Value Chain

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REVIEW OF GLOBAL VALUE CHAIN
I. Systems view of world order and relations

Three concrete systems stand out: 1. Mini system 2. World empire( make the world similar) 3. World economies ( feel the influence of some economy around) Ex: There is a German university in Vietnam The system consists of a single division of labor within one world market but contains many states and cultures. Core states concentrate on high skill, capital- intensive production (not use much labor but machine). They are militarily strong and appropriate much of the surplus of the whole world economy. Peripheral areas focus on low skill, labor intensive production and extraction of raw material: they have weak states. Semiperipheral areas have stronger states. II. Globalization: State of belonging to networks and getting into interdependencies in multi-continental level where linkage and interdependencies occur through flows and influences of capital and goods, information and ideas, people and forces. A. Cobweb of globalization: Consumer and industrial market: domestic, international, regional, global Around the consumer and industrial market are substitute products and services The substitute products and services are influences by: 1. Producers 2. Suppliers 3. Intermediaries 4. Providers. All of these things above are affected by : 1. Political systems 2. legal systems 3. cultural systems 4. natural resources and ecology 5. technology and know-how 6. government and other change agents, Note: the differences between industrial market and consumer market In a consumer market, the consumer uses the product for personal use but in an industrial market, the products are used as supply or to do the operations

1 Nguyen Anh Phuong

B. Drivers of the economic globalization: 1. Market: a. Common customer need b. Global customer c. Global market channel d. Transferable marketing Ex of Transferable marketing: An advertisement for a shampoo is made in Iran. This advertisement or marketing campaign can be used in many countries like India, Banglades,… as they have somehow similar culture and thinking. This ad keeps the same content and change the languages. 2. Cost: a. Sourcing efficiencies b. Global scale economies c. Factor productivity differentials d. High product development cost e. Rapidly changing technology 3. Government: a. Less restrictive investment and trade policies b. Compatible( to be exist or be used together without causing problems) and harmonious standardization c. Harmonious regulatory regime(particular system) 4. Competition: a. Two way trade and cross border FDI b. Global competitor c. Interdependency and integration through policy, trade, investment and management link Market Government Cost Competition

Low Domestic

high Global

2 Nguyen Anh Phuong

C. Looking for a clever choice: Offshoring and outsourcing Outsourcing refers to an organization contracting work out to a 3rd party, while offshoring refers to getting work done in a different country, usually to leverage cost advantages. It is possible to outsource work but not offshore it. For instance, hiring an outside law firm to review contracts instead of maintaining an in-house staff of lawyers. It is also possible to offshore work but not outsource it. For instance, a Dell customer service center in India to serve American clients. Offshoring outsourcing is the practice of hiring a vendor to do the work offshore, usually to lower costs and take advantage of the vendor’s expertise, economies of scale, and large and scalable labor pool Comparison chart:

Offshoring
Risks and criticism Is often criticized for transferring jobs to other countries. Other risks include geopolitical risk, language differences and poor communication Offshoring means getting work done in a different country Benefits of offshoring are usually lower costs, better availability of skilled people, and getting work done faster through a global talent pool

Outsourcing
Risk of outsourcing...
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