Global Value Chain Essay

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In the era of globalization and international trade, global value chains (GVCs) have emerged as an important avenue for economic development especially for developing countries. GVCs allow small companies, and enterprises in low income countries to take part in the increasingly integrated global economy. A value chain refers to the range of processes involved in making a product including its conception, creation, distribution etc. and, the same process, when conducted amongst firms on an international level is considered a global value chain (Gereffi and Fernandez-Stark 4). The framework of GVCs is very detailed - it allows us to understand the complex processes and intricate procedures for production in global industries and the role various …show more content…

It utilizes various components along a value chain such as regulations, processes, markets, products and technologies to provide a complete picture of how firms "govern/top down" and how firms, countries or regions "upgrade/bottom up" (Gereffi and Fernandez-Stark 4). Gereffi identifies four dimensions of GVC research - input/output focuses on the procedures involved in converting raw materials into finished products and how value addition occurs at each step of the process; geography entails understanding the distribution of international supply chains and how they collectively form global value chains; governance discusses the coordination and control aspect of GVCs where some actors have more authority than others, and institutional context refers to different policies and conditions that affect the economic dynamics of value …show more content…

Another important aspect is upgrading and it refers to the movement of firms, countries or regions from low value activities to ones of higher value so that they can reap more benefits and become more actively involved in the global value addition process. Upgrading is affected by many factors including the institutional context of the countries involved in the value chain and the input/output structure. Depending on the country and industry, upgrading can be linear process where proficiency at one stage is required for upward movement in the value addition process, as is the case for horticulture and apparel industries (Gareffi and Fernandez-Stark 14). Non-linear patterns are visible in industries such as tourism and offshore

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