MNEs, GVCs and Development

Question 1

Value chain and the value network

Answer 1

The value chain describes the activities within and around an organisation which together create a product or service

VC analysis;

• Identifies clusters of activities providing particular benefits to customers
• Highlights activities which are less efficient any may need to outsource
• Requires managers to think about the role of such activities
• Cost and value of activities

Question 2

Balance Scorecard

Answer 2

Value; Financial, customer, internal, future

Question 3

The value of network

Answer 3

Supplier value chain - organisation value chain - channel value chain - customer value chain

• the value network is a set of inter-organisational links necessary to create a product
• Specialisation of roles
• Needs to understand the whole process

Key questions;

• where is the value and cost created
• which activities are vital to the organisation
• where are the profit pools
• who are the best partners

Question 4

Activity maps

Answer 4

• Identify significant success factors
• Identify higher order strategic themes
• Unpack the themes by identifying the underpinning resources

Question 5

Building Dynamic Capabilities

Answer 5

• Promote a learning organisation
• Add activities to support learning
• Manage organisation knowledge
• Develop spiral of interaction between tactic and explicit knowledge
• Question core rigidities

Question 6

Strategic Capabilities

Answer 6

• Comparative advantage derives from strategic capabilities
• Strategic capabilities comprise tangible and intangible resources deployed via competencies
• Continual improvement of cost efficiency is vital
• Strategic capabilities must be rare, robust or non substitutional
• DC needed in changing environment
• VC to understand the value creation
• Benchmarking establishes relative performance and challenges assumptions
• Stretch capabilities

Question 7

GVCs

Answer 7

• Trade is increasing driven by GVC, leading to significant amount of double counting
• Presence of MNEs drives GVC participation
• FDI shapes patterns of value added in trade
• Longer term, the ideal development path involves not just participation but also domestic value added creation

GVC
Positive;
- Value added contributes to developing country GDP
- Positive correlation between participation in GVCs and growth per capita
- Helps acquisition of tech and skills
- Building infrastructure in developing countries
Negative;
- Limited if countries only capture small share of the value chain
- Environmental impacts
- Locked into low value added activities

Countries need to make a strategic choice on whether and how to promote GVCs

• development strategies in line with specific situation
• countries may not have a choice
• requires targeting specific GVC segments

Policies matter to make GVCs work for development framework;

• Embedding GVCs in development strategy
• Enabling participation in GVCs
• Building domestic productive capacity
• Providing a strong environmental, social and governance framework
• Synergy-zing trade and investment position and institutions