CHANGES for Bá Thi Café

Innovation

. The thinking here is that firms need to examine their capabilities to identify those of their attributes which:
❏ Provide value to the final customer;
❏ Are relatively unique in the sense that few competitors possess them; and
❏ Are difficult to copy, i.e. where there are barriers to entry.

A useful corollary to this line of thinking is that in a dynamic world, core competences can easily become corerigidities (Leonard-Barton, 1995), and part of the task of upgrading is to relinquish areas of past expertise.

It argues that corporate profitability in the long run cannot be sustained by control over the market (for example, through the adoption of quasimonopolistic practices), but through the development of dynamic capabilities which arise as a result of the firm’s:
❏ Internal processes which facilitate learning, including the capacity to reconfigure what the firm has done in the past;
❏ Position, that is its access to specific competences either within its own activities, or those which are drawn from the regional or national system of innovation; and
❏ Path, that is, its trajectory, because change is always path-dependent.

RETAIL +SERVICE COFFEE

FARMING + POST HARVEST PROCESS COFFEE
-

POSSESS A UNIQUE COFFEE SPECIES

Moka Bourbon in DaSar

It is thus possible to identify four trajectories that firms can adopt in pursuing the objective of upgrading, namely:


❏ Process upgrading;
❏ Product upgrading;
❏ Functional upgrading; and
❏ Chain upgrading.

Functional upgrading is a little more complex, since it involves firms engaging in a different mix of activities, both within their individual link and perhaps by also moving to other links in the value chain, as upgrading implies the shift from control over embodied to control over disembodied activities* (for example, from production to design)


Functional upgrading: increasing value-added by changing the mix of activities conducted within the firm (for example, taking responsibility for, or outsourcing, accounting, logistics and quality functions) or moving the locus of activities to different links in the value chain (for example from manufacturing to design).

Product upgrading: Introducing new products or improving old products faster than rivals. This involves changing new product development processes both within individual links in the value chain and in the relationship between different links of the chain.

Finally, in some cases, barriers to entry in a particular chain may be so low that there are few prospects of upgrading. In this case, upgrading may imply the capacity to move to new chains.

Chain upgrading: moving to a new value chain (for example, Taiwanese firms moved from the manufacture of transistor radios to calculators, to TVs, to computer monitors, to laptops and now to WAP phones).

LESSON LEARNED

MOVING FROM COFFEE MANUFACTURING => RETAIL + SERVICE COFFEE

What the value chain perspective offers here is the recognition that process and product upgrading increasingly involve integrated actions between firms in the chain


Process upgrading: Increasing the efficiency of internal processes in such a manner as to ensure that they are significantly better than those of rivals, both within individual links in the chain (for example, increased inventory turns, lower scrap), and between the links in the chain (for example, more frequent, smaller and on-time deliveries).

These led to the development of standardized business processes such as just-in-time single unit flow procedures, total quality control, and continuous improvement practices. The mechanisms for activating these processes included the utilization of process-packages such as ISO quality and environmental standards (ISO 9000 and ISO 14000), and industry-specific standards such as Hazard Analysis and Critical Control Point (HACCP) processes in the food industry

This suggests that upgrading working conditions in global supply chains requires significant resources and managerial diligence

HIERARCHY OF UPGRADING

  • This accords with the common assertion that East Asian firms have made the transition from

OEA production (original equipment assembling, i.e. thin value added assembling under contract to a global buyer) to


OEM (original equipment manufacturer, i.e. manufacturing a product which will bear the buyer’s badge), to


ODM (own design manufacturer) to


OBM (own brand manufacturing). Invariably this is a trajectory which involves a progressively higher content of disembodied, knowledge-intensive activities.

The barriers to entry which define the envelope of profitable production are declining most rapidly in the embodied links in the value chain (that is, in regard to process capabilities). These are the areas most subject to competition and hence to declining terms of trade. By contrast, it is the disembodied activities such as design, marketing, technology and strategic repositioning where rents are appreciating and which are most difficult to enter and which consequently offer the highest rates of return

The relative importance of disembodied inputs is, as a general rule, progressively more important as the challenge moves from process, to product, to functional to chain upgrading. Hence, to sustain income growth SMEs— either individually or collectively— will in the long run need to develop the capability to upgrade not just processes and products, but increasingly also their functions

At the early phase of the upgrading trajectory—where process upgrading is critical—the primary arena for cooperation is in production sharing or a division of labour in the production cycle (for example, firms making complementary products or components for each other). But, as the upgrading frontier moves towards increasingly disembodied activities, SMEs require the skills to manage and share knowledge, rather than to cooperate in production.

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UNDERSTANDING THE MODE OF INCORPORATION IN THE GLOBAL ECONOMY

Arms-length relationships describe a world where producers and customers are faceless to each other. They operate in a world of transient and impersonal relationships, much as that described in economic textbooks on perfect competition. The export of many primary commodities (such as coffee) is an example of this form of incorporation in global markets.

