The Importance Of Global Value Chains

The full range of firm's activities, from the conception of a product to its end use and beyond is called value chain. It includes activities such as design, production, marketing, distribution and support to the final consumer (Porter, 1986; Giraffe et al., 2001). Generally the activities in a value chain are performed by a single company or spread among several different suppliers, enclosing goods or services within a geographical area or over different locations. The denomination of "Global value chains" reflects the trend of dispersion of value chain activities across the world. Several firms split their value chains and distributes production stages across many countries, at the same time, they outsource parts of their value chains

All the different terms relate to the increasing importance of vertical production and trading chains across countries. Production, trade and investments are key players of Global Value Chains, mainly due to the fact that production processes are spread geographically with companies concentrating different stages of production in several locations through a network of suppliers and affiliates. Accordingly with a research conducted by MIT Center of Transports and Logistics (2009), with a group of 300 global companies with sales of over USD 1 billion, on average 51% of component manufacturing, 47% of final assembly, 46% of warehousing, 43% of customer service and 39% of product development took place outside the home

The reduction of obstacles to trade and declining transport costs enhanced international trade growth. The liberalization of capital movements spurred international economic integration by eliminating restrictions on foreign direct investment, and multinational enterprises, with headquarters mostly located in developed economies, established affiliates in foreign markets. Thus, communication networks, helped to link the various stages of production across huge physical distances; economies of scale and scope remained important but on the level of individual activities rather than industries. All those factors, has considerably changed the speed and nature of economic globalization: international trade now consists of imports and exports of intermediates rather than trade in final