Les 11: GVCs, GPNs, and international sourcing
Importing is more international than exporting, more firms import than export
Exporter will take care of all the administration
Focus on purchasing and production and different ways to organize production
GVC’s= global value chain
GPN= global production networks
Focus on the same aspects but the way they tackle networks is different
GPN: how things are organized
In international businesses more GVC and the activities are split up
A lot of GVC are under stress covid and war in Ukraine
Robustness= GSC is the strength of your supply chain during a crisis
War, Natural disaster,…
Resilience= how back you come back after a crisis
How fast can you get back to production after crisis?
Redundancy= there is an overlap in a supply chain
If you only have one source of materials and there is a problem with no redundancy
What you want? Cheapest good at best quality
Trade-off between quality and price
When you do sourcing, we believe labor cost is the most important
Also important is could be a plant that can run 24/7
VIDEO CASE: KIPLING
VRAAG 1: What different entry modes would you consider and why?
Each HQ has their own production chain to have some space and backup
A joint venture (investment mode, partly invest) with other brands
PROBLEM: you invest into production capacity with other brands, but do they need the
same materials and production??
Joint venture with local manufacturers, because you are a small start up
Joint venture with Belgian manufacturers country of origin effect
License
Outsourcing = country manufacturing
You are not doing it yourself, you’re asking someone else
You don’t need to invest in a production plant
It’s not just about the money
You can have many or just a limited number of contract manufactures
Why limited?
• Manage relationship with a few instead of a lot to maintain
• Follow up less manufactures, less controlling
Which money are you gonna use?
You don’t need money, you are just going around looking for licensers
VRAAG 2: Why did China become the production plant for the world?
Les 11 13/12/2022 Pagina 1 van 15
, The contracters become international and you tag along with them, it is not the lead firm that
choose.
If the contractor is not shifting than he will not be able to maintain that relationship, he convinces
you to change places and seduces you with reduction in price.
There is always a balance between price and quality, so don’t follow to risky regions.
Capital refers to western influences, so they call it equity joint ventures.
The more developing you are the more stricter you as a government.
It is becoming more expensive, so get a local company to invest.
VRAAG 3: Where has sourcing moved to more recently? Why (not) move out of China?
Countries?
Bangladesh
Mexico
Eastern Europe
Why move out of China?
Because of the increasing labor costs
WTO
Covid-policy
Legalsystem rule of law, but in China it is rule by law= you apply the system to your liking
Human right issues: it is a hands of type of approach
They want the same policy to be applied in Taiwan
It is for their own benefit rather than the benefit of the guest country
Why would you invest in China?
Because of the large market, biggest market on earth
The policy is getting better: China would be an improved destination for investment
Les 11 13/12/2022 Pagina 2 van 15
Importing is more international than exporting, more firms import than export
Exporter will take care of all the administration
Focus on purchasing and production and different ways to organize production
GVC’s= global value chain
GPN= global production networks
Focus on the same aspects but the way they tackle networks is different
GPN: how things are organized
In international businesses more GVC and the activities are split up
A lot of GVC are under stress covid and war in Ukraine
Robustness= GSC is the strength of your supply chain during a crisis
War, Natural disaster,…
Resilience= how back you come back after a crisis
How fast can you get back to production after crisis?
Redundancy= there is an overlap in a supply chain
If you only have one source of materials and there is a problem with no redundancy
What you want? Cheapest good at best quality
Trade-off between quality and price
When you do sourcing, we believe labor cost is the most important
Also important is could be a plant that can run 24/7
VIDEO CASE: KIPLING
VRAAG 1: What different entry modes would you consider and why?
Each HQ has their own production chain to have some space and backup
A joint venture (investment mode, partly invest) with other brands
PROBLEM: you invest into production capacity with other brands, but do they need the
same materials and production??
Joint venture with local manufacturers, because you are a small start up
Joint venture with Belgian manufacturers country of origin effect
License
Outsourcing = country manufacturing
You are not doing it yourself, you’re asking someone else
You don’t need to invest in a production plant
It’s not just about the money
You can have many or just a limited number of contract manufactures
Why limited?
• Manage relationship with a few instead of a lot to maintain
• Follow up less manufactures, less controlling
Which money are you gonna use?
You don’t need money, you are just going around looking for licensers
VRAAG 2: Why did China become the production plant for the world?
Les 11 13/12/2022 Pagina 1 van 15
, The contracters become international and you tag along with them, it is not the lead firm that
choose.
If the contractor is not shifting than he will not be able to maintain that relationship, he convinces
you to change places and seduces you with reduction in price.
There is always a balance between price and quality, so don’t follow to risky regions.
Capital refers to western influences, so they call it equity joint ventures.
The more developing you are the more stricter you as a government.
It is becoming more expensive, so get a local company to invest.
VRAAG 3: Where has sourcing moved to more recently? Why (not) move out of China?
Countries?
Bangladesh
Mexico
Eastern Europe
Why move out of China?
Because of the increasing labor costs
WTO
Covid-policy
Legalsystem rule of law, but in China it is rule by law= you apply the system to your liking
Human right issues: it is a hands of type of approach
They want the same policy to be applied in Taiwan
It is for their own benefit rather than the benefit of the guest country
Why would you invest in China?
Because of the large market, biggest market on earth
The policy is getting better: China would be an improved destination for investment
Les 11 13/12/2022 Pagina 2 van 15
