How Global Value Chains May Have an Impact on an Organization's Supply Chain Design - Essay Example

The global value chain encompasses functions that are strongly included and frequently managed on a regular basis. Thus, these functions can impact the activities of organizations at the home as well as in other host countries where they perform business operations. These impacts are pretty straightforward when an organization from one nation inaugurates a new industrial unit or engineering unit in another nation. A few of the impacts are more complex when an organization of one nation makes an agreement with an organization in another nation in order to coordinate production in plants.

The impacts of the global value chain are precisely seen in the supply chain design and corporate alignment of an organization (Schroeder, Goldstein, & Rungtusanatham, 2010). Value Chain and Supply Chain The idea of value was first created and promoted by Michael Porter in the year 1985. He had demarcated value as the number of purchasers who are prepared to pay for an organization’s products or services (Chan, 2007). According to him, the value chain is the blend of nine common value-added functions inside an organization that can deliver value to the consumers. On the other hand, the concept of supply chain first appeared in the year 1980. The supply chain describes the handling of material flow inside an organization from suppliers to the end-users.

Impact of Global Supply Chain on Organization’s Supply Chain Design
Nowadays, globalization is no longer restricted to only products; it has expanded to other business aspects such as foreign direct investment, occupation, and services among others. The global value chain is determined by the organization’s wish to raise competency because increasing domestic competition and global market powers are facilitating organizations to become more effective with respect to the cost of products and services.

In this regard, a strong value chain can help organizations to enter new evolving markets and to improve access to strategic resources which can assist in tapping foreign business knowledge (Kleindorfer, Singhal, & Wassenhove, 2005). In order to cope up with the changes carried by rapid globalization, there is a need for an accurate supply chain design. A properly structured supply chain design can enhance the internal network and flow of resources through it. With the constant commoditization of several goods, organizations require improved methods to differentiate themselves from other competitors. In order to compete in the global market, there is a need for improvement through supply chain redesign. Therefore, the global value chain can impact on supply chain design of organizations in order to fulfill the objective of cost minimization and to develop a more efficient value chain to stay cost-competitive (Power, 2005).

Impact of Global Value Chain on Corporate Alignment
The global value chain is also related to the corporate alignment of an organization. The global value chain delivers the contents of organizational culture, management style, regular business operations, and problem-solving activities. It can create an environment of openness and sharing of culture within the organization. In a globalized market, one of the major challenges confronted by organizations is that of flexibility. Organizations need to align with the market it operates so that it can bring value to the customers. The global business environment and its value chain generate demands for organizations and fulfilling those demands require alignment with the business environment. The organization is a part of the external business environment that comprises economic, social, cultural, technological, and political aspects which impact performance. Therefore, corporate alignment is necessary for organizations to function in a complex business system. With the increased globalization and business operations in several nations, people of various organizational hierarchical levels are now visible to the difficulties of cultural impact on both external and internal organizational environments. Therefore, in order to implement any strategy in the global market, an organization might need to align the business processes within the business environment (Lane, Maznevski, & DiStefano).

In the present day’s corporate context, successful organizations need to reinvent their business processes simultaneously. Global deregulation in several industries is introducing new markets and new competitors. Business expansion and global value chain are reducing the requirement for standardization of supply chain management and increasing the alignment with the corporate environment so that organizations can become more responsive, efficient and achieve better coordination with the customers, suppliers, and other business associates (McAdam & McCormack, 2001).