Impact of Conceptual Approaches to global Supply Chain on Power of Supply Chain Actors Essay

Introduction

The Supply chain is a significant aspect of every organization or industry since it involves the sourcing of the raw materials, manufacture of products and distribution of manufactured goods to the end consumer. While the producer must add value to the raw materials in order to obtain finished goods, the added value requires inclusion of technology, which is a significant source of power for the firm in the supply chain.

Other sources of power for supply chain firms include the changing needs of the market, deregulation, economic liberalization and application of sophisticated strategies for competitive advantage among others. All these sources of power can be applied across the different types of chains such as the global commodity chains, global value chains and global food chains as discussed in this paper.

Approaches to Global Supply Chain

The global supply chain as noted by Appelbaum and Lichtenstein (2006, p. 115) is a significant aspect of the global business environment since it is enables firms to make decisions on whether or not to buy products in their lines of operation. They are a source of the competitive advantages through which firms strategically dominate their markets.

The globalization of the supply chain is a continued and extended concept of globalization that comes with advanced technology. The force of globalization continues to offer many opportunities, challenges and uncertainties as firms expand their activities to include many countries across the globe.

With advanced technology that is significant for the global supply chain, many firms can now sell their products in other markets across the world other than the domestic market. Similarly, they can obtain resources from other countries. Despite the opportunities that it offers to firms, the global supply chain faces challenges from political stability and economic uncertainties (Burch & Lawrence 2005, p. 13).

The global supply chain can take many forms such as the global commodity chains, global commodity value chains and the global food supply chains that common among firms operating in different industries in the global economy. Global commodity chains determine the access to markets and resources for the firms in the industry thereby determining the power of the firms as well.

Strange and Newton (2006) Argues that understanding the concept of power among the elements of the global supply chain could be enhanced by the understanding of market power, which was developed by Hymer.

According to Glassman (2011, p. 2), global commodity chain can be defined as sets of inter-organizational networks that are clustered around one commodity that links households that produce the commodity, the enterprises that process the products and the world states that end up consuming the final output. GCCs have four significant dimensions that help its participants gain power.

They are the input-output structure, territoriality, the structure of governance and the institutional framework. The determination of power in the firms in the GCC involves the governance structure of the GCC, which may be either buyer or producer driven. According to Gereffi (1994), some dominant firms in the GCC determine who does what and how in the GCC.

Buyer-driven GCCs are characterized by large retailers such as supermarket chains and named merchandizers. Such types of chains are labor intensive and production of finished goods is done in factories. On the contrary, Producer-driven GCCs are characterized by dominant TNCs, the firms are capital intensive and the participants are involved in international subcontracting. Examples are firms that operate in the automobile industry and computer industry (Brunn, 2006, p. 107).

The perception of the supply chain using the GCC approach has limitation since is it biased on the governance structure and the vertical structure of the global supply chain. While it is silent on the powers within the firm, it is also silent on the structure of the global economy. Lastly, it has rigidity with regard to buyer and producer driven taxonomy.

Due to these limitations, the global production network has been adopted by many firms across the globe. According to Dicken (2011, p. 56), Global production network is “a circuit of interconnected functions, operations and transactions through which a specific commodity, good or service is produced, distributed and consumed.”

The GPN addresses the vertical and linear concepts of the global supply chain network thereby addressing the issue of power among dominant firms in the supply chain. The governance structure of the GPN defines power, which includes power centered in corporations, institutions and the collective power among all participants in the network (Henson & Reardon 2005, p. 247).

Sources of Power in the Global Supply Chain

Firms operating in the global supply chain obtain their powers basing on the role they perform and whether they are dominant players in the chain or not. As indicated above, the governance structure of the supply chain is what determines the sources of power. However, other sources of power exist (Bair 2005, p. 164).

First, the changing needs of consumers provide a source of power for the participants in the global supply chain. Significant is the changing culture of consumption and feminization of labor that has been experienced in the UK and U.S. retail market and led to the increased power of super markets in the supply chain (Seth & Geoffrey 2011, p. 106).

Deregulation is another significant source of power for most operators in the retail sector. Common examples are relaxation of taxation in some areas such as labor in the UK and antitrust in the U.S. is an important reason for the rise of large retailers such as Wal-Mart (Burt & Sparks, 2003).

Dicken (2011) argues that the revolution in the IT sectors that led to containerization and innovation of some technologies such as RFID, and bar code could explain increased retailing power of supermarkets.

Other sources of power among firms include the competitive strategies applied and economic liberalization. The acquired power can be manifested in various ways such as emergence of oligopolies and increased food standards that is characterized by barriers to entry in the market and increased competitive advantage (Vorley, 2003, p. 62).

Conclusion

The power of participants of a supply chain is significant in determining the dominant firm in the chain. The governing structure is significant in determining the power of firms in the supply chain.

The sources of power in the supply chain could be obtained from the competitive strategies applied by the firms, the liberalization of global economics, revolutions in the IT sector, changes in the society and deregulation in the U.S. and UK markets.

The acquired power can be manifested by increased oligopolies and food certification that involves take-it or leave-it deals. Therefore, power in the global supply chain is significant in determining the dominant firms in the chain.

List of References

Appelbaum, R & Lichtenstein, N 2006, ‘A New World of Retail Supremacy: Supply Chains and Workers’ Chains in the Age of Wal-Mart’, International Labor and Working Class History, vol. 70, no. 1, pp. 106-125.

Bair, J. 2005, ‘Global Capitalism and Commodity Chains: Looking Back, Going Forward’, Competition and Change, vol. 9, no. 2, pp. 153-180.

Brunn, SD 2006, Wal-Mart World: The World’s Biggest Corporation in the Global Economy, Routledge, Abingdon.

Burch, D & Lawrence, G 2005, ‘Supermarkets Own Brands, Supply Chains and the Transformation of the Agri‐Food System’, International Journal of Sociology of Agriculture and Food, vol. 13, no. 1, pp. 1-18.

Burt, S & Sparks, L 2003, ‘Power and Competition in the UK Retail Grocery Market’, British Journal of Management, vol. 14, no. 3, pp. 237-254

Dicken, P 2011, Global Shift, 6 ed., Sage, London.

Gereffi, G 1994, ‘The Organization of Buyer-Driven Global Commodity Chains: How U.S. Retailers Shape Overseas Production Networks’, in Gereffi, G and Korzeniewicz, M (eds.), Commodity Chains and Global Capitalism, Praeger, London.

Glassman, J 2011, ‘The Geo-political Economy of Global Production Networks’, Geography Compass, vol. 5, no. 4, pp. 154-64

Henson, S & Reardon, T 2005, ‘Private Agri-food Standards: Implications for Food Policy and the Agri-food System’, Food Policy, vol. 30, pp. 241-253.

Seth, A & Geoffrey, R 2011, The Grocers: The rise and rise of the supermarket chains, Kogan Page, London.

Strange, R & Newton, J 2006, ‘Stephen Hymer and the externalization of production’, International Business Review, vol. 15, no. 2, pp. 180-193.

Vorley, B 2003, Food, Inc.: Corporate concentration from farm to consumer, UK Food Group, London.