Value chain research and GVC Presented By Dr Gautam Dutta Mekong Institute

OUTLINE PRESENTATION Introduction Objective Process Outcome Q&A

Value Chain The term value chain refers to the full range of activities that are required to bring products from conception through different phases of to delivery to the final customers and disposal after use. A value chain exist when all the actors operate in a way that generates maximization of value across the chain.

Common questions that value chain should reply analysis Who are the actors that participate in businesses across value chains? Are there actors that coordinate activities in the overall value chain? What are the contractual arrangements under which actors buy and sell products? How do actors exchange information and learn about solutions to improve products and business performance? What technical, business and financial services are available to support actors in the chain?

How much value do actors add to the product in the different steps in the chain, what are their costs and how is this value distributed? What are the power relations in the chain and to what extent do they determine how economic gains and risks are distributed among chain actors? What kinds of barriers exist for firms to enter the value chain? What is the level of competitiveness of firms in the value chain? What bottlenecks exist and what opportunities are available for development (upgrading) of the value chain?  Which policies and institutions constrain/support chain actors and facilitate value chain development?

Global value chain and cluster linkage Pakistan India Twain Bangladesh pur Raw cotton Spinning Dying Knitting Thailand Selling Finishing with Japanese zipper EU

Barbie is sold in 140 countries at a rate of two dolls every second. Barbie's story begins on the outskirts of Los Angeles where Mattel's team of experts on commodity and material prices determine the optimum locations to buy the plastic resins, the cloth, the paper and other materials. Barbie has never been made in the United States. The first doll was produced in Japan in 1959, Mattel manufactures Barbie dolls in factories, two in China and one each in Indonesia and Malaysia.

More than 40% of the dolls are sold overseas, primarily in Europe and Japan. Taiwan's imported oil--about 32%--comes from Saudi Arabia. Other major sources include Oman (10%), Kuwait (10%), Iran (8%) and the United Arab Emirates (7%). Most of the moulds themselves, the most expensive item in toy making, come from the U.S. (for Barbie), Japan or Hong Kong.

Pricing Virtually all the materials used in making Barbie are shipped through Hong Kong and trucked to the Guangdong factories In most cases, the only things that China supplies are the factory space, labor and electricity. Pricing: US Retail price: $9.99 Leaving Hong Kong harbor: $2 which includes :35 cents for labor,65 cents for materials. 80 cents for transportation and overhead, 20 cents profit for the companies that manage the manufacturing process. Shipping, ground transportation, marketing, wholesale, retail, : $5.99 Approx Mattel profit:$2

Barbie's Sourcing El Segundo: Mattel Inc. U.S.: Cardboard packaging, paint pigments, moulds China: Factory space, labor, electricity Saudi Arabia: Oil Hong Kong: Management, shipping Taiwan: Refines oil into ethylene for plastic pellets for Barbie's body. Japan: Nylon hair

Nike’s Value Chain In footwear, Nike has been able to develop long-term relations with several large Korean and Taiwanese firms. With some of these firms, Nike designers create and then relay via satellite new footwear designs and styles for upcoming seasons to suppliers, who in turn, develop the prototypes. Once these prototypes are approved, these lead suppliers fax the product specifications to their various plants throughout Southeast Asia, where production can take place almost immediately. In apparel, given short product cycles and volatile trends, the situation is completely different. Nike works with numerous suppliers, most of whom are also working for other (often competitor) companies.

NIKE’S Sourcing ke Zipper Assembly Filler Label, elastic, studs, toggle and string Lining Product Design Shell BY X Performing production slicing to identify the best location/ country to undertake each stage of process, adding value along the way & integrating the entire supply chain

Cluster linkage with GVC /IPN

Orchestrate & discover value along the supply chain The Evolution of SCM Consumer Needs Product Design Development Raw Material Sourcing Factory Manufacturing Control Shipping Consolidation Forwarder Customs Clearance Local Forwarding Wholesaler Li & Fung’s Supply Chain

Integrated-Distribution Services Li & Fung Group Li & Fung Group Li & Fung Trading IDS Group Li & Fung Retailing The origins of the IDS Group can be traced back to an era of British dominance in Asian import distribution. IDS is steeped in the richness of a long-standing history and is even more privileged to benefit from the strong heritage of our parent, the Li & Fung Group. Founded in 1906, Li & Fung was one of the first Chinese-owned companies to engage in foreign trade. Today, our listed company, Li & Fung Ltd. is Asia’s pre-eminent export trading company, sourcing soft and hard goods from over forty (40) countries and is renowned for its Supply-Chain Management competency whilst Li & Fung Retailing represents some of the best-known retail consumer brands like Toys R Us & Circle-K.  Li & Fung’s latest creation, is off course what we present to you , the IDS Group. We are today a growth driven organization, an industry thought- leader and innovator, seeking solutions to the age-old challenges faced by Distributors. We have taken a hard look at the entire supply chain, seeking answers to address the unconnected and misaligned objectives of the many varied players in the chain, inefficiencies that lead to overblown inventories and retail mark-downs that costs the industry millions of wasted dollars. In a nutshell, we must turn the adversarial nature of the distribution business into one that allows for effective partnership of businesses. Integrated-Distribution Services Export Sourcing Retailing USD14 billion in 2008 Soft & Hard goods 40 countries, 70 offices USD1.7 billion in 2008 Asian Distribution Global Logistics USD900 million in 2008 Toys ‘R Us, Trinity, BLS Circle K (HK GEM) (HKSE#494) (HKSE#2387) (Privately held) 16