What is a value chain?
Theoretically, the concept of "value chain" was proposed by Harvard Business School professor Michael Porter in 1985.
Porter believes that "Every enterprise is a collection of activities carried out in the process of designing, producing, selling, delivering and supporting its products. All these activities can be represented by a value chain. "The value creation of an enterprise is composed of a series of activities, which can be divided into two categories: basic activities and auxiliary activities. Basic activities include internal logistics, production operations, external logistics, marketing and sales, Services, etc.; and ancillary activities include procurement, technology development, human resource management and corporate infrastructure, etc. These different but interrelated production and operation activities constitute a dynamic process of creating value, that is, the value chain.
Value chains are ubiquitous in economic activities. There are industry value chains between upstream and downstream related enterprises. The connections between various business units within the enterprise constitute the enterprise’s value chain. There are also value chain connections between business units. Every value activity in the value chain will have an impact on how much value the company can ultimately achieve.
Porter's "value chain" theory reveals that the competition between enterprises is not just a competition in a certain link, but a competition in the entire value chain, and the comprehensive competitiveness of the entire value chain determines the competitiveness of the enterprise. competitiveness. In Porter's words: "The value in the minds of consumers is composed of a series of specific material and technical activities and profits within a company. When you compete with other companies, it is actually multiple internal activities that are competing, not Competition in a certain activity” (Comprehensive summary by Shenzhen Commercial Daily reporter Yuan Lei)
Comprehensive summary by Shenzhen Commercial Daily reporter Yuan Lei
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Carlos Maglinhos, Director-General of the United Nations Industrial Development Organization: Local industries are embedded in global value chains and production networks
May 31, 2004 04:29 Shenzhen Business News
What is the emerging business environment faced by global companies today? Perhaps the most appropriate answer is the high degree of globalization of production. Rapid technological progress, liberalization of trade and investment, and enforcement of international regulations have promoted the gradual extension of global value chains (GVCs) and production networks (GPNs). This global business scenario has increased opportunities to increase incomes and provide employment, but it also poses some challenges.
Participating in global value chains and global production networks can help producers in developing countries use the global market to earn more foreign exchange, diversify export products, and more importantly, master new technologies. , and improve production efficiency. But this also puts the macroeconomic and industrial environment of many countries under greater competitive pressure, forcing them to improve their physical infrastructure and business environment. In addition, small and new businesses generally do not have comparative advantages and are more vulnerable to intensified competitive pressures.
Asian Countries and Global Value Chains
More and more Asian countries and their producers are participating in global value chains and global production networks to provide products for a larger market and services. This is particularly true in East Asia and China. Three sectors are discussed here: textiles, electronics and automotive. They have typical significance in global value chains and production networks.
In the textile industry, the relocation of some links in the entire manufacturing process began in the 1950s, from North America and Western Europe to Japan. Then in the 1970s and 1980s, Hong Kong, Taiwan and South Korea became centers of garment production. In the late 1980s and early 1990s, most of the world's textiles and garments were transferred to mainland China and several Southeast Asian countries such as Indonesia, Thailand, Malaysia and the Philippines.
By the late 1990s, some South Asian countries had entered the ranks, while at the same time the shares of Hong Kong, Taiwan and South Korea were declining. The share of mainland China and Southeast Asian countries in U.S. garment imports rose from 8% in 1983 to 12% (Southeast Asia) in 2001, and China's share of 8% to 14%. If the garment export volume is US$1 billion as a benchmark, the world's major exporting countries and regions in 1980 were Hong Kong, South Korea, Taiwan, Mainland China and the United States. By 1990, Indonesia, Thailand and Malaysia, India and Pakistan will be added.
By 2000, the Philippines, Vietnam, Bangladesh and Sri Lanka also joined the ranks.
In the electronics industry, Asian countries participated in the global production system in the 1960s, when Japanese companies issued licenses to Taiwan, Hong Kong and South Korea, initially to produce semiconductor radios and handheld calculators. Since the late 1960s, companies in the United States and Western Europe have moved labor-intensive semiconductor assembly processes to Singapore, Hong Kong, Malaysia, and Thailand. Since then, Asian countries and regions have been increasingly participating in global production.
For example, hard drive production took place in the United States until the early 1980s. Southeast Asia now dominates the production of this product, accounting for 70% of the global total. Seagate is a global leader in hard disk production. Among its 22 global manufacturing companies, 64% of its factories were located in Asia in 2000. The proportion of Asian production in the company's total production was 35% in 1990, and increased to 61% in 1995. Asian employees accounted for 85% of Seagate's total workforce, rising from 70% during the same period.
In the automotive industry, many developing countries have adopted import substitution industrialization policies since the 1950s to promote the share of domestic production in this industry. Since the 1990s, trade liberalization has begun to change and form the international production organization of this industry. The automotive industry is now seen as one of the most global of all industries, with manufacturing processes and products widely distributed across the globe. Although the number of Asian countries participating in this division of labor is still limited in absolute terms, the trend is rising. ASEAN countries' share of global car and bicycle sales climbed from 1.7% in 1990 to 4% in 2001. East Asian countries, especially Indonesia, Malaysia, Thailand, the Philippines and China, although their individual shares are not large, their market expansion is rapid, which is the main factor driving the expansion of the global automobile industry in the 1990s.
The assessment of the above three areas also shows China's increasing participation in the global production process, especially in the labor-intensive sectors of the value chain. This has created great competitive pressure on manufacturers in other developing countries, which has led to public and academic debates: Will China's accession to the WTO seriously damage the competitive position of some countries? If it is negative, how will it affect the industrial division of labor in other developing countries, especially China's neighbors?
