1. Integration and Expansion of SMEs into Agribusiness Global Value Chain in APEC Region
Chackrit Duangphastra,PhD
Director of Transportation Institute , Chulaongkorn University, Thailand
Chackrit Duangphastra, PhD

2. Outline of Presentation
Global Value Chain (GVC) in agricultural business
Research finding on the promotion of participation of SME in Agro business in GVC in APEC region
Way forward for SME involvement in APEC GVC
Chackrit Duangphastra, PhD

3. Global Value Chain : GVC
Full range of activities that are required to bring a product from its concept, through its design, its sourced materials and intermediates inputs, its marketing and distribution, and its support to final consumer in international context.
Increasing GVC activities in Agro based industry resulting from growing local and international market demand, more production in some countries needed for export, seek greater competitiveness from globalization to lower production cost, labor, tax incentive, better logistics connectivity, and trade and investment liberalization
Chackrit Duangphastra, PhD

4. Snapshot of development of Agro based and Food Industry in Thailand
Prior to 1960: production to serve local demand
Employed low technology and local wisdom to preserve food and little link to global market
1960 to 1970: start production to substitute import
Import raw materials and technologies to start modernize production system such as canned food, sweeten condensed milk
1970 to 1980: start exportation
Start exportation but still lack of production skills and lack of standard and quality improvement
1980 to 1990: growing period
Used labor cost competitiveness and import high technology from Europe and APEC economy. Economy of scale and OEM is key. Product champion: canned seafood, rice, canned and processed fruits, frozen chicken and frozen seafood
1990: trade liberalization and greater international competition
More competition from lower cost agro based makers
Value added and quality standard are key issues.
Pressure from MNC and buyer to show food safety and quality standards such as ISO and HACCP
Chackrit Duangphastra, PhD

5. New Challenges for Agro Based and Food Industries in Asia
Food safety and Food quality are outstanding issues to doing business
From Farm to Table Value Chain
Need market diversification and product diversification to avoid competition
Labor shortage
Attitude to work in agro based and food industries compared to other production and service sector such as telecom, banking, automotive sectors, and E-commerce
Too many standards
CODEX, HACCP GMP, Low Acid Canned food, Seafood standard, Animal welfare, Halal, Greendot, and more to come
Non Tariff Measures, especially SPS, contamination, product standard, accreditation, labor and environmental issues
Chackrit Duangphastra, PhD

6. Analysis of Diamond Model to realize competitiveness
Demand Conditions
(+) Various patterns of consumption (ready to eat, ready to cook, eat out)
(+) consumer sophistication
(+) competition in food retails and franchise increase consumer sophistication
(+) Production gradually move from PUSH to PULL
Factor Conditions
(+) local raw materials are available
(-) labor shortage
(-) lower quality of soil and water
Supporting Industries
(+) emergence of production cluster and contract farming
(-) many trade association (but limited link to unorganized SME)
(-) R&D and investment in technology is limited
(-) only supply chain but no supply chain management
Strategy, Structure and Rivalry
(+) Value added, quality improvement, focus on production and distribution standard
(-) lack of branding
(-) complicated government procedures along international value chain
Chackrit Duangphastra, PhD

7. Big players in Agro based Business in APEC: Food Processing
Players from APEC
Food processing
USA: Mondelez International, Archer Daniels Midland, Kraft Foods, Tyson Foods, Campbell Soup, JM Smucker, Coca-Cola, Pepsi Co
Singapore: Olam International, Golden Agri Resources , Wilmar International
China: China Mengniu Dairy, WH Group, Inner Mongolia Yili, Tingyi Holding, New Hope Liuhe
Taiwan: Uni President
Korea: CJ group
Thailand: Charoen Pokphand Foods, Thai Beverage
Malaysia: IOI Group
Japan: Nippon Meat Packers, Asahi Group, Kirin Holdings, Ajinomoto, Meiji Holdings
Players from Non APEC but located in APEC region
Food Processing
Switzerland: Nestle
Denmark: Carlsberg
Netherlands: Heineken
Chackrit Duangphastra, PhD

