Global Value Chain Concept / Strategy Development
THE GLOBAL VALUE CHAIN CONCEPT
SHAPE, Compete, Discover and Dialogue products are built on the concept that markets lead trade and business growth and therefore drive the structure and operations of a sector. Supply, production and sales markets are becoming increasingly globalised. This means that all developing country exporters now find they are part of a chain of productive units spread over many countries, like that illustrated below.
The sequence of stages is called a value chain because every stage and service in the chain has to link together to add value to the final product or service that is delivered to a consumer. The export performance and competitiveness of any stage of a developing country’s value chain can only be as good as the combined performance of all the stages, trade support and business services in the chain, and in those countries supplying it. SHAPE uses the concept of global sector value chains as a way to diagnose issues and opportunities and engage all parts of the business community in strategy development.
STRATEGY DEVELOPMENT STARTS AT THE SECTOR LEVEL
The diagram below illustrates the market and business environment of an exporter. At the centre, 1: an entrepreneur with a product and service offer to the market and the value-adding factors that are under its direct control. In layer 2: are the business services that support each enterprise directly. In layer 3: are the trade facilitation services, national policies and trade support services that cover all exporters in a sector. Levels 2 & 3 together are called the “Sector enabling environment”. Level 4 represents designated markets, with their costs and competitiveness factors.
In developing countries the sector-enabling environment is often seen to be adding more costs and uncertainties than benefits. Studies have shown that it also has a greater impact on enterprise competitiveness than the factors that are under the control of each business. In competitive and economically successful countries most of the services provided in layers 2 and 3 are aligned to work in favour of exporters and “enable” them to optimise their capabilities, offers and delivery performance to customers.
Other research has shown that investment in production, value addition and business development by entrepreneurs in developing countries increases when a sector’s enabling environment services are improved and made more reliable. The entrepreneurs also worked with a longer planning and investment horizon, benefiting employment and export earnings.
In most countries there are also many national issues to be addressed, existing development projects and investments to be taken into consideration. The techniques contained in these products ensure that all the above factors are addressed. Participants illustrate their interdependence and how each factor or service is interrelated with overall trade performance.
The sector level is where economic, social and environmental impact is created by industry and measured. It is also the level where most individual stakeholders consider they have some common interest and inter-dependency.