Global Value Chains Flashcards
Global Value Chains =
Global Value Chains = manufacturing and assembling a product in multiple countries, with each step adding value to the product.
About: GVCs
- Key facilitator of contemporary globalisation. All about flows: of materials, goods, information, knowledge, finance, people.
- Activities in a GVC can be within a single or multiple firms.
- Roughly 80% of global trade takes place through GVCs.
Types of GVC
- Hierarchal
- Captive chains
- Relational chains
- Modular chains
Types of GVC: HIERARCHAL
HIERARCHAL
Fully internalised operations of vertically integrated firms. When product specifications can’t be codified, products are complex or highly competent suppliers can’t be found.
Types of GVC: CAPTIVE CHAINS
CAPTIVE CHAINS
Involve suppliers or intermediate customers with low levels of capabilities who require high levels of support and are the subject of well-developed supply chain management from lead firms (“chain governor”)
eg, US small chicken suppliers.
Types of GVC: RELATIONAL CHAINS
RELATIONAL CHAINS
Long-term relationships between lead firms and suppliers with high levels of capabilities and more autonomous.
eg, automobile sector
Types of GVC: MODULAR CHAINS
MODULAR CHAINS
Outsourcing of specific tasks to independent suppliers, often located in different countries. Suppliers typically make products / provide services to a customer’s specifications.
What makes a GVC different?
- Complexity of transactions
- Codifiability of transactions
- Competence of suppliers
What makes a GVC different?:
COMPLEXITY OF TRANSACTIONS
COMPLEXITY OF TRANSACTIONS
More complex transactions require greater interaction among actors in GVCs so stronger forms of governance is required, rather than simple price-based markets.
What makes a GVC different?:
CODIFIABILITY OF TRANSACTIONS
CODIFIABILITY OF TRANSACTION
Some industries cofidy complex information so data can be processed between GVC partners with relative ease using advance information technology.
What makes a GVC different?:
COMPETENCE OF SUPPLIERS
COMPETENCE OF SUPPLIERS
The ability to receive and act upon complex information/instructions from lead firms requires a high degree of competence from suppliers.
Dimensions of GVC analysis
- INPUT-OUTPUT STRUCTURE
Transforming raw materials to final products. - GEOGRAPHICAL CONTEXT
Location and global/regional spread of GVC - INSTITUTIONAL CONTEXT
Political, social, institutional dynamics eg, unethical work environments in China, Cambodia, India - GOVERNANCE CONTEXT
Nature of control and co-ordination of GVC.
Types of GVC upgrading
- PROCESS UPGRADING
eg, use of more complex technology - PRODUCT UPGRADING
eg, move to more sophisticated product lines - FUNCTIONAL UPGRADING
eg, move to new function in GVC requiring new skill content - INTER-SECTOR UPGRADING
eg, shift to new and related industries
Eg. Bangladesh + Cambodia becoming more popular for manufacturing clothes, as China moves into other sectors eg, tech.
Moving up the value chain =
= becoming a higher value product.
eg, would pay hundreds for Nike and 20 quid for other trainers.
Advantages of GVCs
- Participation often involves increases in trade and FDI which enables countires eg, China, to develop industries and narrow technological gap with rest of world in a short period.
- Directly contribute toward overall GDP of respective economies, provide employment opportunities for industrial development and help increase transfer of technology.