8. Big players in Agro based Business in APEC: Food Retail
Players from APEC
Food retail
Japan: Seven & I Holding, Aeon
Australia: Wesfarmers, Woolworths
USA: Kroger, Sysco, Whole Foods Market,
Thailand: CP All
Taiwan: President Chain Store
Players from Non APEC but located in APEC region
France: Carrefour
UK: Tesco
Netherlands: Royal Ahold
Chackrit Duangphastra, PhD

9. Big players in Agro based Business in APEC: Restaurants
Players from APEC
Restaurants
USA: McDonald’s, Starbucks
Players from Non APEC but located in APEC region
France: Carrefour
UK: Tesco
Netherlands: Royal Ahold
Chackrit Duangphastra, PhD

10. Chackrit Duangphastra, PhD

11. Global Value Chain of Thai Rice
17% 9% 7%
29%
10%
Chackrit Duangphastra, PhD

12. Global Value Chain of Thai Cassava
75% 2% 9%
Chackrit Duangphastra, PhD

13. Global Value Chain of Thai Fruit
67%
19% 7%
Chackrit Duangphastra, PhD

14. Global Value Chain of Thai Processed Fruit
18%
14%
40% 6% 8 4%
Chackrit Duangphastra, PhD

15. Chackrit Duangphastra, PhD

16. Global Value Chain of Thai Shrimp
37% 5%
41% 8% 2% 4%
Chackrit Duangphastra, PhD

17. Global Value Chain of Thai Processed Seafood
18%
14%
30% 6% 8 7%
Chackrit Duangphastra, PhD

18. Chackrit Duangphastra, PhD

19. Global Value Chain of Thai Chicken
55%
35% 3% 2% 4%
Chackrit Duangphastra, PhD

20. Global Value Chain of Thai Sugar
28%
11% 8% 8%
20%
Chackrit Duangphastra, PhD

21. Global Value Chain of Thai Coconut Oil Products
75% JP+ROK+HK
38% Pp
33% VN
29% ID
Chackrit Duangphastra, PhD

22. Global Value Chain of Thai Coconut Juice Products
28% CN+JP+ROK+HK+TW
11% USA
38% Pp
33% VN
30% ASEAN+AUS
29% ID 22
Chackrit Duangphastra, PhD
Chackrit Duangphastra, PhD

23. Critical Success Factors for developing Global Value Chain
Identify Value from Chain
Assess scenario of competitiveness within sub sectors and prioritized value chain or cluster
Actors in global value chain from producers to consumers. Alliances are important
Direct Actors who are members of chain through which product moves (such as harvesters, traders, manufacturers and consumers)
Indirect Actors who influence marketing of products (such as researchers, government, NGOs)
Chackrit Duangphastra, PhD

24. Research and Development Human Resource Management
Global Value Chain extended from Normal Value Chain to Incorporate Stakeholders and Opportunities and Risks in International Production and Marketing Networks
Margin
Procurement
Research and Development
Human Resource Management
Firm Infrastructure
Inbound Logistics
Operations
Outbound Logistics
Sales &
Marketing
Service
The Value Chain
Customer Value Different between what is paid & benefits gained
Dr.Chackrit Duangphastra

25. Competitive Advantage
Value Proposition
Product
Performance, quality, features, brand, selection, search, easy to use, safe
Price
Fair, visible, consistent, reasonable
Access
Convenient, location, nearby, at-hand in a reasonable time
Service
Ordering, delivery, return, check-out
Experience
Emotional, respect, atmosphere, familiarity, fun, relationships, community, ambience
Competitive Advantage
Availability
Cost
Differentiation
Flexibility
Speed
Continuous Improvement
SME
SME
SME LE
Group SME LE LE LE
Dr.Chackrit Duangphastra

26. Global Trends in Supply Chain Management
Customer Needs
Increasing needs for better, faster & cheaper logistics services
Increasing trends for global sourcing & Increased quality from suppliers
Increase outsourcing transportation & warehousing activities to 3rd Party Logistics
Competition
Agile competitions
Consolidation in 3rd Party Logistics Market
Technology
Move from “Push” to “Pull”
Automation for ordering processing
Cross unit visibility of logistics information
Enterprise wide database rather than separate database for each business unit
People Ware
Ability to monitor cost trade-off
Need to bring logistics employees at all levels to participate in supply chain strategies / program
Basic Philosophy
Right Product
Right Quantity
Right Source
Right Destination
Right Condition
Right Time
Right Documentation
Right Cost
Chackrit Duangphastra, PhD

