The Role of Services in Global Value Chains

In some ways of services plays an important role similar to that of goods. But their roles also differ, in that service facilitate the emergence in GVCs in a way that goods do not. Services can be seen as elements in GVCs that are different from the typical cross-border or arm's length trade usually analyzed in the case of goods. It really emphasizes that GVCs trade on services is important especially in manufacturing activities since it used to operate productions and increase the productivity rate.

Firms can do nothing without the presence of service, either input or output. Another important note on . The reasons for these developments are variants of the older arguments for why the shared of service in GDP tends to grow: the splintering or outsourcing of service activities from manufacturing firms; the growing importance in GVC world of connecting services such as telecommunications and transport. The growing service component in sophisticated manufacturing goods, such as software of cars; and increases in the price of service tasks relative to manufacturing task.

Get quality help now

Bella Hamilton

Verified writer

Proficient in: Values

5 (234)

“ Very organized ,I enjoyed and Loved every bit of our professional interaction ”

+84 relevant experts are online

Hire writer

Thus, it implicates that manufacturing tasks is a labor-intensive concern, it strives to increase production rate. Service also build an efficiency towards the global value chain and ensure a greater the importance of share of the service of the most developed and developing countries. In fact, the progress of service sector has been deliberated as an indicator as country's economic progress in which service sector should meet a quality standard towards international business in order to compete and to be more active in terms of contribution to have a higher productivity rate.

According to Servicification, therefore, implies that competitive services could be a key to improving performance in manufacturing. It means that service is not limited to the service industry itself in having a better performance can lead as to be a competitive one. Services became a strategy that contributes to adopting new-technologies, effective communication, and efficient transportation to make it more industrious.

Moreover, services are often considered as the ‘glue’ of GVCs. It is essential in the production process starting from the beginning value chain that includes planning, designing and even engineering up to the end of the production that is finishing with marketing, sales, and after sales of the service.

According to , despite its key role as an enabler or ‘glue’ that holds supply chains together, the role of services in GVCs is often underappreciated and poorly understood. Firms that provide a large scale of services usually focused on the core countries also known as developed countries. As a result, countries that will be underdeveloped and developing countries will left behind.

GVC have transformed international trade and the world of the economy in general. They have created a new option for least developed (LDC) and developing countries, which can now join supply chains and trade rather than having to spend decades building their own industries. The offshoring of labor-intensive manufacturing stages and heightened role of technology have spurred significant growth in emerging economies. Fragmentation of production in different countries has seen technology and know-how to spread to all parts of GVCs, resulting in a lower cost for producers, lower prices for consumers, better quality and a greater variety of products and services. Global value chains in service really influence in terms of international business through different strategies that come up to them on how they contribute to the industries beyond them. The development could be achieved if processes are improved. Through the improvements (good quality of services, innovation towards new technology, communications and etc.), it could change inputs to outputs a lesser time that recognized in the production system. But climbing into the development, GVC participation should also climb to the top that can provide more significance in production. It also manifested that processing and selling commodities should be upgraded through using higher technology things such as computer and gadgets for advertisements, innovation towards the design of the output, the quality of the output. The management, marketing, and the research should demonstrate the best knowledge on how to step up to high-intensity services.

Moreover, service features in almost every activity in an economy and are therefore key determinants of competitiveness and countrywide productivity. They have been referred to as 'the glue that holds supply chains together and ensures that they function well, and involved in productions and product sales. Services also play a crucial role in the transformation of international trade and investment pattern, both through enabling the development of the GVCs and through the creation of GVCs in their own right. Furthermore, a service role in international business and trade is to increase the productivity rate. Also, it allows industries to perform in every activity that guarantees contribution