Global Value Chains & Strategy

Crafting Strategic Moves | Creating Sustainable Competitive Advantages

Sheikh Morshed Jahan

Professor, IBA, University of Dhaka
smj@iba-du.edu | +880-1828-64-9875
Agenda
• Frim Value Chain
• Industry Value Chain
• Global Value Chain (GVC)
• Value Chain Governance
• GVC Strategy
Firm Value Chain
Global Value Chain
Value Chain
Governance
GVC Governance
• Market. Market governance involves transactions that are relatively simple, information on
product specifications is easily transmitted, and producers can make products with minimal input
from buyers.
• Modular. Modular governance occurs when a product requires the firms in the chain to
undertake complex transactions that are relatively easy to codify.
• Relational. In this network-style governance pattern, interactions between buyers and sellers are
characterized by the transfer of information and embedded services based on mutual reliance
regulated through reputation, social and spatial proximity, family and ethnic ties, and the like.
• Captive. In these chains, small suppliers are dependent on a few buyers that often wield a great
deal of power and control. Such networks are frequently characterized by a high degree of
monitoring and control by the lead firm.
• Hierarchy. Hierarchical governance describes chains that are characterized by vertical integration
and managerial control within a set of lead firms that develops and manufactures products in-
house. This usually occurs when product specifications cannot be codified, products are complex,
or highly competent suppliers cannot be found.
Determinants of Governance Structure
The form of governance can change as an industry evolves and matures, and governance patterns
within an industry can vary from one stage of the chain to another. The dynamic nature of
governance can be largely accounted for with three variables: the complexity of information that
the manufacture of a product entails (design and process); the ability to codify or systematize the
transfer of knowledge to suppliers; and the capabilities of existing suppliers to efficiently and
reliably produce the product. Additional influences on the governance structure include the quality,
stability, and power of the business enabling environment and institutions, as well as other sources
of power in the chain, such as suppliers and consumers.
• Information Complexity refers to the intricacy of information and knowledge that must be
transferred to ensure a particular transaction can occur.
• Information Codification is the extent to which lead firms can convert tacit, implied information
and knowledge into explicit, concrete and situation-specific information and transmit it to
producers effectively, efficiently and at minimal cost.
• Supplier Capability refers to the ability of suppliers to meet all transaction requirements. These
may include quantity and quality specifications; on-time delivery; and environmental, labor and
safety standards.

https://www.marketlinks.org/good-practice-center/value-chain-wiki/value-chain-governance-overview
Domain Thinking & Strategy
Crafting Strategy by Connecting the Dots (Analytical Insights) …

Capitalize on
• TTF Strategic Insights
drawn from TTF, TTF-
•+ GVC and TTF-BMC
Analyses in
• GVC CRAFTING winning
STRATEGIES …

(C) 2020. Sheikh Morshed Jahan, IBA, University of Dhaka 8

Team Exercise:
Breakout-room & Beyond

• Choose an industry of relevance to Bangladesh economy. Develop its Global Value

Chain (GVC). Think of a major company of this industry....
• ... Develop a TTF-augmented GVC analysis for the company. Do the SWOT
synthesis and offer strategic insights/recommendations for the company.