In the era of globalization and international trade, global value chains (GVCs) have emerged as an important avenue for economic development especially for developing countries. GVCs allow small companies, and enterprises in low income countries to take part in the increasingly integrated global economy. A value chain refers to the range of processes involved in making a product including its conception, creation, distribution etc. and, the same process, when conducted amongst firms on an international level is considered a global value chain (Gereffi and Fernandez-Stark 4). The framework of GVCs is very detailed - it allows us to understand the complex processes and intricate procedures for production in global industries and the role various …show more content…
It utilizes various components along a value chain such as regulations, processes, markets, products and technologies to provide a complete picture of how firms "govern/top down" and how firms, countries or regions "upgrade/bottom up" (Gereffi and Fernandez-Stark 4). Gereffi identifies four dimensions of GVC research - input/output focuses on the procedures involved in converting raw materials into finished products and how value addition occurs at each step of the process; geography entails understanding the distribution of international supply chains and how they collectively form global value chains; governance discusses the coordination and control aspect of GVCs where some actors have more authority than others, and institutional context refers to different policies and conditions that affect the economic dynamics of value …show more content…
Another important aspect is upgrading and it refers to the movement of firms, countries or regions from low value activities to ones of higher value so that they can reap more benefits and become more actively involved in the global value addition process. Upgrading is affected by many factors including the institutional context of the countries involved in the value chain and the input/output structure. Depending on the country and industry, upgrading can be linear process where proficiency at one stage is required for upward movement in the value addition process, as is the case for horticulture and apparel industries (Gareffi and Fernandez-Stark 14). Non-linear patterns are visible in industries such as tourism and offshore
Royal Caribbean Cruise Ltd (RCCL) has two distinct supply chains which create a unique challenge. Each supply chain is managed by a Provision Master. The first supply chain includes all food, beverage, and lodging inventories that needed for the trips. The second supply chain encompasses “corporate spend” materials, such as office supplies, printing services, hardware and software, printed materials, computer supplies, marine consumables (spare parts, fuel, lubricants, any and all services associated with the ship maintenance and etc).
When looking at Target’s value chain, it is evident that they apply aspects of both design and corporate responsibility while thinking through every decision they make to ensure it lives up to their values and helps the world. Starting at the top, they look at design. Design is what they call the heart of the business. Looking at every detail from the big picture to the small things that make a Target shopping experience, the goal is to do it with greater efficiency, style and smarts. (Corporate Responsibility Report, 2014).
With the advent of the Internet, decreased shipping costs, and the removal of trade barriers, the world market has shrunk in such a way that everyone can be a player. While many businesses thrive solely on serving a small local area, a globalized company has the benefits of increased customer markets, gross production, and brand awareness. Take for example Coca-Cola; this multi-national corporation offers products in countries all over the world, operates in over 200 of those countries with the help of its franchisees, and is the most well-known beverage companies. It is interesting to note however, that as positive as globalization may seem, there are many negative ramifications and a large population of detractors to this movement. While increased product availability is good for profits, if a local market is inundated with imported products, locally grown or manufactured items may be squeezed out, to the detriment of the local economy. Although it is cost effective to have your product produced in another country with low wages, you are essentially taking away jobs from the people of your own country, negatively impacting your national economy. However, if you manufacture your products in a country with higher wages, you must increase your products’ prices which may be harmful to your profits. While maximizing your companies profits is always of great importance, it is essential that you weigh the pros and cons of globalization and its effects on not only your company, but the areas in which you wish to spread.
