Professional Documents
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Commodity Chains
Where does your breakfast come from?
From Beyers, Fowler & Andreoli Seattle Music Industry Study, 2008
Linking producers and consumers: The
commodity chain approach
Upgrading strategies in global commodity chains
Process upgrading: improving the efficiency of the
production system reorganizing the production
process
Product upgrading: moving into making more
sophisticated products or services.
Functional upgrading: acquiring new roles in the chain
(and/or abandoning existing functions) to increase the
overall skill content and level of ‘value-added’ of the
activities undertaken.
Inter-sectoral upgrading: using the knowledge derived
from a particular chain to move into different sectors.
Linking producers and consumers: The
commodity chain approach
Management processes
Think of Wal-Mart:
◦ Who controls the organizational structure and nature
of its global commodity chain?
◦ Who decides where inputs are purchased from, and
◦ Where final goods and services are sold?
◦ Who shapes the restless geographies of commodity
chains?
The important issue of governance
Linking producers and consumers:The commodity
chain approach - Management processes
How commodity chains are constituted by a mix of intra-
firm and inter-firm linkages, and a combination of near and
distant connections.
Two factors: Producer-driven and Buyer-driven
◦ Producer-driven chains are commonly found in industries
where large industrial transnational corporations (TNCs)
play the central role in controlling the production system.
◦ Buyer-driven: chains tend to be found in industries where
large retailers (Wal-Mart, Carrefour, Ikea, etc.) and brand-
name merchandisers (Adidas, Nike, The Gap, etc.) play the
central role in establishing and controlling production
systems.
Linking producers and consumers:The commodity
chain approach - Management processes
Form of economic governance
Producer-driven Buyer-driven
Controlling type of capital Industrial Commercial
Capital/technology intensity High Low
Labour characteristics Skilled/high wage Unskilled/low wage
Controlling firm Manufacturer Retailer
Production integration Vertical/bureaucratic Horizontal/networked
Control Internalized/hierarchical Externalized/market
Contracting/outsourcing Moderate and increasing High
Suppliers provide Components Finished goods
Examples Automobiles, computers, Clothing, footwear, toys,
aircraft,electrical machinery consumer electronics
Table 4.1: Characteristics of producer-driven and buyer-driven chains (p.102)
Source:Adapted from Kessler and Applebaum (1998)
Producer--driven – Buyer
Producer Buyer--driven?
Linking producers and consumers:The commodity
chain approach - Institutional processes
Global commodity chains are complex and divided into
intersections.
Rules and regulations that determine how economic activity
is undertaken in particular places (e.g. trade policy, tax policy,
incentive schemes, health and safety/environmental
regulations, etc.)
• Institutional context is different at spatial scales.
At national scale, a huge range of policy measures to try and
promote, and steer, economic growth within their boundaries.
At macro-regional scale, a variety of regional blocs have
considerable influence on trade and investment flows within
their jurisdiction.
At global scale, institutions as WTO and IMF shape the rules-of-
the-game for global financial and trade relationships.
Linking producers and consumers:The commodity
chain approach - Institutional processes
However, joining into the global trade/commodity, the
percentage of income from developed markets has gone up
much higher than from the growers (e.g. farmers) (see p.106-
107).
The changing institutional frameworks can significantly affects
all three of basic dimensions of a commodity chain: the input-
output structure, territoriality, and governance)
Re-regulating commodity chains: the world of
Re-
standards
Table 4.2: The world of standards (page 109)
Attribute of standard Variability
Field of application • Quality assurance • Labor
• Environmental • Social/economic
• Health and safety • Ethical
Form • Codes of conduct • Standard
• Label
Coverage • Firm/commodity chain • Sector specific
specific • Generic
Key drivers • International business • International trade unions
• International NGOs • International organizations
Certification process • First, second or third party • NGOs
• Private sector auditors • Government
Regulatory implications • Legally mandatory • Market competition
• Voluntary requirement
Geographical scale • Regional (e.g. a US-state) • Macro-regional (e.g. the EU)
• National • Global
Source: Adapted from Nadvi and Waltring (2004).
International certification of industrial products?
Société Générale
de Surveillance,
Switzerland Certification body
for sustainable
development in the USA