27. International Strategy Options
High
Wholly owned
foreign subsidiary
Joint venture
Foreign branch
Licensing, contract manufacturing, franchising
Joint venture
Foreign branch
Product diversity
Licensing, contract manufacturing, franchising
Export
Joint venture
Low
High
Market complexity
Chackrit Duangphastra, PhD

28. Case Study of Food Value Chain
Chackrit Duangphastra, PhD

29. Food Supply Chains Planning Demand Supply Transport Farmer
Distribution
Centre
Processing
Stores
Chackrit Duangphastra, PhD

30. Global Food Supply Chain Trends
from PUSH to PULL
Farmers can no longer supply what they
want to grow
Farmers must supply what the consumer
wants
Chackrit Duangphastra, PhD

31. Global Food Supply Chain Challenges
Understanding consumers needs
Forecasting consumer trends
Determining supply capacity
Balancing supply with demand
Benefiting from the global market
Ensuring food safety
Ensuring food quality
Driving supply chain efficiency
Chackrit Duangphastra, PhD

32. Food Supply Chains Business Chain Category Chain Logistics Chain
Supplier’s
Supplier
Business Chain
Customer’s
Customer
Suppliers
Business
Customers
Supplier’s
Supplier
Category Chain
Business
Customer’s
Customer
Suppliers
Customers
Supplier’s
Supplier
Logistics Chain
Business
Customer’s
Customer
Suppliers
Customers
Supplier’s
Supplier
Customer’s
Customer
Suppliers
Planning Chain
Business
Customers
Supplier’s
Supplier
Information Chain
Customer’s
Customer
Suppliers
Business
Customers
Supplier’s
Supplier
Transactional Chain
Suppliers
Business
Customer’s
Customer
Customers
Supplier’s
Supplier
Inventory Chain
Customer’s
Customer
Suppliers
Business
Customers
Supplier’s
Supplier
Suppliers
Food Safety Chain
Business
Customer’s
Customer
Customers
Supplier’s
Supplier
Customer’s
Customer
Suppliers
Management Chain
Business
Customers
Supplier’s
Supplier
Customer’s
Customer
Suppliers
Technology Chain
Business
Customers
Chackrit Duangphastra, PhD

33. Innovation applied to Food Supply Chains
Transport
Farmer
Distribution
Centre
Processing
Stores
Chackrit Duangphastra, PhD

34. GVC brings opportunities and change to SMEs
GVC brings opportunities (sometimes pressures) to SMEs.
Reorganization of production at international level, through increased outsourcing and development of GVC, effects on SME suppliers. New niches for supply of products and services continuously emerge from fragmentation of products, where small firms can quickly position themselves, exploiting flexibility and ability to move fast
Key benefit of SME
Participation in GVC enhances SME internationalization and growth
SME focusing on multipurpose technologies have secured their position in market by becoming specialized suppliers
SME increasingly choose to outsource, even offshore, non core activities to gain competitiveness from production rationalization
Cooperation with partners upstream and downstream improves small firm’s efficiency
Innovating and keeping up with new technologies are required
Chackrit Duangphastra, PhD

35. GVC brings opportunities and challenges to SMEs
Key challenges of SME
Awareness and understanding of structure and dynamics of GVC by SMEs
Major of SME across different countries are not able to identify competitive strengths within value chain
SMEs are mainly concerned with both inadequate availability of managerial and financial resources, skill, and inability to upgrade, protect in-house technology and to innovation
Compliance with strict product quality standard required to participation in GVC
SMEs want frameworks that assist them to better manage their intellectual property
To Move up GVC, SMEs need to take up larger and more complex set of tasks as well as formulate value chain cluster.
Chackrit Duangphastra, PhD

36. Chackrit Duangphastra, PhD
Q&A Thank you
Chackrit Duangphastra, PhD
Chackrit Duangphastra, PhD