Most scholars and business people believe that relevant countries that are threatened by China's industrial competitiveness should regard China's rapid economic growth as a new opportunity rather than a threat to their own development. There are two levels of policy recommendations, one is the industrial level and the other is the national economic level. At the industrial level, countries should pay attention to the application of medium and high technologies in manufacturing. This requires improving technology and skills through upgrading education to increase production efficiency, and establishing organic forward and backward linkages between local industries and foreign industries.
At the national economic level, it is crucial to develop elements that help improve the industrial structure. This includes improving infrastructure (inland ports, export processing zones, fiscal incentives), reforming labor laws, reforming government functions and institutions, creating or expanding inter-regional trading blocs, etc. In fact, foreign investors are willing to repay these policy efforts because they are unwilling to rely solely on China or continue to rely on China beyond a certain limit because of the strategic risks involved.
Therefore, under the risk and investment diversification strategy, improvements in industrial and investment policies in Asia or other regions will help attract foreign investors. In short, these policies will help these countries first reduce the impact of investors diversifying into China; secondly, they will also increase their exports to China.
At the same time, we should also note that China itself is likely to strengthen its competitive advantages and improve efficiency by improving its technological content. In this way, China will increase production of more advanced products and move up the value chain. In this way, for the countries concerned, China can only affect countries that have not been able to implement industrial and technological upgrades to strengthen competition with China.
Improvements brought about by participation in global value chains
Participation in global value chains and global production networks may allow companies to improve efficiency in a single production activity, or to change the structure of a package of activities (through linkages or expand to another network), or expand to another value chain as a whole.
From this we can see four major categories of improvements:
1. Process improvement, that is, optimization of internal processes to do better than one's competitors (such as reducing inventory costs or losses); or improving the value chain Internal relationships (such as multiple and small quantities of timely deliveries).
2. Product improvement, that is, improvement in product quality or performance-price ratio, and more responsive response to the market (launching new products to the market faster than competitors). This is related to internal product development process improvements, as well as connections with other nodes in the value chain.
3. Functional improvement, increasing added value by changing the internal activity structure.
4. Improvements between value chains, corporate activities move to chains with higher value. For example, Taiwan has shifted from the production of semiconductor radios to the production of calculators, televisions, computer monitors, and laptops, and is now shifting to Produces WAP mobile phones.
Two different value chains
According to research, there are two types of global value chains. One is driven by buyers and the other is driven by producers. This difference deserves analysis because the dynamic mechanisms of the two, that is, the relationships and interactions they generate, are different. The opportunities presented by the two are also different.
Generally speaking, convenient technologies tend to facilitate buyer-pulled value chains, while producer-pulled value chains require more difficult technologies to master because they involve close coordination and proprietary technologies. etc.
In terms of buyer-driven value chains, large buyers can set up these value chains and networks because they have core competencies in branding and marketing. They are increasingly organized to strengthen coordination and control of production, design and marketing activities to meet the needs of target markets in developed and developing countries, as well as countries in transition.
This value chain combines typical labor-intensive industries and is closely related to developing countries, such as agricultural products and food industries, textiles, clothing and shoes, toys, furniture and other industries. For branded producers (such as Nestle's food and beverage value chain), the most important thing is to obtain as much value as possible from the R&D and marketing of their products. They are therefore very concerned about maintaining the value of their brands and deterring counterfeiting by protecting their intellectual property. Their strong market position comes from a combination of global brands and brands developing regional markets.
In terms of producer-driven value chains, the main producers in this chain control key technologies, and this technology is very important for the value chain to adapt to the final product market. They coordinate value chains and networks to help suppliers and their own customers become more efficient. This kind of chain mainly exists in medium and high-tech industries, such as automobiles, electronic products, and communications industries.
Generally speaking, producers in developing countries are mostly part of a labor-intensive buyer-driven chain. The exceptions are only some newly industrialized countries and regions in East Asia. Because these countries and regions are increasingly involved in the capital goods and intermediate goods industries, they are shifting from buyer-driven chains to producer-driven chains (automobiles, electronics, communications, etc.).
Industrial policy and manufacturing competitiveness:
Asian experience
Efficient supply chain management requires not only well-located transport infrastructure but also flexibility import and export procedures. An important feature of East Asia's economic success is its drive to improve competitiveness. The United Nations Industrial Development Organization's Competitive Industry Index (CIP) shows that from 1980 to 2000, the index of most East Asian countries continued to improve, with the exception of Hong Kong and Japan. The so-called "driving factors", that is, structural factors, have improved and improved in East Asian countries and regions in the past two decades. These factors include broad technology (domestic technology and foreign technology brought in through foreign investment and patent licensing), infrastructure, human skills (especially technical education), etc.
Another unique feature is that they are all good at supporting intermediary organizations that can support enterprises. For example, Singapore and Malaysia have established investment promotion agencies, while China has established many technology development zones to provide a dynamic environment for enterprises to develop. Singapore's Productivity and Standards Agency works with public and private enterprises to ensure that companies produce high-quality products in compliance with national, international and industry standards. Taiwan has also established a quality inspection agency to ensure that companies produce products that meet export quality requirements.
The experience of Asian countries and regions is twofold.
First of all, the formulation of industrial policies varies by country and region. Each country and region formulates its own strategy and decides what supporting institutional measures and systems to adopt to coordinate the industrial strategy. In this regard, it is critical that national innovation and learning systems are taken seriously. Secondly, it is also very important to support the factors that drive competitiveness to improve the competitiveness of the industry