advantage by analyzing them is the most important aspect. In Porter’s value-chain model, he points out that there are two types of business activities: primary activities, which include inbound logistics, operations, outbound logistics, marketing, sales and service; and support activities, which include procurement, technology development, human resources management, and firm infrastructure. In order to gain an edge, companies should focus on these activities to improve or create products that will satisfy their customers.
Lean manufacturing and just-in-time processing are great business strategies that can severely stress a supply chain. The supply chain and supply chain management is a critical operations management element for any major company to succeed and remain competitive in the global market. The supply chain is one of many pieces critical to maximizing value to the end customer and requires close management to minimize external impacts. If a company is relying on another company to supply the raw materials needed for their production line, then impacts to this other company could impact their supply chain. Careful risk management is needed to optimize performance. As a company expands into global markets and global suppliers, this risk and management challenge is multiplied. The global nature of the company could impact important activities such as transportation, funds transfers, suppliers, distributors, accounting and information sharing. Disruption to the supply chain can significantly reduce revenue, cut market share, inflate costs and threaten production. A major disruption would have obvious impacts to profit, but could have additional intangible impacts to the credibility of the company if products are not delivered on time.
Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by correctly pricing products and assessing the true costs of materials and labor, organizations can align the improvements in efficiency, quality, and profits with its strategic objectives.
Globalization, love it or hate it, but you can’t escape it. Globalization may be regarded as beneficial from an economic and business point of view, but however cannot be perceived the ditto when examined from the social sciences and humanities side of it. Globalization can be argued as a tool for economic growth, advancement and prosperity through co-operation between the developed and developing countries. The pro-globalization critics argue that the benefits that globalization brings to developing nations surpasses or outcasts the negative impacts caused by globalization and may even go a step further to state that it is the only source of hope for developing nations to prosper and stand out. However, the real question to be asked is as to what extent are the positives argued upon without taking into account the negative aspects of globalization towards developing countries. Moreover, how many developing countries out of many are exactly benefiting or even prospering from globalization is another question to consider. Therefore, my paper will dispute that indeed growth and advancement provided by globalization to developing countries is beneficial in short-term, but in the long-run, it will only bring upon negative impacts and challenges due to the obstacles involved such as exploitation of labour and resources, higher increase in poverty, and effects of multi-national corporations on local businesses and the economy, and to an extent the effects on the developing country itself.
Olav Jull Sorensen (2009): “Formation, Organisation and Management of the (Global) Value Chain I a Theoretical Perspective”
Countries around the world have closer over past few decades due to growing integration between economies. The main cause behind this growth has been globalization. There can be various definitions of globalization according to different aspects like economic activities, political, technological, cultural interactions. It brings the countries closer to each other and make them more interrelated through providing unrestrained trade and financial exchange. The process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC’s, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. Opening up the economy to globalization can have both favourable and unfavourable impact on the country’s economic growth, environment, human capital, cultural dominance etc. Since globalization has been a hot topic over last few decades, it becomes imperative to study its impact on the economic growth of the country.