Global Value Chains - Summary

Global Value Chains (GVCs) are international networks of economic activities through which goods and services pass through multiple stages of production, processing and distribution, carried out in different countries. These chains allow the integration of national economies into the global system, where each country contributes a specific part of the production process, depending on its comparative advantages.

• Components of Global Value Chains

1. Segmentation of production processes:

- The production of a good or service is divided into several stages, carried out in different countries, such as design, component manufacturing, final assembly, marketing and distribution.

- Ex: The production of a smartphone involves design in the USA, component manufacturing in South Korea or Japan and assembly in China.

2. Roles of countries in value chains:

- Developed countries often focus on high value-added stages, such as research, design and marketing.

- Developing countries usually contribute to lower value-added stages, such as the production of raw materials or the manufacture of components.

3. International connections:

- Companies collaborate and distribute their activities between different locations to optimize costs and take advantage of local resources (labor, technology, raw materials).

• The importance of global value chains

1. Economic integration:

- Participation in GVCs allows countries to become part of the global economy, even if they do not have the capacity to produce a whole product.

- For example, a country that produces electronic components can participate in the global technology industry.

2. Economic growth:

- Integration in GVCs stimulates exports, investments and technology transfer, contributing to the diversification and modernization of the economy.

3. Specialization and comparative advantages:

- Countries can focus on what they do best (e.g. production of raw materials, IT services) and import the other components.

4. Jobs and Innovation:

- GVCs create jobs in diverse industries and encourage innovation through international cooperation.

• Concrete examples

- Automobiles: Parts of a car are manufactured in several countries (engines in Germany, electronic components in Japan), and the final assembly takes place in another location.

- Textiles: Developing countries (e.g. Bangladesh, Vietnam) produce clothing for global brands, using imported raw materials.

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