Learning from

Joining, Upgrading and Being

Competitive in Global Value
Chains
A Strategic Framework
Presented for:
Sheikh Morshed Jahan

Associate Professor

Presented by:
Mazharul Islam Bin Towhid MBA 53E Roll 32

Al-Imran Bin KhodadadMBA 53E Roll 33

Nazika Nazmin Choudhury MBA 53E Roll 36

Presentation Flow

Increasing
Value Chain & trade
Global Value integration
Chain through GVCs Take-aways

Measuring a Increasing the

countrys value for trade
performance in GVCs
with regard to
GVCs
Part 1
Value Chain & Global Value Chain
Impact of GVC
What is Value Chain?
A high-level model of how businesses receive raw materials as input,
add value to the raw materials through various processes, and sell
finished products to customers
Describes the full range of activities that firms and workers do to bring a
product from its conception to its end use and beyond
Includes activities such as:
design, production, marketing, distribution and support to the final consumer
What is GVC?

Full range of activities involved in creating, producing and

delivering a product, when divided among several companies and
spread across the world
Value chains are said to be global when the activities are carried
out in inter-firm networks on a global scale (Gereffi and Fernandez-
Stark, 2011)
Impact of GVC
1) Transforming Economies:
Trade in customized intermediates should be increasing in relation to generic
products or commodities (Sturgeon and Memedovic, 2011) and that part of this trade
takes place within conglomerates.

2) Changing Paradigm:
Change of relevant strategic framework (countries to firms and GVCs)
Change of relevant economic framework (industries to tasks and business functions)
Change of relevant economic assets (endowments and stocks to flows)
Change of relevant barriers and impetus (public to private)

3) The Result Chain (Discussed later)

Impact of GVC
4) Source of Opportunities:
Second unbundling
Offers an alternative outward-looking development model driven by trade
and competitiveness
The TOSP framework: tasks, occupations, stages, and products
(Baldwin and Evenett, 2012)
 Impact of GVC
4) Source of Opportunities:
trade and GVCs only benefit large multinational firms

Developing country producers in

the agri-food sector could
upgrade to meet international
standards and start exporting
part of their production thanks
to their participation in GVCs.
Impact of GVC
4) Source of Risk:
a) Reshaping of the elasticity of international trade (higher trade elasticity and exposure to
imported crises through trade)
b) Volatility of trade flows (as they are driven by business rather than government
strategies)
c) Exclusion of a number of countries from major trade opportunities
d) The private impetus raises a number of new challenges for trade and development
policies

5) Adjusting policies to a new and rapidly changing business environment:

the organization of GVCs tends to be sector-specific (and sometimes even firm-
specific), and there are no one-size-fits-all policies (Sturgeon and Memedovic, 2012).
Part 2
Measuring a countrys performance with regard to GVCs

The participation The performance

The value for
of countries in of countries with
trade in GVCs
GVCs regard to GVCs
The participation of countries in
GVCs
The input-output structure of GVCs and trade in value-added
The World Input-Output Database (WIOD)
The OECD Inter-Country Input-Output tables
The Global Trade Analysis Project (GTAP) database
Eora global multi-region input-output (MRIO)

Principal indicators based on input-output data

The countrys participation in GVCs
The length of GVCs
The distance to final demand
The performance of countries
with regard to GVCs

Series of quantitative indicators or perception indexes

Doing Business (World Bank Group)
Logistics Performance Index (World Bank Group)
Global Competitiveness Index (World Economic Forum)
Trade Enabling Index (World Economic Forum)

Some indexes also measure the performance of countries in one specific

sector or type of activity
Offshore services attractiveness index (AT Kearney or WEF)
 The Results Chain
The value for trade in GVCs

GVC

Increasing the value for

trade

Value captured by the

country in terms of jobs,
income, technology
Increasing trade and diffusion, sustainable
investment
development, etc

Increasing competitiveness
and openness
Part 3
Increasing trade integration through GVCs
 Increasing trade integration through
GVCs
Joining GVCs Preserving Moving up the value
participation in GVCs chain

Ensuring cost Identifying the Upgrading

competitiveness threats and Task bundling
Improving the opportunities Workforce
connectivity with Responding to development and
international business priorities innovation
markets and strategies
Improving business Designing long-
and investment term strategies
climates
Fostering
innovation and
building capacity
Part 4
Increasing the value for trade in GVCs
Increasing the value for trade in
GVCs

Maximizing the benefits Minimizing the risks of

of participation in GVCs participation in GVCs

Risks Improving backward Responsible investment

linkages Competition
Increasing within GVC
transfers and spillover
Opportunities effects
GVC Governance

19
GVC Governance

Market:
Market linkages do not have to be completely transitory, as is typical of spot
markets; they can persist over time, with repeat transactions. The essential point
is that the costs of switching to new partners are low for both parties.

Modular:
Typically, suppliers in modular value chains make products to a customers
specifications, which may be more or less detailed. However, when providing
turn-key services suppliers take full responsibility for competencies
surrounding process technology, use generic machinery that limits transaction-
specific investments, and make capital outlays for components and materials on
behalf of customers.
GVC Governance
Relational:
In these networks we see complex interactions between buyers and sellers, which often create mutual
dependence and high levels of asset specificity. This may be managed through reputation, or family and
ethnic ties. Many authors have highlighted the role of spatial proximity in supporting relational value
chain linkages, but trust and reputation might well function in spatially dispersed networks where
relationships are built-up over time or are based on dispersed family and social groups (Menkhoff,
1992).

Captive:
In these networks, small suppliers are transaction wise dependent on much larger buyers. Suppliers
face significant switching costs and are, therefore, captive. Such networks are frequently characterized
by a high degree of monitoring and control by lead firms.

Hierarchy:
This governance form is characterized by vertical integration. The dominant form of governance is
managerial control, flowing from managers to subordinates or from headquarters to subsidiaries and
affiliates.
Part 5
Take-aways
Thank you