The Issue:
Most export strategy-makers focus their attention on the relationship
between the exporter and the foreign buyer. However, achieving and
sustaining competitive advantage within a given product or industry
sector requires a more systemic and inclusive approach to strategy
definition. The value chain approach provides the answer.
The
Proposition:
Strategy-makers should develop sector-level strategy on the basis of
analysis of the sector’s value chain.
The
value chain approach to strategy development starts with the key
requirements of the foreign buyer. These requirements determine the
sector’s critical success factors. Within the context of
these critical success factors, the value chain approach analyzes the
full range of activities and relationships (i.e. linkages) that are
required to bring the product from conception, through the various
phases of design, production, packaging, marketing, branding and
delivery to the final consumer, as well as final disposal of the
product after use.
In
other words, the value chain approach views production as only one of
a number of value-added links within the chain.
Taking this systemic approach ensures that the analysis covers the
operations of all "actors" whose performance has an impact on the
sector’s international competitiveness (from, for example, the
boat-builder to the fisherman, to the fish merchant to the fish
processor to packagers and package-makers and the packaging
importers, to managers of the "cold chain" to transporters, to
airport handlers, to the foreign buyer, to the retailer and to the
final consumer). It thereby enables the strategy-maker to identify:
·
the
linkages within the value chain that contribute the greatest value
(actual or potential) in terms of meeting the sector’s critical
success factors;
·
the
linkages that represent the greatest bottlenecks to competitiveness
and to capturing and retaining maximum value; and, based on this
analysis,
·
the
linkages upon which the trade support network must focus.
As
importantly, the value chain approach permits the strategy-maker to
understand the sector's current and potential contribution to overall
economic and social development. It therefore facilitates the
selection of which sectors should be given higher priority within the
national export strategy.
Focus of the Debate:
Despite its utility, the value chain approach is not used extensively
in strategy analysis and design. Why not?
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Related material from earlier
Executive Forums and publications
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