Global Value Chains

Question 1

What is the “smile curve” and what does it represent?

Answer 1

Shows the shift of process into foreign markets because of the increased degree of specialization:

Developed countries specialized on the high value-added stages of the value chain that require high technical knowledge (R&D, Design) and that are close to the customer (Marketing, Services)

Developing countries on the other side focused on lower value-added activities which are more tangible activities (Purchasing, Production, Distribution)

Question 2

When do global value chains make economic sense?

Answer 2

When the efficiency gains outweigh the cost of complexity

Question 3

Name disruptions of global supply chains!

Answer 3

• Natural disasters
• Operational risk
• Regulative and political concerns
• Finance problems
• Transportation disruption

Question 4

What elements do companies have to internalize to navigate geopolitical complexities?

Answer 4

Corporate due diligence:
Pay attention to regional political trend and make sure that suppliers/customers are legitimate

Corporate Diplomacy:
Do not manipulate or be manipulated by governments by developing a genuine understanding of the political interests of all countires.