Analysis Of Global Value Chain

This section summarizes conceptual issues from Global value chain (GVCs) literatures that are relevant to paper’s objectives. It provides the overview of global value chain theory, and the most important concepts.

Nowadays, the globalization of economy is increased, products of one country can be consumed in other foreign countries. According Gereffi and Fernandez-Stark (2016), the evolution of GVCs has an important role in global trade, production and employment and how developing countries firms, producers and workers can access into the global economy by linking firms, workers and consumers. Especially, in developing countries, the ability to effectively joining into GVCs is a vital condition for development. It also believed a chance for

Therefore, “GVC governance refers to the content and the management of these decisions across all suppliers and sub-suppliers, the strategies behind the decisions taken and management methods chosen to implement them, and the systems through which their outcomes are monitored and reacted to” (Gibbon et al, 2008). Understanding governance as well as how a value chain is controlled facilitates firm/organization entry and development within global economy (Gereffi and Fernandez-Stark, 2016). There are five typology governance structures in the GVC analysis: markets, modular, relational, captive, and hierarchy and these can change and affect opportunities and challenges for economic and social upgrading (Gereffi and Fernandez-Stark,

Value chain upgrading includes economic upgrading and social upgrading. Economic upgrading is defined as “the possibility for (developing country) producers to move up the value chain, either by shifting to more rewarding functional positions or by making products that have more value added invested in them and that can provide better returns to producers” (Gibbon and Ponte, 2005: 87–88). Within the GVC framework, four types of economic upgrading identified that are process upgrading (applying better technology/ reorganizing activities to produce more efficiently), product upgrading (moving into more sophisticated products), functional upgrading (changing their position in the chain), and chain upgrading (firms move into new but often related industries) (Gereffi and Fernandez-Stark, 2016). Social upgrading is “the process of improvement in the rights and entitlements of workers as social actors, which enhances the quality of their employment” (Barriento, Gereffi and Rossi, 2011). It can be divided into 2 components: measurable standards and enabling rights. Measurable standards include standards of working hours, safety, health, wages, regular contracts, social protection, number of women employed, unionization… and enabling rights include Non-discrimination, freedom of