2.

3 Porter’s value chain Model

A value chain is a collection of processes that a company performs to create value for its

consumers. As a result, he asserts that value chain analysis is directly linked to competitive
advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard
Business School professor Michael Porter. The tool analyses a company’s value chain – defined
as the combination of processes that the company uses to make money.

Understanding Porter’s Value Chain model

Porter’s Value Chain model is a strategic management tool developed by Harvard Business School
professor Michael Porter.

The tool analyses a company’s value chain – defined as the combination of processes that the company
uses to make money.

Competitive advantage occurs when a business systematically examines its internal processes and how
they interact with each other. Each process in the value chain should create value that exceeds the cost
of creating that value. In other words, it should be profitable.
The strength of Porter’s model lies in its focus on customers through value chain systems. This is in
contrast to other value chain models that focus on departmental and accounting expenses, for
example. 

The primary activities of Porter’s Value Chain model

The value chain gives a company the ability to create value exceeding the cost of
providing its goods or service to customers. Porter breaks down his value chain model into five
primary processes or activities.

1. Inbound logistics

This includes the receiving, warehousing and associated inventory control of raw materials to reduce
time for clients from purchase. This also includes the nature of the relationship with suppliers.

2. Operations

Operations encompass any process that turns raw materials into a finished product ready for sale,
including labeling, branding, and packaging. These are value-creating activities that transform inputs into
products, such as developing an app or software.

3. Outbound logistics

Outbound logistics concern any process where the product is distributed to a customer. This includes
the storage and distribution of products and the processes involved in fulfilling customer orders.

4. Marketing and sales

Any processes that attempt to enhance product visibility among a target audience are included
in marketing and sales. This activity is also heavily reliant on customer relationships.

5. Services

Services include any processes that occur after a purchase has been made, including customer service,
repairs, refunds, and warranty acknowledgment.

Secondary activities

Within Porter’s Value Chain model four secondary activities support the foundational primary activities
common to most businesses.

1. Company infrastructure

Company infrastructure entails any process that supports daily business operations. Administration,
clerical, financial, and line management are all value-creating infrastructure processes.

2. Human resource management

Human resource management (HRM) covers any process related to the training, acquisition, or
termination of employees. HRM departments and their ability to hire talented and motivated staff are
crucial to a company’s competitive advantage.

3. Research and development

Technology can create a competitive advantage in Porter’s value chain because it can streamline
important processes. These include payroll automation software, customer service procedures,
and distribution networks.

4. Procurement

Procurement is simply the acquisition of necessary goods or services. The most typical example is the
procurement of raw materials and the negotiation of pricing and product purchase contracts. It may also
include the purchase of equipment, offices, buildings, and machinery.

Maximising the activities in any one of these steps allows a company to have a
competitive advantage over its industry competitors.

A successful value chain needs connections between consumer demand and what a
company produces. A value chain’s main focus is on product testing, innovation,
research and development and marketing.

Amazon Value Chain model Example

Value chain activities

Inbound logistics  

In general terms, Amazon does not source raw materials from suppliers because it does not
manufacture its own products. As a primarily online retail business, the Fulfillment by Amazon (FBA)
service allows sellers to have their items picked, packed and shipped by the company in one of its many
fulfillment centers around the world.

Value is added via immense economies of scale and additional perks such as free shipping and access to
buyer traffic. The company also takes care of customer service and product returns as part of the FBA
service.

Operations

Amazon’s operations are divided into three core segments:

 1. North America – which includes websites in the United States, Canada, and Mexico.

2. International – which includes country-specific websites in a further 13 locations such as

Australia, China, France, Germany, and Spain.

3. Amazon Web Services (AWS) – incorporating sales of cloud infrastructure services, storage and
database items, plus other services for enterprises, governments, and academic institutions.

Outbound logistics

Amazon utilizes approximately 185 fulfillment centers around the world as part of its FBA service.
Product fulfillment is supported by robotic inventory technology and then delivered via aircraft, ships,
trucks, drones, and local couriers.

Outbound logistics also encompasses the delivery of downloadable products and physical store sales
such as those from the Whole Foods Market chain.

Marketing and sales

Amazon spends billions of dollars on marketing each year across online and offline channels. The
company promotes its vast selection of products and services, rapid delivery, superior customer service,
and membership programs such as Amazon Prime.

Services

Amazon offers customers unprecedented levels of customer service for buyers in terms of shipping,
refunds, returns, and exchanges. It also works with vendors to ensure warranties and other promises are
honored when applicable.

