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Global commodity chain

Global commodity chain. Definition A type of production system characterized by Goods and services linked together in a sequence of value-adding activities, which are highly integrated but take place in enterprises located in multiple countries,

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Global commodity chain

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  1. Global commodity chain • Definition • A type of production system characterized by • Goods and services linked together in a sequence of value-adding activities, • which are highly integrated but take place in enterprises located in multiple countries, • And which are governed by a set of authority/power relationships that determine how capital and labor is organized.

  2. Buyer-driven commodity chain • Definition • Chains of contracts • In which larger retailers and brands (“buyers”) • Lead decentralized production of goods organized through networks among multiple countries. • Most common for labor-intensive, low-technology products made with low-skill labor • Examples: general (Walmart), apparel (Gap, Limited), shoes (Nike, Reebok), toys (Brio, Mattel),

  3. Producer-driven commodity chain • Definition • Production system • In which large, integrated industrial enterprises (“producers”) • Directly control or participate in production of the most technology- and capital-intensive parts of the production process in multiple countries, often through equity investments in enterprises. • Most common for capital-intensive, high-technology products made with higher-skill labor • Examples: autos (GM, Ford), airplanes (Boeing, Airbus)

  4. Triangle manufacturing • “US (or other) buyers place their orders with the NIC (newly industrialized country) manufacturers they have sourced from in the past (e.g. Hong Kong or Taiwanese firms), who in turn shift some or all of the requested production to affiliated offshore factories in one or more low-wage countries (e.g. China, Indonesia, Vietnam). These affiliated offshore factories [often] have equity investments by the East Asian NIC manufacturers. The triangle is completed when the finished goods are shipped directly to the [US] buyer (Gereffi, p. 114).”

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