Local Company Contribution within Global Value Chain: A Case Study in the Indonesian Footwear Industry

Abstract

Nowadays, Global Value Chain (GVC) theoretical framework has become a tool can be utilized by country and company to understanding its competitive advantage and position in global economy. By governing companies from various country around the globe into global network relationships, GVC has shown a great value added to the product. The competition among lead firms are built through their ability to gain the most efficient production by sourcing globally, in which involve local company, and Multi National Enterprise’s (MNE’s) located at developing country. Indonesia is a case of country in which many global lead firms include local company in its value chains. This study aim to understand the value chain governance of Indonesian local company within footwear’s industry organized by a global brand and its contribution to development of the local company. This paper revealed that the involvement of local company within Indonesian footwear industry is driven by global lead firm. The first tier suppliers are mostly from Taiwan and only one Indonesia local company on the value chain. While the lead firm undertaking process of design, distribution and marketing, Indonesian local company performing mostly manufacturing activities. However, there is a dynamic transformation in which local company start involving in development stage of the footwear.

DOI: 10.5901/mjss.2015.v6n6s5p444