Vendors are also offered a suite of business tools that increase their odds of success. This includes
training and documentation on advertising products, setting competitive prices, and earning exemplary
customer reviews.

Secondary process activities

Company infrastructure

A company of Amazon’s size would not be viable for long without the necessary infrastructure in place.
The company has an extremely consistent, reliable, and scalable logistics system. What’s more, it has
managed to turn some parts of its infrastructure into businesses in its own right. One example is the
cloud-based Amazon Web services.

Human resource management

Amazon utilizes a mixture of employees, contractors, and seasonal or temporary labor to cope with
periods of increased consumer demand. Employee performance is assessed with a lean, data-driven, Six
Sigma-Esque approach instituted by CEO Jeff Bezos.
In the United States, Amazon’s minimum wage of $18 per hour is twice the federally mandated rate. The
company also offers benefits that extend to an employee’s immediate family, such as paid parental
leave, retirement plans, and healthcare coverage.

Research and development

Amazon has utilized technology to its advantage, whether that be drone deliveries and robotic
warehouses or via acquisitions of virtual and augmented reality companies such as Oculus.

In 2020, the company’s SEC filing noted it was granted 2,244 patents. The majority of these were in
machine learning, artificial intelligence, computer vision.

Procurement

Amazon procurement is formally known as Sales and Operations (S&OP). The company forecasts
individual product sales and monitors real-time inventory levels based on receipts and shipments from
fulfillment centers. 

Procurement also includes the necessary equipment, resources, technology, and infrastructure required
for its core eCommerce platform. Also included here is vendor and supplier procurement, which
encompasses information systems, supply chain partner eligibility rules, and performance evaluation.

2.1 Value Chain in Electronic Commerce

Impact of E-Commerce on value chain can be analyzed in following activities:

1. Role of Intermediaries
Intermediaries may be more important now than ever before because most of the rapidly growing
Internet businesses are essentially middlemen. For example, companies such as Amazon, CD-
Now, Egghead.com, Cisco, and E-Trade can all be thought of as middlemen-resellers of products
provided by some other source. Intermediaries will continue to be important because they provide
consumers with selection, specialized distribution, and expertise. Some internal disintermediation
may take place, in which employees will be removed if they add little value or even negative value
to the distribution channel. For example, Dell, Cisco, and some online brokerages have eliminated
staff in an attempt to realize cost savings in certain areas.
2. Value Pricing
In addition to employing e-commerce technology to enhance distribution channels, this technology
is also used to redefine pricing strategies. Most companies pursuing a premium pricing strategy, for
example, can use the Internet to better understand their customers. The Internet allows companies
to price with far more precision than they can off-line and to create enormous value in the process.
Value pricing involves several approaches. One approach to pricing involves businesses offering
heavily discounted prices in an attempt to attract customers to their web sites. Another approach
involves businesses transferring their “off-line” prices to the Internet. Neither of these approaches
is very efficient because they do not maximize value. An attractive alternative approach is to utilize
the Internet to track customers buying habits and adjust prices accordingly, thereby uncovering
new market segments. The Internet allows companies to test prices continually in real time and
measure customer responses.

3. Brand Differentiation/Loyalty
Pricing is just one of several ways for a company to differentiate itself from the competition.
Another way in which a company can differentiate itself is by promoting brand loyalty. Brand loyalty
encourages repeat customers and helps to create long-term profitability. A major benefit of
customer loyalty is that loyal customers often refer new customers to a supplier.

4. E-Procurement
E-commerce technology has provided organizations with the capabilities to improve the
effectiveness and efficiency of the logistics and purchasing functions. Firms such as Wal-Mart
and Amazon.com are currently outsourcing delivery, relying on logistics companies to deliver the
product to the customer. E-procurement is the term currently used to denote the process of using
the Internet to integrate supply chain partners through collaboration on key initiatives and to
improve the purchasing process within organizations. A major benefit of e-procurement is the cost
savings aspect. In fact, organizational costs of placing orders can be reduced by as much as 75%
through utilization of the Internet. It also offers organizations the ability to use the Internet to
search for the best pricing available.

 5. E-Fulfilment
E-Fulfilment contrasts with traditional fulfilment. Suppliers are now capable of accepting order
online via the Internet and having the information sent directly into their order processing systems,
something not possible via traditional fulfilment. Orders placed via e-fulfilment tend to be smaller
than those placed via traditional fulfilment channels. The expected and actual lead times are
shorter than those witnessed via traditional fulfilment.

