John Tomlinson GEO 3502: Quiz 2 Study Guide 2.18.14I. Commodity Chains (or, Production Chains):  Raw Materials  Processing  Logistics  Retailing  Consumption Input-Output Structure: the sequence and range of actors involved in a particular commodity chain.  Constituted by a mix of intra-firm and inter-firm linkages, and a combination of near and distant connections.  Dimensions of the Commodity Chain Process: Geographical Structures (Territoriality): o The geography of a commodity chain can range from being concentrated in one particular area to being widely dispersed across a wide range of localities. o Nowadays, it is hard to identify a contemporary commodity chain as not being (somewhat) global, in at least one area of their input-output sourcing. o Global Commodity Chains: an extensive range of international connections; one of the primary features of the modern world economy … 2 important reasons why: Determines, precisely, which actors are connected together across the global economy. Reveals the unequal geographical distribution of value, and associated economic benefits,between different points along the commodity chain. o 5 Major Points about Geographical Structures (Territoriality) of Commodity Chains: The geographical complexity of global commodity chains is increasing, enabled by a range of developments in transport, communication, and process technologies.  The geographic configurations of global commodity chains are becoming more dynamic and liable to rapid change.  Understanding the geography of global commodity chains is not as simple as locating each stage in a particular place or country – interplace competition.  Global commodity chains are not just a feature of the agricultural and manufacturing sectors, but are also apparent in many service sectors as well.  Connect the ideas about the geographical extensiveness and complexity of global commodity chains with arguments about the geographical clustering of economic activity. Governance Processes: o In most cases, a chain will have a primary coordinator, or lead firm, driving the whole system.o Two primary drivers in commodity chains: producer-driven & buyer-driven.  Producer-driven Chains:- Commonly found in industries where large industrial transnational corporations (TNCs), the producers of specific products and/or services, play the central role in controlling their global production. - Characteristic of many capital and technology-intensive industries such as aircraft, automobile, computer, semiconductor, pharmaceuticals, and machinery manufacturing. - Notable for the degree of control exercised by the administrative headquarters operations of TNCs- Producers dominate such chains not only in terms of their earnings and profitability, but also through their ability to develop new products and markets, and to exert control “upstream” over raw material and component suppliers and “downstream” over the distributors and retailers of their products. - Profits are secured through the scale and volume of production in combination with the producers’ ability to lead technological and know-how developments.  Buyer-driven Chains:- Tend to be found in industries where large retailers (Wal-Mart, Tesco, Carrefour, and IKEA) and brand-name merchandisers (Adidas, Nike, Gap) play the central role in establishing and controlling the global production systems for their commodities, usually located in export-oriented developing-world countries.  These retailers and brand-name merchandisers are collectively known as buyers in this framework because they source their manufactured commodities from suppliers (i.e. – producers) all over the world.John Tomlinson GEO 3502: Quiz 2 Study Guide 2.18.14 Note: buyers in these chains are not final consumers; rather they are retailers, merchandisers, and wholesalers who bring these commodities to the final consumers. - Common in labor-intensive consumer goods sectors, such as clothing, footwear, toys,and handicrafts. - Production is (usually) carried out through multi-tiered layers of subcontractors and suppliers that make finished goods subject to the specifications of powerful buyers. - Profits are derived from the bringing together of design, sales, marketing, and financial expertise, allowing retailers and merchandisers to connect overseas factories with the main consumer markets. - Control is enacted through the ability of these buyers to shape mass consumption patterns through strong brand names and meet this demand through global sourcing strategies from their suppliers/producers.  Institutional Frameworks:  4 Upgrading Strategies of Global Commodity Chains:o Process Upgrading:  Improving the efficiency of the production system by either reorganizing the production process or introducing superior technologies.  Ex: a car manufacturer might introduce robot technology to speed up its assembly lines.o Product Upgrading: Moving into making more sophisticated products or services.  Ex: a basic food-processing firm might start making prepared frozen meals, or a financial firmmight offer new kinds of insurance products. o Functional Upgrading: Acquiring new roles in the chain (and/or abandoning existing functions) in order to increase the overall skill content and level of “value added” of the activities undertaken.  Ex: an electronics manufacturer might move from simple assembly to original equipment manufacturing (OEM) to own-design manufacture (ODM) to own-brand manufacturing (OBM). o Intersectional Upgrading: Using the knowledge derived from a particular chain to move into different sectors.  Ex: a firm might use its experience of making televisions to enable it to move into computer monitor making. II. Importance of Certifications & Standards:  Certifications & Standards are keys to trade; it helps ensure trust to the market and buyer that the good being purchased meets a minimum level of standards. o Examples: 1st Information Security Company, National Organic Program (USDA Organic), Fair Trade Certified, Hampshire County Council Trading Standards Service, ISO 9001 (International Certifications). Some are legally mandated by regulations; others, like Fair Trade, are voluntary.  All are meant to give assurances of a certain level of standards and practices.  They are meant to add value, improve ethical standards or improve quality.  Can