1. GLOBAL VALUE CHAIN
Report by Alfredo V. Primicias III
In partial fulfillment of IR 204| Tues. 6pm -9pm | Dr. Cabegin
University of the Philippines- Diliman, Quezon City

2. Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
2What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
1. GVC stands for-- 5 points
a) Global Volume Consumption
b) Gas Valve Compound
c) Global Value Chain
C
2. Globalization is (pg 15, Handbook for Value Chain by R Kaplinsky and M Morris)-- 10 points
a) pervasive decline in barriers to the global flow of information,
ideas, factors, technology and goods.
b.) process of international integration from the interchange of world
views
c.) variable that is accessible in every scope
A
3. 4 Key Dimensions of Global Commodity Chains are-- 15 points
(1) Input- Output Structure
(2) Geographical Coverage
(3) Form of Governance
(4) Institutional Framework
(pg 7, A New Approach to GVC Analysis by J Keane)
a) TRUE
b.) FALSE
A

3. Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
3
4. Global Foreign Direct Investment (FDI) fell to 18% from US$1.25T in 2011
to US$ 1.95T- 20 points
a) True
b) False
(pg 30, World Investment Report 2013)
B
Developing countries inserting into the global economy through
commodity exports have little opportunities to sustain income growth in the
long run. Only by downgrading into high-value added processes within
primary industries or diversifying into technology-based and skill intensive
sectors, will they be able to seize the development opportunities brought
about by internationalization.- 30 points
a) True
b) False
(pg 31, Understanding and Escaping Commodity dependency, O Farfan)
B
GLOBAL VALUE CHAIN
-- from US$1.65T to US$ 1.35T

4. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) International Trade
2.) Global GDP
3.) Employment
Significance
1.) Understand how global industries are organized
2.) Trace shifting patterns of global production
3.) Focus on Value Added- conception to production
Framework
1.) How China and India became new drivers
2.) Why process certifications = export- oriented
success
3.) What demand- driven workforce development is
Importance
Pages 2, 3: Global Value Chain Analysis: A Primer by Gary Gereffi and Karina Stark/ 2011

5. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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Source: Graphic News Boeing Dreamliner 787
Full range of activities that firms and workers perform to bring a product from its
conception to end use and beyond.

6. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
6
China assembles all iPods, but it only gets about $4 per unit –
or just over 1% of the US retail price of $300
451 parts that go into the iPod
The retail
value of the
30-gigabyte
video iPod that
the authors
examined was
$299 in
June, 2007
The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80
for each of these video iPods it sells, which is by far the largest piece of value added in the entire
supply chain. Apple figured out how to combine 451 mostly generic parts into a valuable product.
Hard Drive by Toshiba  Japanese company, most of its hard drives made in
the Philippines and China; it costs about $73 - $54 in parts and labor -- so the
value that Toshiba added to the hard drive was $19 plus its own direct labor costs
Video/multimedia processor chip by Broadcom American company
with manufactures facilities in Taiwan. This component costs $8.
Controller chip by Portal Player American company with
manufactures .This component costs $5 .
-Final assembly done in China, costs only about $4 a unit
The unaccounted-for parts and labor costs involved in making
the iPod came to about $110
The largest share of the value added in the iPod goes to
enterprises in the United States $163 of the iPod’s $299 retail
value in the United States was captured by American companies
and workers, breaking it down to $75 for distribution and retail costs,
$80 to Apple, and $8 to various domestic component makers.
Source: Varian, Hal R. The New York Times, June 28, 2007. An iPod Has Global Value. Ask the (Many) Countries That Make It.

7. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
7
History
For developing countries, GVCs is as
old as when we started exporting our
commodities.
However, production, design, and
marketing used to be more vertically
integrated in developed countries.
Since 1980s – low costs of ICTs and
wage differences, lower costs of
transport, led to fragmentation of
production – unbundling.
GVC Today
• Before countries had to build deep
and wide industrial bases before
becoming competitive. US,
Germany, Japan.
• Today, countries take part in
industrial production by joining
international supply chains.
Baldwin: ‘join-instead-of-build’
development paradigm. Emerging
economies have adopted this new
strategy.

8. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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What is a value chain?
A value chain describes the full range of activities that firms and workers carry
out to bring a product from its conception to its end use and beyond.
Source: CGGC (http://www.cggc.duke.edu), More Information: Global Value Chains (www.globalvaluechains.org )
8

9. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
9
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
Process that brings product or service from
conception to consumer’s hands
Input- Output
Structure
Gereffi, 1995 | Humphrey and Schmidt 2002
Inputs
Prod. for
Export
Packing &
Storage
Processing
Distributi
on &
Marketing
Inputs
Prod. for
Export
Packing &
Storage
Processing
Distributi
on &
Marketing

10. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
10
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
Developing Countries offer
1.) Low Labor Cost
2.) Raw Materials
Developed Countries offer
1.) Highly Educated Talent (R&D)
2.) Product Design
Geographical
Consideration
Gereffi, 1995 | Humphrey and Schmidt 2002
Regionalization:
EU
ASEAN

11. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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http://online.wsj.com/article/SB10001424052748704828104576021142902413796.html

12. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
12
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
Authority and Power relationships that determine
how financial, material and HR are allocated and
flow within a chainGovernance
Structure
Gereffi, 1995 | Humphrey and Schmidt 2002
2 Terms of Governance:
1.) Buyer- Driven (WalMart, Tesco, Nike, SM)
2.) Producer- Driven (vertically integrated)

13. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
13
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
1.) Market
2.) Modular
3.) Relational
4.) Captive
5.) Hierarchy
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

14. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
14
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
1.) Market
•Transactions are simple
•Information is easily transmitted
•Suppliers can make products with minimal inputs
from buyers
•No formal cooperation between ‘actors’
•Price is main consideration
•McDonalds and Goldilocks
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

15. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
15
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
2.) Modular
•Complex transactions are easy to codify
•Suppliers make products according to specifications
using generic machines that spread investments
across a wide customer base
•Mexico and US– jeans industry
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

16. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
16
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
3.) Relational
•Buyers and Sellers rely on complex information that
is not easily transmitted or learned
•‘Lead Firms’ specify what is needed; exerts level of
control over suppliers
•Intel and Amkor Anam (Anam Tech)
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

17. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
17
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
4.) Captive
•Suppliers are dependent on Buyers who exert great
deal of power
•High degree of monitoring and control by the ‘Lead
Firm’
•Offshoring (Sykes, Convergys)
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

18. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
18
What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC
GVC= Global Value Chain
1.) Input- Output Structure
2.) Geographical Consideration
3.) Governance Structure
4.) Institutional Context
4 Basic
Dimensions*
5.) Hierarchy
•Vertical integration
•Product specifications can’t be codified, products
are complex
Governance
Structure
5 Typology
Gereffi, 1995 | Humphrey and Schmidt 2002

19. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
19
191919
Developing Country Examples in GVCs
SOFTWARE INDUSTRY
Microsoft and Egypt
Egyptian firms translate software
products of leading brands into
Arabic, provide support package to
users, running call centers. They
have now branched into software
development market in the Middle
East.
IBM and Vietnam
Firms provide IBM software services
to clients – banks, enterprises, the
government Others distribute
hardware
Participation in GVC makes
upgrading easier- local firms
have access to lead firm’s
training. However, they sell and
adapt established products and
services. Genuine innovation is
still in infancy. Firms lack
maturity to compete globally.
AUTO INDUSTRY
Toyota and South Africa
Toyota South Africa managed to export a couple of models
globally. Local firms supplying to the first tier supplier
experienced high competition to meeting technology,
quality standards.
Volkswagen and Mexico
No SME has been able to use link to GVC as a springboard
for its own internationalization. Import inputs, add little
value to products.
Constraints: lack of skill labor, infrastructure, lack
of finance to upgrade operations to meet
international standards, no competitive edge in
technology

20. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
20
2020
© 2010 Center on Globalization, Governance & Competitiveness© 2010 Center on Globalization, Governance & Competitiveness
Offshore Services Value Chain

21. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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212121
© 2010 Center on Globalization, Governance & Competitiveness© 2010 Center on Globalization, Governance & Competitiveness
Mapping Selected Countries in the Offshore Services
Value Chain
12

22. Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
222222
Factors that Hinder Lower-Income Countries to Enter GVCs
1. Being technology savvy is important - Knowledge intensive products
depend on specialized and reliable suppliers. Low-income countries tend
to be involved in low-value-added segments of chains; and in sectors
where chains are shorter and less technologically intensive (eg. apparel,
agriculture).
2. Need medium to large enterprises for large scale production.
3. Require investments to ensure timely shipments, high quality outputs.
4. Management expertise necessary to meet complex GVC management
issues
5. Size of the domestic market matters – attracts foreign forms . Smaller
developing countries have less leverage to create such a strong linkage
with lead firms.
6. Trade and transport facilitation is important, but requires large financial
resources. In recent years, assistance has increased but has gone to
middle-income countries. In LDCs, donor resources may be competing with
other priorities – health and education.
(UNCTAD, 2011)
22What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC

23. Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
232323
In a NutShell…
1. Participation in GVCs is useful.
2. Ultimate objective must be building the domestic productive capacity (eg.
domestic industry in textiles and apparel).
3. Developing countries inserting into the global economy through commodity
exports have little opportunities to sustain income growth in the long run. Only by
upgrading into high-value added processes within primary industries or
diversifying into technology-based and skill intensive sectors, will they be able to
seize the development opportunities brought about by globalization.
4. In addition, and in most cases, poor framework conditions and deficient structural
drivers – including skills, technology and innovation – largely inhibit the
emergence of industrial capabilities.
23What is
GVC?
Why GVC is
analyzed?
Relevance of
GVC

24. GLOBAL VALUE CHAIN
Alfredo V. Primicias III | IR 204 | Dr. Cabegin| Tues. 6pm- 9pm
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242424
Gary Gereffi, Director, CGGC
Duke University
Center on Globalization, Governance &
Competitiveness
ggere@soc.duke.edu
http://www.wto.org/english/res_e/statis_e/miwi_e/miwi_e.htm