6. Value Nets
Firms are continually seeking out new ways to attract and maintain customers. A development that
has proven to be effective in attracting and servicing customers is that of the Value Net. A value net
is a network consisting of partnerships, which assists in the transfer of information among supply
chain partners on a regular basis. The main benefit of a value net is the competitive advantage it
offers to all participating organizations. The primary concept behind a value net is its ability to allow
firms to address and solve customer problems, rather than just selling a product.
E-Commerce in India
Despite being a developing country, India has shown a commendable increase in the ecommerce
industry in the last couple of years, thereby hitting the market with a boom. Though the Indian
online market is far behind the US and the UK, it has been growing at a fast page.

Further, the addition of discounts, coupons, offers, referral systems, 30days return guarantee, 1-7
days delivery time, etc. to the online shopping and the E-Market have added new flavors to the
industry.

The Key drivers of in Indian ecommerce have been:

 Increasing broadband Internet and 3G penetration.

 Growing Living standards
 Availability of much wider product range
 Busy lifestyles and lack of time for offline shopping
 Increased usage of online categorized sites
 Evolution of the online marketplace model with websites like eBay, Flipkart, Snapdeal, etc.

How to Conduct a Value Chain Analysis in Ecommerce

Organizations must conduct a value chain model analysis to determine where

improvements can be made to increase brand image and customer value. An
analysis that evaluates each and every activity that contributes to the value chain of
a firm is known as value chain model analysis.

This helps executives to see how each link in the chain contributes to or detracts
from the end product and service. An eCommerce value-chain market analysis, for
example, might find methods to make tasks more effective, lowering costs,
improving product design, or boosting product distinction. 

Performing a value chain analysis consists of three steps:

Step 1: Determine The Activities in The Value Chain 

This is the initial step which includes learning about the basic and secondary actions
that go into generating a product or service. Because the interactions may differ, it's
critical for organizations that provide various products or services to undertake value
chain analysis for all of them. 
 Step 2: Determine The Amount And Value Of Various Activities 

The next stage is to figure out how much each specified activity contributes to the
overall value-chain process. It's also crucial to consider the costs associated with
each operation, as cutting them could increase the total transaction value. 

Step 3: Look For Ways To Get A Competitive Edge

You may assess the value chain via the perspective of whichever competitive
advantage you are seeking to create. For instance, a corporation looking to cut costs
would examine the eCommerce value chain from the standpoint of lowering costs
and enhancing efficiency. Perhaps, research will reveal operations that can be
outsourced or even deleted entirely to save money, or bottlenecks in the production
process that might be fixed to save time and money. 

Final Conclusion

Value chains in eCommerce facilitate the analysis of all operations involved in the
production of a product or service, as well as the identification of cost-cutting and
differentiation. You can streamline efforts, remove waste, and boost profits by using
a value chain.

Further, it aids in getting appropriate insights of inner processes that can improve
the end customer's experience. Overall, an eCommerce value chain is used to
improve operational efficiencies such that a company may give the most value to its
customers for the least amount of capital investment. 

2.2 Supply Chain

A supply chain is a network between a company and its suppliers to produce and
distribute a specific product to the final buyer. The entities in the supply chain
include producers, vendors, warehouses, transportation companies, distribution
centres, and retailers. A supply chain involves a series of steps involved to get a
product or service to the customer. The steps include moving and transforming raw
materials into finished products, transporting those products, and distributing them
to the end-user.
Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves
the active streamlining of a business's supply-side activities to maximize customer
value and gain a competitive advantage in the marketplace.

A supply chain is the complex relationship between a company and its suppliers.
From raw materials to producing and distributing a specific product or service, the
supply chain represents the steps taken from raw materials to get the product or
service to market.

