Global supply chains. Definition: Global supply chains (GSCs) are the connective tissue that allows fractionalized and dispersed stages of production to operate as a harmonious whole. Business model based on highly competitive settings. Cost min – Profit max
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Win-Win. Advantageous for everybody participating, but for some more than others. Not participating may not be an option anymore.
Two main implications for developing countries:
Main cause of production fragmentation was Lower Trade Costs, now is:TECHNOLOGY
…someone figured out that combining high technology with low labor cost was a profitable strategy!
Technology is become far more mobile internationally.
Technology has become more mobile due to:
Technology/know-how is one of the most valuable advantages of GSCs and thus GSCs actively protect their technology.
GSC relocation processes driven by: cost-minimization of all production processes (from idea to consumers)
GSC Cost function depends on:
The rise of GSCs affect DEVELOPMENT STRATEGIES:
Value Added …Profit sharing
Externalities…spillovers to local economy
diversification does not really matter if you don’t own the skills.