GVC analysis elements of successful Global Value Chain (GVC) engagement - Mapping. © FAO: http://www.fao.org

1. www.fao.org/ag/ags
GVC analysis
Resource material prepared for an Advanced Training of
Trainers Advanced Workshop to enhance Pro-poor Policy
Formulation and Implementation at Country Level
(GCP/RAS/276 & TCP/RAS/3405 )
30th May - 3rd June 2016, Hanoi, Vietnam.
elements of successful Global
Value Chain (GVC) engagement

2. Supply chain
Input
suppliers
Producers
Assemblers,
traders
Processors Retailers
Flow of services, goods, products and information

3. A simple value chain
Design and
product
development
Production
Inward logistics
Transforming inputs
Packaging
Marketing Consumption
& recycling

4. Value Chain Mapping
• Mapping the flow of inputs – goods and services
– in the value chain can determine the influence
of behaviour and the important roles of other
actors in its success.
• The focus is usually on:
▫ Functions
▫ Actors
▫ Relationships
▫ Enablers

5. Distribution of rewards
• A value chain perspective analyses how firms,
regions and countries are linked to the global
economy.
• This will determine the distributional outcomes of
global production systems
• Informs about the needs to upgrade capacity to
benefit from global integration.
• By focusing on the institutions that drive
international specialisation, value chain analysis
identifies policy levers which can be used to alter
these distributional patterns.

6. Sources of Rent – rewards for
entrepreneurial activity
• Distributional outcome
▫ Capital -- for its entrepreneurship, risk-taking and
ownership of technology),
▫ labour (for its effort), and
▫ to the owners of natural resources (land
ownership and stewardship).
• Sustainable incomes needs to be measured as
▫ Value-added (that is output value minus input
costs) at each step of the value chain

7. Examining the determinants of income
distribution
• Identifying the nature and extent of barriers to
entry along the chain
• Sources of comparative advantage
▫ core competences and dynamic capabilities
▫ inter-firm relationships
▫ locational advantages/disadvantages
• Government policies
▫ Incentives, disincentives, access rights, etc

8. Value Chain Map
of off-season
vegetable
production in
Nepal
Source: USAID 2011

9. Common Flow of Vegetables in Nepal

10. Inter-provincial
wholesalers
Hotels,
Restaurants
Service Provision
Financial Services
• Loans
• Saving
• Insurance
Non-financial
service
• Extension
services
• Plant health
• Market
information
• Soil testing
Physical input
• Seeds
• Fertilizers
• Pesticides
• Equipment
• Irrigation
Governance
Importers
CHANNEL 2
Imported channel (0.51
million tons)
Production
Aggregation
Wholesaling
Retailing
Domestic Consumers (0.93 million tons)Consumption
CHANNEL 1
Domestic channel ( 0.42
million tons)
Retailers
Wholesalers
Producers
Collectors
Vegetable Value Chain in Cambodia
Source: Duong and Khin (2016, Draft)

11. Inter-provincial
wholesalers
Hotels,
Restaurants
Service Provision
Financial Services
• Loans
• Saving
• Insurance
Non-financial
service
• Extension
services
• Plant health
• Market
information
• Soil testing
Physical input
• Seeds
• Fertilizers
• Pesticides
• Equipment
• Irrigation
Governance
Importers
CHANNEL 2
Imported channel (0.51
million tons)
Production
Aggregation
Wholesaling
Retailing
Domestic Consumers (0.93 million tons)Consumption
CHANNEL 1
Domestic channel ( 0.42
million tons)
Retailers
Wholesalers
Producers
Collectors
56%
44%
3% 37%16%

12. Relationships within a VC
• The value creation is relied upon effective
relationships
▫ Vertical and Horizontal Linkages
• Vertical Linkages
▫ attained through cooperation between the
different players or firms
▫ benefits in transferring skills and share knowledge
to reduce transactions costs

13. Vegetable Value Chain in Cambodia
• Production system
▫ Seasonal production
▫ Led by smallholders with limited land
▫ Mainly traditional production methods
▫ Issues re handling of agrochemicals etc
▫ Limited knowledge on harvesting and handling
▫ High spoilage
• Post-harvest handling system
▫ Traditional methods
▫ Lack of knowledge/facilities
▫ No processors or exporters
• Weak supporting infrastructure
▫ Certification and quality control inadequate

14. Horizontal Linkages
• Relationships among different players operating
at the same level of a value chain
▫ Benefits from planning and coordination
▫ Farmer associations,
 Avoiding gluts, managing pest and disease risks
▫ Traders unions, etc.
 Supply coordination
 Price setting

15. Points to remember
• Two key aspects of VCA …
▫ Understand the sources, key leverage points and
approaches that will maximize value impact
▫ How to facilitate VC activities by bringing together
the capacities of the public sector, the private
sector, and civil society into an effective
partnership
▫ Identify performance measures that reflect
contribution to well-being – economic,
environmental and social

16. Conclusion
• Value chain mapping help understand how current activities
in a production system links to local capacity in meeting
consumer demand for particular goods and services
▫ By enumerating and quantifying input-output relations, it
can assesse broad-based impacts on poverty reduction in
agriculture in the context of globalization
▫ Informs how economic integration into global product
markets can enhance local benefits
▫ Identifies ways to improving performance in order to
realize full potential of domestic resources
• Value chain mapping thus informs policy analysis that seeks to
facilitate gainful links and address risks in Global Value Chain
engagement.