Quasi-hierarchical relationships between buyers and producers describe a world in which the two parties are not joined by ownership, but engage in a long-term relationship. One of the parties tends to be dominant—to assume the role of “governor”—and to define who is incorporated in the chain, and what standards they have to meet.

Network relationships occur when different producers have complementary skills which they need to share in order to prosper. The defining aspect of these complementary skills is that they define a world of cooperation among “equals”, often engaging in technological collaboration (for example in the electronics industry, or in automobiles where major assemblers jointly produce engines)

Hierarchical relationships refer to the incorporation of producers in a vertically integrated production chain, connected by close bonds of ownership. It describes a value chain of head offices and subsidiaries, that is a world of foreign direct investment.

  • CAUDATFARM:
  1. Create retail + service first by introducing The Coffee House
  2. Create Caudatfarm = Manufacture Arm to ensure the quality of coffee and the supply of healthy vegetable

THE MARRIED BEAN

  1. Possess and Maintain a network of coffee farmers producing high-end coffee -> Product Upgrading + Functional Upgrading
  2. NOW, going to retail + service GOURMET coffee in SAIGON -> Chain Upgraidng + Product Upgrading
  3. Buying from high-end farmer + Focus on POST-HARVESTING coffee process -> Buying- Process Upgrading + Post-Harvesting Upgrading

THE K'HO COFFEE

  • Having Rolan to control the quality of coffee through communicate to the group of K'HO People -> COMMUNITY RELATIONSHIP UPGRADING
  • Josh take care of quality control: Picking the ripe cherries + Drying coffee on beds -> PROCESS UPGRADING + PRODUCT UPGRADING
  • They are both selling ROASTED COFFEE to Cafes and Final Customers -> CHAIN UPGRADING

Producers seldom supply directly to final consumers. Their products characteristically pass through a number of intermediary buyers, and these determine the extent to which SMEs can upgrade their operations. The following major types of buyers can be identified:
In the consuming country:
❏ Multi-outlet retailers
❏ Single-outlet retailers
❏ Independent specialized buyers
❏ Large international firms with global production networks
In the producing country:
❏ Local buyers and export agents
❏ Large producing firms acquiring products and other inputs from other local suppliers

Groups of firms located in the same geographical space benefit from collective efficiency when:

  1. Together they generate external economies which spill over in a beneficial way to other firms. For example, they may:
    ❏ Generate a pool of skills;
    ❏ Draw in infrastructure and specialized suppliers; and
    ❏ Attract buyers.
  2. They engage in joint actions. For example, they may:
    ❏ Engage in joint purchasing;
    ❏ Sell under a collective label; and
    ❏ Provide a collective facility for customs clearance.

NESTLE INSTANT COFFEE COMPANY => COFFEE FARMERS

OLAM PROCESSING COMPANY => FARMERS

These “governors” play an extremely important role in the modern era of globalization which, as we saw earlier, can be distinguished from nineteenth century internationalization precisely because of the complex and coordinated roles in which global production networks operate

CASES
For many decades Levi-Strauss has been the most prominent brand name in jeans production. It prided itself on its global production network and on its profitsharing schemes with its workforce. Even as major rivals retreated out of production, Levi-Strauss retained its global production system through much of the 1990s.
However, towards the end of the decade, profits began to decline. From 1990 to 1999, Levi’s market share of men’s jeans dropped to 25 per cent from 48 per cent. For the first time the company began to question whether it was equipped to control the production process in-house. Would it make more sense to perhaps concentrate on design, marketing and buying (as Nike does) and leave production to independent producers?
Indeed this is precisely the direction Levi is moving towards. In 1999, the company announced it was closing half of its 22 plants in Canada and the United States.
According to John Ermatinger, the president of the Americas division of LeviStrauss: “Our strategic plan in North America is to focus intensely on brand management, marketing and product design as a means to meet the casual clothing wants and needs of consumers. Shifting a significant portion of our manufacturing from the United States and Canadian markets to contractors throughout the world will give the company greater flexibility to allocate resources and capital to its brands. These steps are crucial if we are to remain competitive.”
Production is now seen as only one element to a company’s commercial strategy. Developing global supply chains and targeting key value-added functions are also priorities.

IDEAS OF SUPPLY INNOVATION

Create a FARM using BIG ECONOMY OF SCOPE

  1. Grow Expensive Coffee
  2. Make Honey
  3. Grow Tea
  4. Grow Avocado + ...
  5. Make Soap of Coffee
    OR
    Create a Sorting/Drying Station + Coffee shop + Retail Shop = LÀ VIỆT

FEEDING INTO THE SUPPLY CHAIN OF MULTINATIONAL COMPANIES

  • LÀ VIỆT => UCC
  • INDIAN COFFEE ESTATE => ILLY

When asked how they saw their supply-base evolving, the assemblers described a uniformly changing world, from locally owned firms using local technology to suppliers using proprietary technology from one of the global first-tier suppliers, preferably within an FDI relationship.


