MANAGING GLOBAL VALUE CHAINS

In the past few decades, many companies have undertaken rapid transformations that are changing
the way products and services are produced. Thanks to reduced communication and transportation
costs, they have abandoned the practice of producing goods and services themselves in a single
country. Through offshoring and outsourcing, they have sliced up their value chains and dispersed
production activities across the globe, creating global value chains (GVCs).

Bombardiers Global Express aircraft is a good example of a product made with a GVC. Its
production involves dozens of companies that are located in several countries around the world. The
fuselage comes in part from the Bombardier plant in Belfast and another part of its Japanese partner.
The fuel system is produced in Europe, the wings are made in Japan, and the tail is made in Canada.
All major components are shipped to the Bombardier plant in the vicinity of Montral for final
assembly. The Global Express is hardly an isolated case, but rather part of a larger trend. Currently,
trade in intermediate inputs has grown to account for roughly two-thirds of international trade
(Johnson and Noguera, 2012). And a new dataset on trade in value added (TiVA) compiled by the
OECD and WTO provides evidence that the share of foreign value added embodied in a countrys
exports has increased for virtually all countries around the world between 1995 and 2011.

In this course, we will analyze what the economic rationale is for companies to slice up their value
chains and disperse activities across multiple regions. We will investigate the following questions:
Why is it now easier for companies to disperse value chain activities geographically?
Which type of value chain tasks are best to offshore and where should they be located?
What are the hidden costs related to orchestrating a global value chain?
What are the implications for a firms competitive strategy?

This course complements other courses and disciplines related to strategic management and the
global environment of business (trade, finance, law, etc.). In Building Global Value Chains our
focus will be on cost arbitrage in an international context.

PEDAGOGICAL APPROACH:

The course uses a mix of lectures, case studies and class discussions. Considering the format, it is
obvious that students need to keep up with their lecture material and required readings at all times.
You should read required materials before class to be ready to ask questions and engage in
discussions. Class attendance is neither useful nor desirable if the cases have not been prepared
and the readings have not been completed .

EVALUATION:

This module has 6 sessions based on readings and cases. Your grade will be determined as follows:

Individual Participation 20 %
Intermediate Report 30 %
Team Case Presentation 20 %
 Final Report 30 %
Contribution to learning (20%)

The contribution to learning (before labelled participation) grade is based on attendance and the
significance of in-class contributions. Students are not expected to have all the right answers in
every case, nor are they expected to dominate the discussion in every class. However, they are
required to be prepared and contribute regularly to the classroom discussion. The evaluation scheme
is designed to encourage participation by judging both the quality and quantity of participation.

Classroom participation should demonstrate:

(1) Evidence of careful preparation of cases and readings;

(2) Clarity and conciseness of recommendations;
(3) Strong and convincing analysis to support recommendations.

The quality of the discussion in class will depend on how well students have prepared and how
willing they are to share their analysis with the class. It is not possible to get a high participation
grade (within the A range in particular) solely on the frequency of participation. In addition,
simple attendance in classeven to all classeswithout active participation will yield a
participation grade not higher than the minimum passing grade for graduate studies. Missing more
than two classes without justification will result in a fail grade.

Individual Report (30%)

Students should prepare an individual report on a trending topic in the news that will be assigned at
the end of session 3. The write-up should be no more than 10 typed pages in length (double-spaced,
12 pt font, 1 inch or 2.5 cm margin all around, including graphs and bibliography) and is due at the
beginning of session 4 (two weeks after session 3).

Case presentation (in teams of 5-6) (20%)

Each student will be asked to present, in groups of five or six students, one of the four assigned
cases in sessions 3-6. The goal of the presentation is to introduce the topic of the session and to
stimulate discussion before we head into the theory. You are not solving the case! A team will have
15 minutes to present the case, followed by a Q&A period of the same length.

Final Report (40%)

Students should prepare an individual report on a trending topic in the news that will be assigned at
the end of session 5. The topic will be related to a subject treated in the last three sessions. The
write-up should be no more than 10 typed pages in length (double-spaced, 12 pt font, 1 inch or 2.5
cm margin all around, including graphs and bibliography) and is due on the day that the final
exam is scheduled.
ORGANIZATION OF THE COURSE

10/02 17/02 24/02 3/03 10/03

AM Session 1: Session 3: ******** Session 4: Session 6:

Introduction Exploiting the Race to the Redesigning

system Bottom? the chain

PM Session 2: ******** Session 5:

Spotting and Navigating the

responding to Maze
cost differences

Assignment Intermediate Final report

s report assignment
assignment

DETAILED COURSE DESCRIPTION:

SESSION 1: INTRODUCTION

Readings:

Kerr, William (2016). Harnessing the Best of Globalization. MIT Sloan Management
Review.

SESSION 2: SPOTTING AND RESPONDING TO COST DIFFERENCES

Readings:

Ricart, J.; Agnese, P. (2011). Adding Value through Offshoring. IESE Insight 10, pp. 60-66.
Head, K. (2007), Factor Advantages. Chapter 3 in Elements of Multinational Strategy,
Springer, 39-53.
 Porter, M.; Rivkin, J. (2012). Choosing the United States. Harvard Business Review.

SESSION 3: EXPLOITING THE GLOBAL SYSTEM

Case:

De Simone, L.; Hoopes, J.; Lester, R.; Melvin, S. (2016). Etsy: Keeping it Real By Keeping Taxes
Low. Stanford Graduate School of Business Case.

Readings:

Head, K. (2007) International Taxation. Chapter 12 in Elements of Multinational Strategy,

Springer, 189-201.
Fox, Justin (2014) . The Conversation We Should Be Having About Corporate Taxes.
Harvard Business Review.

SESSION 4: Race to the Bottom?

Case:

Hau, Lee & Melvin, Sheila (2015). Everything is Connected: A New Era of Sustainability at Li &
Fung. Stanford Graduate School of Business Case.

Readings:

Spar, D.; La Mure, L. (2003). The power of activism: Assessing the impact of NGOs on
global business. California Management Review 45(3), 78-101.
Distelhorst, Greg (2016). Can Lean Manufacturing Put an End to Sweatshops? Harvard
Business Review

SESSION 5: Navigating the Maze

Case:
Lee, Hau; Silverman, A. (2008). Renaults Logan Car: Managing Customs Duties for a Global
Product. Stanford Graduate School of Business Case GS-62.

Readings:
Head, K. (2007). Trade Rules. Chapter 5 in Elements of Multinational Strategy, Springer,
Berlin, 75-94.
http://proxy2.hec.ca:2171/content/k05p4482240nq40k/fulltext.pdf
Session 6: Redesigning the Chain

Case:
Uniqlo: A Supply Chain Going Global HK1085-PDF-ENG

Readings:

Pisano, G.; Shih, W. 2009. Restoring Americas Competitiveness. Harvard Business Review.
Pisano, G.; Shih, W. 2012. Does America Really Need Manufacturing? Harvard Business
Review.