Executive Forum 2002
25-28 September
Montreux, Switzerland

Managing Competitive Advantage: The Values of National Strategy

Thursday, 26 September

Session 2: Capturing Value: A Value Chain Approach to National Export Strategy Development  

The issue  

Trade strategy-makers and exporters have traditionally focused their attention on the issues of market access and export promotion and often purely for the purpose of finding international markets for domestic products.  

However, with the evolution of trading patterns into complex value chains and increasing global product regulation, a poorly focused export strategy will lead to incorrect positioning and potential marginalisation of a developing country as just a supplier of commodities. To avoid this trap, strategy-makers and entrepreneurs must address the questions:  

• What businesses can we compete in (segmentation, knowledge, capacity and capabilities)? 
• How can we be a part of those businesses (buyer requirements, market dynamics and standards)?  

Strategies frequently benefit only those exporters and traders in a country that have influence at government levels. To be sustainable, trade strategy should also maximize the socio-economic value of export products. Poverty reduction, the informal sector, domestic suppliers, infrastructure and the balance of payments must all be taken into consideration. Where, and how, should a strategy-maker start to incorporate these difficult issues into the development of trade strategy?  

The Proposition 

We believe that a value chain approach can provide the best starting point for inclusive sector strategy formulation and capturing value from exports. It is also a robust foundation on which to build integrated national strategies to develop seamless trade processes.  

A value chain extends from raw material supply through all activities of production to the delivery of finished goods and services to a consumer. When a buyer places an order, it unites many suppliers and service providers across borders into concerted action.  It is international buyers that determine value and demand quality consistency, dependability, volume, traceability and speed of delivery to answer the requirements of consumers in their markets.  

Information on these key "value and demand-side considerations", the structure, competitive situation and information flows in a value chain are, therefore, vital to improving the performance of exports in the short term and to developing successful trade strategies in the longer term.  

Two inherent strengths of the ITC value chain approach are that it involves all "actors" and it combines a number of tools to provide an international perspective of trade sector dynamics - border in, border and border-out.  

Informal clusters, non-exporting suppliers, regulatory authorities, trade finance institutions and other intermediaries all become engaged in the strategy development and export value capture process. This rapidly motivates alignment around a common supply purpose, meaningful public/private sector dialogue and working partnerships. The proposition raises a number of questions that we would like to debate during Session 2, including:  

• How can a value chain approach contribute to building effective national trade strategies? 
• What mechanisms exist to consolidate sectoral value chain approaches into national trade strategy development? 
• What are the implications of the value chain approach for the strategic objective of ensuring a "total response capacity"?  

To launch the debate, we will present the proposition, illustrate the case with researched country examples and related experiences and then discuss the questions above.