Commodity-Chains in Global Perspective

Lecture Organization

1. Commodity chain dynamics:

Concentration of ownership

retail space: a limit to environmental choices?

2. Commodity logic:

Consumer spaces: Retail giants in the West

Commodity Chains: Linking West and Non-West

Value and Resource Use

The Apparel Industry: a knowledge test

?? What percentage of US apparel is controlled by the top 5 firms? What are they?

Percentage of apparel controled by top 5 firms = 068%

Firms: year 2000 data

Wal-Mart

Sears

Kmart

Dayton Hudson (target, mervyn's, dayton's, hudson's, marshall field)

JC Penney

Next 24 firms = 30%

Same trend in other first world nations

Year 2008 data

1.  Commodity chains: Basic concepts

a.          Consumption and production are linked through a web of sites

b.         Nodes and links

c.          Each node and link has social, economic and environmental consequences

social=affects lives through work relations,

economic = wealth is accummulated,

ecological = production activities affect the environment

2.         Producer Driven Commodity Chains

Producer-driven commodity chains managed by product producers. Retail owners have little control over commodity-chain structure

3.         Buyer-Driven Commodity Chains

4. Power: who controls the commodity chain? Who determines how things (nature, labor) are valued in production?

Is this 'natural'?

History  of the commodity

Commodities in Nature
Buyer-Driven Chains are controlled by retailers or larger intermediary purchasers (Wholesalers)

Triangle Manufacturing/Sourcing: the foreign producer becomes a middle merchant who then contracts most or all production to firms in other regions/countries

see Gereffi article for additional information

Struggle: Buyer- versus producer-driven chains, Who will wrest control of manufacturing?

Who will advance 'up the ladder' to brand manufacturing independence:

OEM (original equipment) manufacturing, or 'full-package' manufacture,

then to OBM (Own Brand) manufacture as foreign companies begin to produce their own brands.

Branded apparel manufactures:

widely recognized brands that carry out no manufacturing whatsoever: 'born global' with outsourcing always overseas.

Struggle

a.          a tension exists between foreign OBM manufacturing and first world retail firms

b.         This tension is evident in the struggle over 'up-grading' where foreign manufacturers try to gain a larger share of value-added in (in this example) the apparel industry

The Environment:

a. retail spaces are very much controlled in the United States, and to a lesser degree in other 'northern' nations

b. this lack of competition may reduce consumer access to knowledge about the environmental 'green' characteristics of consumer items since retailers do not compete to provide this information

c. This also facilitates overseas production and the exploitation of 'triangle' manufacturing in which retailers have little control over environmental or labor conditions

Conclusion

1.         Commodity chains are increasingly global in scope

2.         The location of the different nodes, however, is constantly changing

3.         Commodity chains embed power relations: the nodes each contain real people with interests in the location of brand name manufacture

4.         the struggle is over who will run the brand name game. JC Penny's is instructive in this regard. They were snubbed by Liz Claiborne for distribution early on, but have since developed their own brands and have come back strong (e.g., Arizona jeans)