better labor rights and protection at home and abroad. GVC analysis can also be applied by environmental and health groups to show how global economic processes interact in local contexts to environmentally degrade land, water, and air quality, or change the types of foods available in schools and communities, all which can have adverse impacts on health outcomes.
The GVC model employs specific methodological tools to discover how the chain is organized. We highlight these as a series of discrete research steps. First, we identify the stages and actors in the value chain. We begin by tracing the entire input-output process that brings a product or service from initial conception to the consumer’s hand. The main segments in the value chain typically entail: design → production → distribution → marketing → sales. After we determine the stages of the chain, we identify the actors in each segment, their relative size and importance, and how their roles may be changing. These actors include the lead firms of each industry and their suppliers.
The second step is to determine the geography of the chain. The relative ease with which companies are able to relocate their production facilities in order to gain access to raw materials, new markets, and lower labor costs reflects major advances in the world’s communications and transportation technologies. Developing countries are under constant pressure to devise strategies to maintain their position in existing production networks or to upgrade to higher value-added segments of global value chains.
Third, after identifying the input-output structure and the geographical spread of a value chain, we can analyze the ties between firms in the industry. These relationships are described as “governance” structures that dictate how the chain operates and who controls the diffusion of technology, standards, and brands within the chain. Traditionally, value chains were characterized as either “producer driven” or “buyer driven.” A producer-driven chain tends to be vertically integrated and it connects firms through ownership or tightly knit production alliances. A buyer-driven chain is characterized by lead firms (retailers, marketers, and manufacturers without factories) that utilize a wide array of independent suppliers, which are linked to one another through complex global sourcing networks and intermediary firms (Gereffi 1999; 2005).
Recently, a more comprehensive typology of GVC governance structures has been put forward, with five distinct kinds of relationships: markets, hierarchies, and three types of networks – modular, relational, and captive (Gereffi, Humphrey, and Sturgeon 2005). This typology recognizes that there are new network forms of organization within global value chains