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Friday, September 21, 2012

Global Value Chain in Electronics Industry!

Recently I came across the concepts of “Global Value Chain”, “Electronic Value Chain Management (E.V.C.M.)” & “Value Chain Modularity”. Till now I have had heard about simple good old Michael Porter’s Value Chain. What could this word “Modularity” possibly mean? Started surfing in net for some material which would be little easier for me to understand. I wonder, where would I possibly have gone if there was no “Google”! Ran though some really interesting articles. Whatever I understood I am sharing with you & will try to make it as simple as possible.
 
Electronic Hardware Industry is one of the most crucial goods producing sector, generating greater revenue than any other industry and gives employment opportunity to a huge base of skilled human resources. The electronics manufacturing industry enhances the output productivity of other industries as well, adding value to the other industry value chain. As a result it is entitled as the “Propulsive Sector”. Thousands of odd companies from different countries contribute to the industry on day to day basis. Even a single product can contain work carried out by ten different firms in multiple countries.
 
There are mainly 3 major players in the industry – the Lead Companies (Contract givers), the Contract Manufacturers, and the Platform Providers (the Software Firms). They all the interdependent for their sheer existence and growth. There are many hitches and death traps for the Electronics firms to overcome. The developed countries get better facilities, whereas the developing countries struggle harder to sustain in this highly competitive market scenario. 
 
In the developing countries the electronics firms uses 4 strategies to overcome these limitations.
(1) global expansion though acquisition of declining brands (emerging multinationals);
(2) separation of branded product divisions from contract manufacturing (original design manufacturing (ODM) spinoffs);
(3) successful mixing of contract manufacturing and branded products (platform brands) for contractors with customers not in the electronic hardware business; and
(4) the founding of factory-less product firms that rely on global value chains for a range of inputs, including production (emerging factory-less start-ups).
 
Strategic Action Plan could be, Attract FDI from component manufacturers, Form joint ventures with component manufacturers, Manufacture under license, Move away from contract manufacturing to ODM and OBM, Establish Design Services, Establish Support Industries, Establish a Branding Strategy (Via subsidiaries, Via links with buyers).
 
For further studies please refer the below mentioned .pdf materials. These are very enriching and indepth informative research papers.
 
http://www.unescap.org/tid/projects/sasme_s4b.pdf http://unstats.un.org/unsd/trade/s_geneva2011/refdocs/RDs/GVC%20in%20Electronics%20Industry%20%28Sturgeon%20-%20Sep%202010%29.pdf
http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-5417
http://spectrum.ieee.org/webinar/1705632

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