Globalization of Value Chain (Part I)

1. Globalization of Value Chain (Part I)

2. What is Value Chain? • A value chain is a chain of activities. Products pass through all activities of the chain in order and at each activity the product gains some value. • The chain of activities gives the products more added value than the sum of added values of all activities

3. Globalization of Value Chain • The globalization of value chain caused by two main reasons: • The desire to increase efficiency lead to source inputs from more efficient producers • The development of new emerging markets and access to strategic assets to tap into foreign markets

4. Global Value Chain Process • Two-way process with trade and foreign direct investment between developed countries and developing countries • The increase of manufactured exports of developing countries is associated with the increase of the corresponding imports in these countries due to the expanding of domestics markets and demand for intermediated products

5. Economic Impact of Global Value Chain • International Trade • Foreign Direct Investment • Infrastructure Investment • Emerging Market and Developing Countries • Multinational Enterprise and operation flexibility

6. Productivity Impact of Global Value Chain • Economies of scale and comparative advantage lead to better, cheaper inputs to improve the productivity • Outsourcing and off-shoring of less efficient activities lead to the increase of productivity and innovative activities • Providing channel for flows of foreign technology • The multinational firms has direct or indirect contribution to the productivity of host countries

7. Knowledge Economy and Global Value Chain • Knowledge-intensive high-tech manufacturing industries and market services provide comparative advantages and competitiveness over labor-intensive • Internationalization of R&D promote faster technological change and offer a large pool of well-trained researchers with relatively low labor cost

8. Drivers of Global Value Chain • Innovation • Entrepreneurship • Education • Technology and Infrastructure

9. Business Functions of GVC • Research and Development • Design of Products, Services, or Processes • Production • Marketing & Sales • Distribution • Customer Service

10. Case Study : Unilever’s Leveraging Community Values One of the largest consumer goods companies with 250,000 employee in 100 countries Invest 2.5% of annual turnover to basics research and product innovation, which leads to more than 400 patent application per year

11. Unilever’s Challenge • To make knowledge contribute to top-line growth and profitability • To capture or transfer tacit knowledge from employees and promote organization learning • To reach out the community of practice to address the knowledge gaps

12. Unilever’s Strategies • To organize knowledge workshop for key experts and practitioners to understand about the knowledge strengths and weaknesses. • To form Knowledge Management Group to ensure the effective and efficient operations of the firm’s communities of practice.

13. How did Knowledge Management Group help Unilever ? • To promote organization learning and lead to efficiency improvement, increased innovation and improved risk management • To bring together the most talented people in their area with clear and measurable objectives and operational plan • To design community guideline and train for community of practice

14. The Outcome • To establish three global communities of practice • To share expertise and good practice • Rapid and effective implementation of good practice • Potential of savings from Non-Production Items buying communities

15. Discuss the following questions: • What problems do Unilever address? How does knowledge management initiative help solve these problems? • What issues and challenges do knowledge management present? What can be done to address these issues? • What are the business as well as the technology issues that should be addressed when Unilever organize the community of practice ?