=> COMPANY UNDER THE UMBRELLA OF MNCs may receive the technology and the support of the Big MNC

But there are other trends which are simultaneously affecting the way in which SMEs are being incorporated into the global economy. Here two contrasting developments can be identified—one characteristic of buyer-driven chains, and the other of producer-driven chains. In the first case, particularly in the buyer-driven chains producing final consumption goods such as clothes, footwear, toys and consumer electronics, there is an increasing trend for large firms to retreat from production and to buy-in products made to their close specifications.


This is because the barriers to entry in production have declined as more and more countries around the world have developed their industrial sectors, as indicated in figure 4.4 above. In these sectors, therefore, global producers are therefore moving to become global buyers as explained in box 4.7.

Maybe TRUE & NOT TRUE FOR COFFEE

  • Because MNCs can buy COFFEE BEAN, THEN EXPORT to consuming countries and finally ROAST THEIR COFFEE OVER THERE = JAPAN, US, EU

=> Potentially the way to export THE BRAND + THE COFFEE SAFELY by COOPERATING WITH AN OUTSOURCING COFFEE ROASTING in this consuming countries => DOI CHAANG COFFEE IN THAI LAND exported to CANADA MARKET + KEEP THE BRAND + STORIES

DISEMBODIED TECHNOLOGY .VS. EMBODIED TECHNOLOGY

LINK: https://books.google.com.vn/books?id=w_miAgAAQBAJ&pg=PA151&lpg=PA151&dq=DISEMBODIED+ACTIVITIES&source=bl&ots=oHCXprwu_n&sig=Ef8DUzVnX4ZtMvn7rpFT3njmr4U&hl=en&sa=X&ved=0ahUKEwjOs9-U5unSAhVHgrwKHc1qDU4Q6AEIHjAC#v=onepage&q=DISEMBODIED%20ACTIVITIES&f=false

CREATE A BIG WASHING / COMPANY COFFEE STATION IN DASAR => KZ NOIR WASHING STATION IN RWANDA COFFEE = LÀ VIỆT COMPANY

WHY?
The second describes a world where key producers in the chain, generally commanding vital technologies, play the role of coordinating the various links

“Producer-driven commodity chains are those in which large, usually transnational, manufacturers play the central roles in coordinating production networks (including their backward and forward linkages). This is characteristic of capital- and technology-intensive industries such as automobiles, aircraft, computers, semiconductors, and heavy machinery.”



“Buyer-driven commodity chains refer to those industries in which large retailers, marketers, and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in the third world. This pattern of trade-led industrialization has become common in labour-intensive, consumer goods industries such as garments, footwear, toys, house wares, consumer electronics, and a variety of handicrafts. Tiered networks of third world contractors that make finished goods for foreign buyers generally carry out production. The specifications are supplied by the large retailers or marketers that order the goods.”

PG 56 OF INTEGRATING SMES BOOKS

From the perspective of developing country producers, the role played by these GOVENORS = PROCESS COFFEE COMPANIES = OLAM, VOLVO, LÀ VIỆTis critically important in determining:
❏ Whether they are to be incorporated in global value chains;
❏ Which market segments they will serve in these value chains;
❏ Which functions they will undertake in these value chains; and
❏ In which areas they will be allowed to upgrade their capabilities.

More contentious is the suggestion that producer-driven chains are a reflection of the old “import substituting industrialization order”, whereas buyer-driven chains are more attuned to the outward-oriented and networked production systems of the 21st century.

WHAT TECH?

  1. WASHING TECH
  2. FERMENTATION TECH
  3. WELL-FLOW TECH

WHAT POWER?

  1. FINANCE POWER
  2. AGRO INPUTS SUPPLY
  3. GROWING TECH POWER
  1. Control the quality and make the farmers working in a good standard
  2. Provide farm inputs + technology
  3. Monitor and keep track of growing coffee practices

Create the FARMER ALLIANCE

  1. Tới + Việt + Hằng +
  2. Linked to ROASTER ALLIANCE

"But the most successful districts thrive when these unintended benefits of proximity are complemented by joint actions to achieve collective efficiency "

Groups of firms located in the same geographical space benefit from collective efficiency when:

  1. Together they generate external economies which spill over in a beneficial way to other firms. For example, they may:
    ❏ Generate a pool of skills;
    ❏ Draw in infrastructure and specialized suppliers; and
    ❏ Attract buyers.
  2. They engage in joint actions. For example, they may:
    ❏ Engage in joint purchasing;
    ❏ Sell under a collective label; and
    ❏ Provide a collective facility for customs clearance.

Cooperation between SMEs appears to be much easier when it involves vertical value chain links than when it requires cooperation between firms doing similar things; for example, shoe, leather and machinery firms cooperate much more readily than do shoe manufacturers alone.

Create GROUP - COFFEE + TEA + JAM (HONEY)

NETWORK OF COFFEE FARMERS & ROASTERS:

  • Collect all coffee farmers and roasters to LEARN & STUDY EACH OTHER