Supply chains are multidisciplinary and highly collaborative bringing great benefit to
a company through integrated and diversified resources, reduced logistics costs,
improved logistics efficiency, and high quality of the overall product or service.
Management of Supply chain follows:
Sourcing (finding the least expensive supplier for those goods)
Procurement (concerned with acquiring goods and services, within your guidelines i.e.
fair trade, carbon-neutral, sustainable, local etc.)
Conversion (processing of raw materials i.e. from minerals to circuit boards)
Assembly (adding your circuit board into your computer)
Logistics (the ability to send your product out)
Adding value to a product or service (putting an Operating System and other software
on your computer for the user

Difference between Supply Chain and Value Chain

1. The supply chain is the process between producing and distributing the product, dealing with
the suppliers and logistics of getting the product to market. The value chain is a set of activities
carried out by the company which maximizes the competitive advantage.
2. The term value chain refers to the process in which businesses receive raw materials, add
value to them through production, manufacturing, and other processes to create a finished
product, and then sell the finished product to consumers. A supply chain represents the steps
it takes to get the product or service to the customer.
3. While a supply chain involves all parties in fulfilling a customer request and leading to
customer satisfaction, a value chain is a set of interrelated activities a company uses to create
a competitive advantage.
4. Supply Chain refers to the integration of all activities involved in the process of sourcing,
procurement, conversion and logistics. On the other hand, value chain implies the series of
business operations in which utility is added to the goods and services offered by the firm so as
to enhance customer value.
5. Supply chains are more of an operational management strategy than value chains that are part
of business management. 
6. A streamlined supply network focuses on minimizing costs, delivering on a customer’s request,
and ensuring customer satisfaction. Conversely, value addition emphasizes innovation, testing,
and marketing of a product to provide businesses with a competitive edge and increase
customer value.
7.

Comparison Chart of Supply Chain and Value Chain

 2.4 Inter-organizational Value Chains

Interorganizational value chain allow the flow of information to be automated between

organizations in order to reach a desired supply-chain management system, which enables the
development of competitive organizations. This supports forecasting client needs and the
delivery of products and services.

An Inter-organizational value chain is an information system shared by one or more suppliers

and customers.  The most common form of interorganizational value chain is electronic data
interchange, which permits instantaneous computer-to-computer transfer of information.
Inter-organizational Systems (IOS) are network-enabled information systems that
extend boundaries of an organization. IOS use enhances an organization’s supply
chain management (SCM) capabilities and supply chain performance.

Benefits or Advantages of Interorganizational Value Chain

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Pursue eco
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 2.5 Strategic Business Unit (SBU) Chains

Strategic Business Unit (SBU) implies an independently managed division of a large

company, having its own vision, mission and objectives, whose planning is done
separately from other businesses of the company. The vision, mission and objectives
of the division are both distinct from the parent enterprise and elemental to the
long-term performance of the enterprise.

It can be a business division, a product line of the division or even a

specific product/brand, targeting a particular group of customers or a geographical
location.

A strategic business unit is specially formed to target a particular market segment,

which requires expertise in production or management, not present in the parent
company.

Characteristics of Strategic Business Unit

 Separate business or a grouping of similar businesses, offering scope for autonomous

planning.
 Own set of competitors.
 A manager who is accountable for strategic planning, profitability and performance
of the division.
 SBU CHAINS
The chain of SBU consist of operating units; wherein the units serve as an
autonomous business. The top corporate officer assigns the responsibility of the
business to the managers, for the regular operations and business unit strategy. So,
the corporate officer is accountable for the formulation and implementation of the
comprehensive strategy and administers the SBU by way of strategic and financial
controls.

There are three levels in a strategic business unit, wherein the corporate

headquarters remain at the top, SBU’s in the middle and divisions clustered by
similarity, within each SBU, remain at the bottom. Hence, the divisions within the
SBU are associated with each other, and the SBU groups are independent of each
other. From the strategic viewpoint, each SBU is an independent business.

A single strategic business unit is considered as a profit centre and governed by

the corporate officers. It stresses over strategic planning instead of operational
control so that the separate divisions of the SBU can respond as fast as they can, to
the changing business environment.
Advantages of Strategic Business Unit Chains
A strategic business unit is important for an organization focused on growing its
product range and market share as it can simplify the process of strategic
management. Have a look at how SBUs benefit organizations:
 

1. IMPROVES COORDINATION

Since strategic units are similar, there is seamless coordination between divisions.
The focus is on complementing rather than competing.

2. DECENTRALIZES AUTHORITY

Reducing the span of control decentralizes authority. Decentralization can positively

impact an organization’s motivation system and effectiveness. It particularly
motivates junior employees by empowering them.

3. SPEED AND EFFICIENCY

As similar SBUs are managed by one person, formulating strategy becomes easier.
The higher authority communicates with the manager, who relays objectives to
implement them effectively. Each division has to participate in planning and
implementation.
 
