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Global Commodity Chain Model - Essay Example
Topic: Using an extended example critically examine whether the 'sector matrix' framework gives a better strategic understanding of product markets than the concepts of 'product' or 'commodity' chains.
The present scenario of globalization has brought an interesting change to the way production of commodities has usually taken place…
This has given rise to the concept of commodity chain. Different firms with heterogeneous geographical distribution engaged in production activities of a commodity is said to constitute a global commodity chain. This is known as the Global Commodity Chain (GCC) model. (Dicken P., 2003)
According to Hopkins and Wallerstein a commodity chain is defined as "a network of labor and production processes whose end result is a finished commodity". The process of production of a commodity is of main importance in the commodity chain. The entire process can be thought of being comprised of a network of points where each point is related to its preceding one in terms of procuring raw material, production, distribution and consumption. These interorganaisational points are technically defined as 'nodes'. The geographical location of the nodes is generally different from one another. This explanation provides an innovative view for explaining the global inequalities in development. The nodes that are located at the periphery of the network are open to more competition than the nodes at the centre. As a result, central nodes are subject to more aggregate wealth than the peripheral nodes. This distribution is augmented by competitive pressures of innovation that flows from the centre to the periphery. ...