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Value Chain Analysis for Policy-Makers and Practitioners

Value Chain Analysis (VCA) is said here to be an increasingly useful approach to gain a comprehensive view of the various inter-locking stages involved from taking a good or service from the raw material to production and then to the consumer. This paper aims to fill a gap where the insights of VCA could provide useful information for policymakers, at national and local levels, who must take important economic and social decisions, especially in countries who are trying to upgrade their industries. It is targeted specifically toward policymakers and planners at different levels of government, business associations and trade unions and others responsible for developing strategies for enterprise development and local economic development, trying to improve the ability of local enterprises to compete in the global economy.

This guide notes that recent work on local networks and clusters suggests that improving local relationships is critical, highlighting the relationships amongst local enterprises and the relationships between these enterprises and support institutions. The central message being that the density and quality of local relationships matter for competing in global markets. However, the guide points out that the connection between the local enterprises and their global customers are also factors of success. Enterprises are not exporting into an anonymous global market, it notes; often they feed into supply chains that are governed by powerful global actors.

This extensive guide begins with a presentation of the key insights of the value chain approach and the questions it raises about how the global economy is organised and how local enterprises can participate more effectively in it. Section 2 sets out why this new analytical approach is important for policymakers and practitioners. Sections 3 to 8 then tackle specific problems and provide practical ideas about how to address these challenges. These latter sections cover:

  • Customer demand as the driver of change
  • Gaining market access
  • Upgrading local enterprises’ capabilities
  • Improving local employment practices and working conditions
  • Bringing together key stakeholders
  • Drawing donor agencies into a common strategy

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