4. ASSURES ACCOUNTABILITY

Since each division has its own manager, performance becomes their responsibility
whether it’s optimal, below par or exceptional. Corporate officers sitting in the head
offices can easily hold managers directly responsible for operations, profits and
losses.

 
5. EASIER BOOKKEEPING

Organizations that process high volumes of data can simplify their bookkeeping
process in monitoring and storing data.

Disadvantages of Strategic Business Unit Chains

Although a strategic business unit can offer these advantages, we must consider the
associated drawbacks as well. As a manager, you must know the disadvantages of
strategic business units to not only decide whether to set one up but also to plan
ways around them. Here are some of the disadvantages.
 This structure introduces an additional layer of units which increases
operational costs and administrative overheads
 A direct link between divisions and head office is missing. This contributes to
communication delays, hinders flow of information, affects decision-making
and prevents accurate assessment of performance
 Decentralization affects flexibility and compromises operations
 Competition for resources and funding within the organization leads to
internal conflicts, unhealthy competition and sometimes malpractice
Managers have to focus on the positives and devise ways to tackle the
disadvantages. They can focus on improving employee relations by correct resource
allocation and come up with solutions to improve communication gaps. They must
find ways to improve costs and stay prepared for operational delays.
Strategic business units support coordination and cooperation across multiple
departments within an organization. It’s challenging to set up such a structure but
rewarding for long-term success and profit. If a manager fully understands what an
SBU is, they can use it as a tool to target a specific customer group or geographical
location.

2.6 Industry Value Chains

An industry value-chain is a physical representation of the various processes involved in
producing goods (and services), starting with raw materials and ending with the delivered
product (also known as the supply chain). It is based on the notion of value-added at the link
level. The sum total of link-level value-added yields total value. 

Industry value chain analysis often involves examining company practices internally and
planning how to optimize them to create value for customers. Industry value chain enables
industry-wide analysis that can provide insights into business activities such as mergers and
acquisitions and funding of new projects. Learning about the industry value chain can help you
efficiently perform your professional duties. In this article, we define the industry value chain,
explain its importance, review its components, explore how to use an industry value chain, give
an example, and compare the industry value chain to the supply chain.

If you are considering a career in business management, you may wonder, "What is the
industry value chain?". The industry value chain can refer to tasks a company performs to
produce a valuable product. This value chain may include a cost-profit analysis for each stage in
production. For example, it usually starts with sourcing raw materials or manufacturing until
the company finally sells the product to consumers. During analysis, the business assesses each
step in production that eventually determines a product's value. The stages assessed may
include supplier raw materials, distribution, and production expenses.

Each step, though independent, has a direct effect on the final product cost, margins, quantity,
and quality. Businesses use the industry value chain to highlight areas to adjust to generate
more profit through efficient cost control, product distribution, and positioning. In each step of
the analysis, stakeholders make different choices that directly or indirectly affect the business'
margins. Value chain portrays an industry as a system with subsystems. Each subsystem has
inputs, transformation procedures, and outputs. The subsystems involve gaining and consuming
resources such as money, material, warehouses, equipment, utilities, land, and administration
and management.

Importance of industry value chain

Here are some benefits of using the industry value chain:

Integration, mergers, and acquisitions

When assessing a company for potential mergers and acquisitions or evaluating the potential
acquisition of a competitive firm, understanding the dynamics for your market is essential to
success. Initial processes in production such as raw material supply may have hidden costs or be
subject to market fluctuations caused by trade tension, shortages, supplier plant closures, and
weather events. Analyzing the elements that control production helps provide insight into the
estimations necessary for potential acquisitions. Some lenders may also request data on all
costs before agreeing to finance an acquisition.

Entry into new markets

Analyzing the industry value chain of a new market can help the company to understand how to
work in a market, including the profits the company may expect. Some factors that affect the
expected profits may include law regulations, market competition, and the average gross
profits. The value chain in its entirety may determine the realized profits in the new market. If
you lack information, you can analyse your competitors' value chain to get details about the
supply chain behaviour, customer market influences, and average margins.

Competitive intelligence

Value chain analysis may help you evaluate the competition. You can then compare the
information gained with your value chain to adjust for competitive market positioning.
Competitive intelligence may offer insight into more cost-effective supply chains or beneficial
pricing schemes. As you study the behaviour of competitor value chains, you can adjust your
margins to match industry averages.

The analysis may also allow the company to manage its profit. This may help you improve your
product, adjust your prices, or change your processes to match customers' expectations. The
process can then drive better future profits. Value chain analysis may also inform you of the
strategies you can adopt or avoid by analysing competitor strategies to control production
costs.

