Value chain

How value chain activities are carried out determines costs and affects profits.According to the OECD Secretary-General (Gurría 2012) harv error: no target: CITEREFGurría2012 (help),[3] 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 (Gurría 2012) harv error: no target: CITEREFGurría2012 (help).

For example, by creating outbound logistics that are highly efficient or by reducing a company's shipping costs, it allows to either realize more profits or pass the savings to the consumer by way of lower prices.

The virtual value chain, created by John Sviokla and Jeffrey Rayport,[8] is a business model describing the dissemination of value-generating information services throughout an Extended Enterprise.

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).

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.

[3] 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.

(Gurría 2012) harv error: no target: CITEREFGurría2012 (help)[3] Through global value chains, there has been a growth in interconnectedness as MNEs play an increasingly larger role in the internationalisation of business.

In response, governments have cut corporate income tax rates or introduced new incentives for research and development to compete in this changing geopolitical landscape (LeBlanc, Matthews & Mellbye 2013, p. 6) harv error: no target: CITEREFLeBlancMatthewsMellbye2013 (help).