Industrialization of Multinational Enterprises, Essay Sample for Everyone

With globalization as one of the leading factors that have contributed to the increased production process movement across nations of the world, it is therefore crucial for these countries to put more focus of developing their respective competitive advantages over their other competitor countries. It is with this that we note that the involvement in all the activities by the firms within and outside the nation with the core aim of bringing the products to the final consumers through the whole process of product production to its consumption by the ultimate consumer is what is referred to as the global value chain (GVC) ("Colombia's backward and forward participation in GVCs," 2017, p. 21). However, as in figure 1, GVC is known to vary depending on the different nations involved mainly because the rates of production in the various countries are diverse and by the virtue that the nations have specialization in different trade links.

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The primary indicator of a nation's degree of GVC participation in GVC is its participation index as it comprises of the backward and forward participation indexes. The backward participation index stands for the foreign value as embodied in the gross exports of the country expressed as a % of the total gross profits of the nation exporting the products. On the other hand, the forward participation index stood for the national value after the addition of the value embodied in exports and expressed as a % of the total gross exports of the country. With this understanding, it is, therefore, appropriate to arrive at the fact that the level of a country's participation in GVC is determined by how high these two indexes are.

As evidenced in Figure 2, the forward participation in GVC for the Republic of Slovak increased from an approximate value of 52% in 2007 to an approximate value of 53% in the year 2011. The backward participation, on the other hand, decreased from 48% in the year 2007 to 47% in the year 2011 as a result of the differences in globalization levels in the years ("Slovenia has a high GVC participation index due to high backward participation," 2015, p. 55). Therefore, to prove the fact that the level of a country's participation in GVC id dependent on the level of the two indexes, the decrease in forward participation to 53% in the year 2011 and the increase in the backward participation index to 47% in the year 2011 resulted to the decrease in the total participation in GVC to 39% in the year 2011 despite the fact that one index increased. This shows that, when the domestic value added in the embodied exports decreases, the total participation is greatly affected even if the foreign exports appear to increase.

Germany and the Czech Republic too underwent the same globalization issues between the years as the graph depicts a similar trend between the years 2007 to 2011. As evidenced in figure 2, 3,4 and 6, despite the Republic of Slovak having a lower forward participation index as compared to both Germany and the Czech Republic forward participation indexes, Slovak has higher backward participation indexes throughout the years for both Germany and the Czech Republic ("GVC participation index, 2009," n.d., p. 22). With this, we can conclude that the Republic of Slovak is becoming more integrated as the country is exporting products that are involved in other countries such as Germany and Czech Republic in exports. Therefore, this factor makes a decrease in foreign value-added leading to a subsequent increase in the value added created in the Republic of Slovak and thus foreign value added in exports is a significant channel of productivity through technology transfers that seem to be more in Germany and the Czech Republic as compared to Slovak.

According to figure 5, the Slovak republic having food products, beverages and tobacco, electrical and optical equipment and the transport equipment industrial participation, it is evident that Slovak is mostly active in the in GVC in the Food products, beverages and tobacco and least productive in GVC participation in electrical and optical equipment industries. Similarly, it is good to note that both Germany and the Czech Republic play a vital role in the international trade relating to food products, beverages, and tobacco. Germany and the Czech Republic are mostly active in the electrical and optical equipment and food products, beverages and tobacco industries respectively ("GVC participation index, 2009," n.d., p. 34). The two nations are least active in food products, beverages, and tobacco and electrical and optical equipment in Germany and Czech Republic respectively. Therefore, from the patterns of active participation among these three nations, it is clear that the Republic of Slovak and the Czech Republic are both mostly active in the production of food products, beverage and tobacco and thus likely to pose competition in this industry. However, Germany seems to take part in more industries as compared to the two nations.

Based on figure 5, the republic Slovak, Germany and Czech Republic have fairly similar participation across industries, as all of them record a participation index in all industries. However, the big difference is evident in the electrical and optical equipment industry that Germany shows greater prowess as compared to the other two nations.

Figure 1. Percentage total participation index

Source: Figure 1.16. Global value chain participation, 2011," n.d

Figure 2: Figure 9. Participation in GVCs by Slovak Republic (in percent)

Source: elaborations based on OECD data (accessed from http://stats.oecd.org on 20 April 2017)

Figure 3. Participation in GVCs by Germany (in percent)

Source: elaborations based on OECD data (accessed from http://stats.oecd.org on 20 April 2017)

Figure 4. Participation in GVCs by Czech Republic (in percent)

Source: elaborations based on OECD data (accessed from http://stats.oecd.org on 20 April 2017)

Figure 5. Participation in GVCs by Slovak, Czech Republic and Germany

Source: elaborations based on OECD data (accessed from http://stats.oecd.org on 20 April 2017)

Figure 6. Participation in GVCs by Slovak, Czech Republic and Germany (In percentage)

Source: elaborations based on OECD data (accessed from http://stats.oecd.org on 20 April 2017)

References

Colombia's backward and forward participation in GVCs. (2017). doi:10.1787/eco_surveys-col-2017-graph45-en

Figure 1.16. Global value chain participation, 2011. (n.d.). doi:10.1787/888933497622

GVC participation index, 2009. (n.d.). doi:10.1787/888932834435

GVC participation index, 2009. (n.d.). doi:10.1787/888932834435

Slovenia has a high GVC participation index due to high backward participation. (2015). doi:10.1787/eco_surveys-svn-2015-graph37-en