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Main article: "Global value chain

Cross border / cross region value chains[edit]

Often multinational enterprises (MNEs) developed global value chains, investing abroad and establishing affiliates that provided critical support to remaining activities at home. To enhance efficiency and to optimize profits, multinational enterprises locate "research, development, design, assembly, production of parts, marketing and branding" activities in different countries around the globe. MNEs "offshore labour-intensive activities to "China and "Mexico, for example, where the cost of labor is the lowest.(Gurría 2012)[4] the emergence of global value chains (GVCs) in the late 1990s provided a catalyst for accelerated change in the landscape of international investment and trade, with major, far-reaching consequences on governments as well as enterprises.(Gurría 2012)[4]

Global value chains (GVCs) in development[edit]

Through global value chains, there has been growth in interconnectedness as MNEs play an increasingly larger role in the internationalisation of business. In response, governments have cut Corporate income tax (CIT) rates or introduced new incentives for research and development to compete in this changing geopolitical landscape.(LeBlanc et al. 6)[7]

In an (industrial) development context, the concepts of "Global Value Chain analysis were first introduced in the 1990s (Gereffi et al.)[8] and have gradually been integrated into development policy by the "World Bank, "Unctad,[9] the "OECD and others.

Value chain analysis has also been employed in the development sector as a means of identifying poverty reduction strategies by upgrading along the value chain.[10] Although commonly associated with export-oriented trade, development practitioners have begun to highlight the importance of developing national and intra-regional chains in addition to international ones.[11]

For example, the "International Crops Research Institute for the Semi-Arid Tropics ("ICRISAT) has investigated strengthening the value chain for "sweet sorghum as a "biofuel crop in "India. Its aim in doing so was to provide a sustainable means of making ethanol that would increase the incomes of the rural poor, without sacrificing food and fodder security, while protecting the environment.[12]


The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for "strategic planning. The simpler concept of "value streams, a cross-functional process which was developed over the next decade,[13] had some success in the early 1990s.[14]

The value-chain concept has been extended beyond individual firms. It can apply to whole "supply chains and "distribution networks. The delivery of a mix of "products and "services to the end customer will mobilize different economic factors, each managing its own value chain. The industry wide synchronized interactions of those local value chains create an extended value chain, sometimes global in extent. Porter terms this larger interconnected system of value chains the "value system". A value system includes the value chains of a firm's supplier (and their suppliers all the way back), the firm itself, the firm distribution channels, and the firm's buyers (and presumably extended to the buyers of their products, and so on).

Capturing the value generated along the chain is the new approach taken by many management strategists. For example, a manufacturer might require its parts suppliers to be located nearby its assembly plant to minimize the cost of transportation. By exploiting the upstream and downstream information flowing along the value chain, the firms may try to bypass the intermediaries creating new "business models, or in other ways create improvements in its value system.

Value chain analysis has also been successfully used in large petrochemical plant maintenance organizations to show how work selection, work planning, work scheduling and finally work execution can (when considered as elements of chains) help drive lean approaches to maintenance. The Maintenance Value Chain approach is particularly successful when used as a tool for helping change management as it is seen as more user-friendly than other business process tools.

A value chain approach could also offer a meaningful alternative to evaluate private or public companies when there is a lack of publicly known data from direct competition, where the subject company is compared with, for example, a known downstream industry to have a good feel of its value by building useful correlations with its downstream companies.

Use with other analysis tools[edit]

Once value has been analysed and the contributing parts of the organisation have been identified, other models can be used in conjunction with the Value Chain to assess how these areas can either be improved or capitalised upon.

For example, a SWOT analysis can be used within the "Outbound Logistics" Function to understand what its strengths and weaknesses are, and what opportunities there may be to improve that area, or identify the threats to what may be a critical part of the value delivery system.

Equally, other models can be used to assess performance, risk, market potential, environmental waste, etc.


The Supply-Chain Council, a global trade consortium in operation with over 700 member companies, governmental, academic, and consulting groups participating in the last 10 years, manages the "Supply-Chain Operations Reference (SCOR), the de facto universal reference model for "Supply Chain including Planning, Procurement, Manufacturing, Order Management, Logistics, Returns, and Retail; Product and Service Design including Design Planning, Research, Prototyping, Integration, Launch and Revision, and Sales including CRM, Service Support, Sales, and Contract Management which are congruent to the Porter framework. The SCOR framework has been adopted by hundreds of companies as well as national entities as a standard for business excellence, and the "U.S. Department of Defense has adopted the newly launched Design-Chain Operations Reference (DCOR) framework for product design as a standard to use for managing their development processes. In addition to process elements, these reference frameworks also maintain a vast database of standard process metrics aligned to the Porter model, as well as a large and constantly researched database of prescriptive universal best practices for process execution.

See also[edit]

Human Resource value chain is to help improve business performance by applying the full capabilities of people.


  1. ^ a b Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York.: Simon and Schuster. Retrieved 9 September 2013. 
  2. ^ a b "Decision Support Tools: Porter's Value Chain". Cambridge University: Institute for Manufacturing (IfM). Retrieved 9 September 2013. 
  3. ^ Porter, Michael E. (1979). "How competitive forces shape strategy" (PDF). Harvard Business Review. Retrieved 9 September 2013. 
  4. ^ a b c d Angel Gurría (5 November 2012). The Emergence of Global Value Chains: What Do They Mean for Business. G20 Trade and Investment Promotion Summit. Mexico City: OECD. Retrieved 7 September 2013. 
  5. ^ a b Michael E. Porter (1985) Competitive advantage: creating and sustaining superior performance. The Free Press
  6. ^ Ghemawat, Pankaj (Spring 2002). "Competition and Business Strategy in Historical Perspective". Business History Review. Harvard Business Review. "SSRN 264528Freely accessible. 
  7. ^ Pierre LeBlanc; Stephen Matthews; Kirsti Mellbye (4 September 2013). The Tax Policy Landscape Five Years after the Crisis (Report). OECD Taxation Working Papers. France: "OECD. Retrieved 7 September 2013. 
  8. ^ Gereffi, G., (1994). The Organisation of Buyer-Driven Global Commodity Chains: How US Retailers Shape Overseas Production Networks. In G. Gereffi, and M. Korzeniewicz (Eds), Commodity Chains and Global Capitalism. Westport, CT: Praeger.
  9. ^
  10. ^ Jonathan Mitchell; Christopher Coles & Jodie Keane (December 2009). "Upgrading Along Value Chains: Strategies for Poverty Reduction in Latin America" (PDF). Comercio y Pobreza en Latino América (COPLA). Briefing Paper. London: Overseas Development Institute. 
  11. ^ Microlinks (2009) [Value Chain Development Wiki] Washington, D.C.: USAID.
  12. ^ Developing a sweet sorghum ethanol value chain "ICRISAT, 2013
  13. ^ Martin, James (1995). The Great Transition: Using the Seven Disciplines of Enterprise Engineering. New York: "AMACOM. "ISBN "978-0-8144-0315-0. , particularly the Con Edison example.
  14. ^ "The Horizontal Corporation". "Business Week. 1993-12-20. 

Further reading[edit]

External links[edit]

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