GVC related definitions

1. GVC related definitions Samuli Rikama

2. Scope of the project • Target to increase knowledge on globalisation / GVCs • how businesses are organised globally • seeks pieces of information on value chains => to compile more holistic view on the phenomenon • Key dimensions used: • International sourcing starting point => expanded • Business functions • Regions (country groups) Samuli Rikama / Business Structures

3. Structure of the questionnaíre • Key elements: • modules on different topics / themes • filter structure dominates the approach • different units covered by questions = > information on the affiliates asked from the enterprise • two time spans covered: either 2009-2011 or point in time information end 2011 • easier for small enterprises => more burden for large ones = all modules relevant for them Samuli Rikama / Business Structures

4. Modules included 1: General information 2: Activities of the enterprise 3: Activities of domestic affiliates 4: Activities of foreign affliliates 5: Subcontracted activities 6: International sourcing and relocation Samuli Rikama / Business Structures

5. Business functions • Business function classification used in IS worked well • Key breakdown: core and support business functions • Idea to expand some functions for GVC study • Two classes included now for different questions => problem arised from the fact that the enterprise is asked about the activity of their affiliates: but what is the core activity of affiliates? (French testing result) • The more detailed classification is slightly expanded from the IS business function classification. • The other is based on this but does not recognise core business functions Samuli Rikama / Business Structures

6. Core business function defined as: Production of final goods or services intended for the market/for third parties carried out by the enterprise and yielding income. The core business equals in most cases the primary activity of the enterprise. It may also include other (secondary) activies if the enterprise considers these to comprise part of their core functions - (Same as for IS survey). Samuli Rikama / Business Structures

7. Support business functions defined as: Support business functions (ancillary activities) are carried out in order to permit or facilitate production of goods or services intended for the market /for third parties by enterprise. The outputs of the support business functions are not themselves intended directly for the market/third parties. -(Same as for IS survey). Samuli Rikama / Business Structures

8. Support business functions in GVC, detailed • New broader classification (compared to IS): • Procurement • Distribution and logistics • Marketing and sales services • After sales services • ICT services • Finance and accounting • Other administrative and management functions • Engineering and related technical services • Research & development • Facility management Samuli Rikama / Business Structures

9. Support business functions, contents • Procurement is the acquisition of goods and/or services. It is favorable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time and location. • Distribution and logistics: Consists oftransportation activities, warehousing and order processing functions. • Marketing and sales services: Consist of market research, advertising, direct marketing services (telemarketing), exhibitions, fairs and other marketing or sales services. Also including call-centre services such as help-desks. • After sales services: consists of various customer support services. Samuli Rikama / Business Structures

10. Support business functions, contents II • ICT services: IT-services and telecommunication. IT services consist of hardware and software consultancy, customised software data processing and database services, maintenance and repair, web-hosting, other computer related and information services. Packaged software and hardware excluded. • Finance and accounting: consist of corporate financial and insurance services and accounting, book-keeping and auditing. • Other administrative and management functions: include legal services, business management and consultancy, HR management (e.g. training and education, staff recruitment, provision of temporary personnel, payroll management, health and medical services). Samuli Rikama / Business Structures

11. Support business functions, contents III • Engineering and related technical services: Engineering and related technical consultancy, technical testing, analysis and certification. Also including design services. • Research & Development: includes intramural Research and experimental development. • Facility management: includes canteen services, cleaning, security services office support services and combined facilities support services. Samuli Rikama / Business Structures

12. Business functions in GVC, aggregated • New aggregated classification (for modules 3-5): - No distinction between core and support- Otherwise close to functions in IS approach • Manufacturing • Distribution and logistics • Marketing, sales and after sales services including help desks and call centers • ICT services • Administrative and management functions • Research & development, engineering and related technical services Samuli Rikama / Business Structures

13. Business functions in GVC, aggregated • Manufacturing: includes the physical or chemical tarsfromation of matrials, substances or components into new products. The recovery and processing of waste into secondary raw materials is not part of manufacuring • Distribution and logistics: consists of trasportation activities, warehousing and order processing functions. • Marketing, sales and after sales services including help desks and call centers: Consist of market research, advertising, direct marketing services (telemarketing), exhibitions, fairs and other marketing or sales services. Also including call-centre services and after sales services such as help-desks or other customer support services. Samuli Rikama / Business Structures

14. Business functions in GVC, aggregated II • ICT services: IT-services and telecommunication. IT services consist of hardware and software consultancy, customised software data processing and database services, maintenance and repair, web-hosting, other computer related and information services. Packaged software and hardware excluded. • Administrative and management functions: include legal services, accounting, book-keeping and auditing, business management and consultancy, HR management (e.g. training and education, staff recruitment, provision of temporary personnel, payroll management, health and medical services) corporate financial and insurance services. Also including procurement functions. • Research & Development, engineering and related technical services: Include intramural research and experimental development, engineering and related technical consultancy, technical testing, analysis and certification. Also including design services. Samuli Rikama / Business Structures

15. Some considerations on the two business function approaches • Ideally one classification would be applied • Only detailed approach has been tested and overall no major problems reported. • With aggregated functions incl manufacturing the dimension of core / support is lost but some other problems solved. • How are other (core) functions recognised, e.g. construction => to be classified and specified under other functions? • Can we apply one function class in the approach and which one preferred? Samuli Rikama / Business Structures