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10 - Upgrading of Value Chains in Developing Countries
- Edited by Meine Pieter van Dijk, Jacques Trienekens
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- Book:
- Global Value Chains
- Published by:
- Amsterdam University Press
- Published online:
- 19 January 2021
- Print publication:
- 15 July 2012, pp 237-250
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Summary
Introduction
The title of this book is: Linking local producers to international markets by developing global value chains. We have given a number of examples in the previous chapters and emphasized that upgrading value chains in developing countries will increase the benefits these countries derive from being linked to world markets. China is probably the country that has benefited most from globalization, in the sense of increasing its exports and import technologies and currently buying whole companies abroad (Van Dijk, 2006). We started in chapter 1 with a Chinese consultant who indicated that developing countries need to have more control over global value chains to benefit more from their own products. That is exactly what China is practicing when it is investing in mining or other industries in Africa (Van Dijk, 2009), or when a Chinese company bought the famous IBM PC company in 2005 with its worldwide marketing network, to push China's relatively unknown computer trademark Lenovo on the world market. More control allows a country or its companies to earn more money and makes upgrading of these value chains easier. Upgrading value chains in developing countries is the topic of this chapter.
After some basic theoretical insights in chapters 1-3, this book has presented a number of cases of value chains of developing countries. This final chapter will review the upgrading strategies in these value chains. First, it will define the options for value chain upgrading, distinguishing four different strategies:
1 upgrading through an increase of value added;
2 upgrading by improving market access;
3 upgrading through better value chain governance structures; and
4 upgrading through partnerships.
These categories are derived from the elements of the framework for value chain analysis developed in chapter 3. Further, as suggested in chapter 1, attention will be paid to the major role of partnerships in upgrading processes.
Subsequently the upgrading options that are discussed in the various chapters in this book will be discussed one after another. Some of the cases focus on how to improve typical conditions/constraints for upgrading: Market access, infrastructures, and economic and social institutions. Others focus on different value chain upgrading options. We combine this analysis with a discussion how to handle value chain upgrading constraints.
3 - Value Chains in Developing Countries: A Framework for Analysis
- Edited by Meine Pieter van Dijk, Jacques Trienekens
-
- Book:
- Global Value Chains
- Published by:
- Amsterdam University Press
- Published online:
- 19 January 2021
- Print publication:
- 15 July 2012, pp 43-68
-
- Chapter
- Export citation
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Summary
Introduction
Chapters 1 and 2 of this book defined key issues for policy and research on developingcountry value chains. Globalization and expanding international markets as well as the fast growing middle- and high-income class in many developing countries offer opportunities for developing-country producers to operate in emerging regional, national and international markets. However, important barriers for these producers are the lack of an enabling environment offering institutional and infrastructural support, availability of resources and efficient and effective coordination in value chains. In particular small-scale producers in developing countries are in a disadvantageous position because they have little capital to invest, use traditional techniques, depend on family labor and lack contact with (international) market players. These BoP producers must upgrade to get access to modern markets and improve their position.
Figure 1 depicts two key perspectives on developing-country value chains: the vertical perspective where we focus on the role of multinational companies and companies operating on the national market, and their relation to smallholders (BoP producers), and the horizontal perspective including attention to collaboration between producers in, for example, cooperatives, multi-actor networks where private and public partners interact and (regional) industry clusters.
In the last decades globalization has been characterized by falling barriers on international trade due to the decrease of tariffs and lowering of price support and export subsidies, the emergence of global value chains and increasing concentration and consolidation in various links of these chains. These developments have turned many multinational companies (MNCs) into global players in the sourcing and distribution of products and has at the same time resulted in the emergence of new players in the national markets of many developing countries. However, unequal power relationships in these chains and trade barriers impact on the distribution of costs and benefits over the chain participants, keeping the high value-adding activities in Western countries. Developing-country producers struggle to strengthen their bargaining position in these chains, by horizontal collaboration between producers, by setting up alliances in sector-wide networks or through the development of regional clusters, in many cases supported by the state, and bringing about new opportunities for various actors and improvements of the competitive position of a region or country.