The organization has had to ensure that it has retail stores in many countries globally and website options in more than 100 countries. The company further enhances access of online stores in more than 37 countries which is accessible all the time and people are able to access the services regardless of their location. Globalization further affects the organization in the sense of international market management which requires it to engage in strictly global decision making. The organization’s production networks have been geared to enhancing global competition (Lüsted, 2012) .The Company is further good when it comes to seizing the opportunities available in global market. For the organization to find efficient as well as cheap means of production, it has to bargain hard so as to allow its contractors to have low profits. This mostly is consequential to the suppliers cutting corners with the use of cheap
Gereffi (1994), a key author in this area of research, defined Global Commodity Chains as; ‘sets of interorganisational networks clustered around one commodity or product linking households, enterprises and sates to one another within the world economy”. This global interconnectedness rose out of commodity chains that out sourced some of their production to other countries as a way of reducing costs and gaining. Commodity chains refer to the whole range of design, production and marketing of a product. (Gereffi 1999) Gereffi (1994) identified three key characteristics of Global Commodity Chains; they have a specific input to output link production chain, a geography in the sense that various activities are located in different places and there is a governance structure determining the power relationships within the chain.
The emergence of INVs is one of the defining features of modern global capitalism (Oviatt and McDougall, 1994). These INVs benefit from the globalized economy in various ways extending their technological learning by tapping into various sources of innovation and competitive advantages as found in the results of a study by Zahra, Ireland and Hitt (2000). Oviatt and McDougall (1994) identified four types of INVs using two dimensions: coordination of value chain activities and the number of countries involved namely- export/import start-ups, multinational trader, geographical focused start ups and global start-up...
Competitive advantage is not created within a single firm alone. Efficiency in internal operations is essential but not necessarily sufficient to compete globally. Factors external to the business are increasingly important. Each firm is inherently part of a "cluster" of activities made up of firms along the value chain as well as related and supporting organizations e.g. research and development, finance, worker skills, infrastructure. In general, clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in particular fields that compete but also cooperate. A cluster may include industries that share similar workforce, input, or infrastructure needs. In addition, a cluster may have more to do with the output of the “cluster” industries. Clusters may also be defined by complementary or interdependent industries: one may produce what another needs. It has been demonstrated throughout the world that strong clusters ensure sustainable competitive advantage and that this strength has managed to help countries improve drastically on their global competitiveness.
This chart indicates the Samsung electronics value chain and also presents primary activity of Samsung includes basic research, product design and product development. Samsung arrange the first step of the value chain that relates to technology development and some product development.
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.
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.
Production, trade and investments are key players of Global Value Chains, mainly due to the fact that production processes are spread geographically with companies concentrating different stages of production in several locations through a network of suppliers and affiliates. Accordingly with a research conducted by MIT Center of Transports and Logistics (2009), with a group of 300 global companies with sales of over USD 1 billion, on average 51% of component manufacturing, 47% of final assembly, 46% of warehousing, 43% of customer service and 39% of product development took place outside the home
The paper focuses on the increased complexity of globalized organizations and methods of altering the process within the structure. Business and environment change constantly to sustain development in emerging markets and increase efficiency. Integration of relationships and processes of the world systems, help to manage local, regional and planetary balance to manage duplication of success become conceivable. The retail giant Wal-Mart exhibits its ability to transform the organization asynchronously with the increase integration of globalization.’ Wal-Mart unveils the type of integration possible between globalization, and business services as it adapts, eliminating redundancies and repetitive movement. It observes the effect and influence, propagated on business through it use of supply chains, and influence.
The aim of the value chain structure is to maximize the value creation while minimizing costs. Value Chain Analysis is a useful tool for working out how you can create the greatest possible value for your customers. Value chain analysis relies on the rudimentary economic principle of competitive advantage -companies are best served by operating in divisions where they have a relative prolific benefit compared to their competitors. Concomitantly, companies should ask themselves where they can deliver the paramount value to their customer. To conduct a value chain analysis, the company begins by identifying each part of its production process and recognizing where steps can be purged or enhancements can be made. These improvements can result
Currently in the global environment, there is a strong sense of competition that must be achieved through better performance, almost all firms are competing in international markets due to the reduction in barriers for capital and tariffs. With the new changes in both communication and technology, the consequences faced are that production processes are no longer within national boundaries but spread across (Debrah & Smith, 2002).
Olav Jull Sorensen (2009): “Formation, Organisation and Management of the (Global) Value Chain I a Theoretical Perspective”