Margin optimization

Multiple factors can affect your supply chain, such as shifting social priorities, industry
competition, geopolitical pressure, and shifting trading patterns. Understanding the dynamics
that control your current value chain can determine policies and strategic decisions to promote
margins and sales. If changes occur globally, industry value chain analysis can conclude how
beneficial it is to shift in response to trade tariffs using other competitors' supply chain
patterns.

For example, a firm affected by tax adjustments can identify new suppliers to support their
production. If the value chain proves to be complex, analyzing it can help industries decide
whether to pursue new supply chains or change their distribution means.

How to use an industry value chain

The aim of the value chain is often to analyze and find areas for growth and improvement
within the company. Here are the steps to use an industry value chain:

1. Establish necessary procedures for each primary activity

Each primary activity can account for a significant portion of a product's value once the
company sells it to the consumer. You may ensure that you correctly assess and value each
activity under the primary components. For instance, if you're a juice maker, you can list the
processes you used to get the fruits under inbound materials and the means of delivery under
outbound logistics. You can then repeat the same process for the five primary components of
the chain.
2. Identify necessary components for each support activity

Support activities may also discreetly contribute to the product's value. You can establish all the
required processes supporting the primary procedures to get a more comprehensive
representation of the industry value chain. For example, the juice maker can now list how
recruitment under the human resources management component helps marketing and sales.

3. Probe each process for enhancements

Check the value chain to establish if there are processes you can improve through streamlining
and restructuring. These changes can allow the company to enhance the productivity and
efficiency of the procedure. For instance, the company may choose to change the fruit supplier
from an imported one to a local supplier to reduce the cost of shipping.

4. Establish solutions to improve productivity

After noting areas for improvement, you can select areas to address with efficient solutions.
You can note the main areas that may require improvements during the probing stage. The
company can also prepare a performance tracking system to compare metrics after
implementation.

5. Apply findings

After analyzing and concluding the right solutions, you can then use them in the company's
processes. You may also choose to track related metrics to find how your adjustments have
performed in the overall value chain. Comparing the company's performance to its competitors
often help understand how well it operates and forecast future operating activity.

Example of Industry Value Chain : Juice Box makes bottled fresh juice for its
customers:
*Inbound logistics: receiving, storing fruits, preservatives, bottles, and supplies*
*Operations: processing and bottling the fruit juice*
*Outbound logistics: shipping the packaged juice to distributors*
*Marketing and sales: social media campaigns and a phone list*
*Service: arranging returns, customer service, and occasionally carrying out
consumer feedback campaigns*
*Firm infrastructure: accounting services, payroll, and a set of four-month, six-
month, and one-year strategic plans for the business*
*Human resources management: training for an engineer, maintaining an
employee handbook, and payroll*
*Technology: experimentation with new flavours*
*Procurement: making orders for fresh supplies to farmers*
Cross border / cross region value chains
Often multinational enterprises (MNEs) developed global value chains, investing abroad and
establishing affiliates that provided critical support to remaining activities at home. To enhance
efficiency and to optimize profits, multinational enterprises locate "research, development,
design, assembly, production of parts, marketing and branding" activities in different countries
around the globe. MNEs offshore labor-intensive activities to China and Mexico, for example,
where the cost of labor is the lowest. the emergence of global value chains (GVCs) in the late
1990s provided a catalyst for accelerated change in the landscape of international investment
and trade, with major, far-reaching consequences on governments as well as enterprises.

Global value chains in development

Through global value chains, there has been growth in interconnectedness as MNEs play an
increasingly larger role in the internationalization of business. In response, governments have
cut Corporate income tax (CIT) rates or introduced new incentives for research and
development to compete in this changing geopolitical landscape.
In an (industrial) development context, the concepts of global value chain analysis were first
introduced in the 1990s and have gradually been integrated into development policy by
the World Bank, the OECD and others.
Value chain analysis has also been employed in the development sector as a means of
identifying poverty reduction strategies by upgrading along the value chain. Although
commonly associated with export-oriented trade, development practitioners have begun to
highlight the importance of developing national and intra-regional chains in addition to
international ones.
For example, the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) has
investigated strengthening the value chain for sweet sorghum as a biofuel crop in India. Its aim
in doing so was to provide a sustainable means of making ethanol that would increase the
incomes of the rural poor, without sacrificing food and fodder security, while protecting the
environment