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CHAPTER 2 LITERATURE REVIEW
2.1 Concept of Value Chains
2.1.1 Definition of Value Chain
(Borch, 2011) defines Value chain as set of consecutive value adding activities that are performed by a set of autonomous yet interdependent actors working in a market to earn a profit. According to Porter (1985), value chain analysis describes the range of activities and services required to bring the product from its conception, through its design, sourcing of raw materials and intermediate inputs, marketing and distribution to its final consumer. These activities produce goods and services and maybe performed by individual firms or among different firms hence, the activities maybe in-house or spread over wider areas. The concept of value chain analysis is built on the assumption that it takes a firm more than just possessing machinery, equipment, labour and financial capital to produce a product but requires all these to be arranged into a system whereby the system will be able to produce products that consumers are willing to purchase (Porter, 1985). Hence, value chain analysis is important for investigating the value that each particular activity adds on to the products or services. Porter goes on to classify the range of activities into primary and support activities as in figure 3. With primary activities as those activities which contribute directly to the production or delivery of a product and are identified as inbound logistics, operations, outbound logistics, marketing and sales. These primary activities however are each linked to support activities such as procurement, technology development, human resource management and infrastructure. All these support activities are meant to improve the effectiveness or efficiency of the primary activities. Both primary and support activities are linked through flows of information, goods and services and systems and processes for adjusting activities. Hence, the effective management of these activities generates margins for the firm (OECD, 2008).
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2.2 Concept Development of GVCs
2.2.1 Definition of Global Value Chain
Antràs, (2020) defines Global Value Chain (GVC) as a series of stages that are involved in producing a product or service that is sold to consumers, with each stage and at least two stages being produced in different countries. The author goes on to conclude that a firm participates in a GVC if it produces at least one stage in a GVC.
2.2.2 Emergence of GVC
World Trade Organisation (2017) GVC is a term which was derived from the comprehensive study on the structure of how value is being distributed among countries. History reveals that, the movement of goods and ideas used to be difficult than it is today and it led to economic activities for self-efficiency to be achieved at points of production and consumption within the close proximity. Only luxury items would be traded outside but at high prices to cater for the risks that would be incurred. However, improvement in the land and water transport led to the exp
