GLOBAL VALUE CHAINS AND THE COMPETITIVENESS OF SMALL AND MEDIUM ENTERPRISES

Authors

  • Zijad Sabotic University “Haxhi Zeka” Peja, Kosovo

Keywords:

Global value chains, small and medium enterprises, competitiveness

Abstract

Modern business, globally, implies the interaction of different countries at different levels of development. In addition, there have been changes, in the form of falling transport costs, removal of trade barriers, technological revolutions, etc. Trade has experienced great progress, investment also. All these factors have influenced the creation of opportunities, favorable, for small and medium enterprises (SMEs), regardless of whether they are still in development. It also creates a favorable environment for gaining competitiveness.

By participating in the global value chain, small and medium-sized enterprises do not have to explicitly develop domestic capacities to perform all major production steps, nor to be extremely expert in performing import-export operations. There is opportunity for SMEs to make better use of the comparative advantage: through suppliers, associates and ultimately, customers. Although the processes during production, logistics or transport are sometimes very complex, this can simplify work operations. In addition, a certain complementarity of goods and services is evident. The prerequisite is that any valid business strategy carefully considers the relationship between goods and services - value chains. It is implied that joining global value chains can encourage increased productivity and competitiveness for less productive firms. Participation in the supply chain and cooperation can imply additional benefits, in the form of development within the company: through the improvement of information flows and learning opportunities, the introduction of new business practices, etc. In this regard, the redistribution of resources and the creation of links with other companies, in the home country or with other countries, are crucial for increasing the competitiveness of SMEs. This represents the potential benefits of SME participation in global value chains. Challenges have been identified and exist, in the form of empirical evidence that SMEs have failed to fully integrate into the global picture.

From a hypothetical point of view, integration into the value chain could help domestic companies become more competitive, in two ways, for example when procuring the necessary raw materials. In this sense, vertical integration has proven to be effective, in the sense that smaller companies are approaching large market players. At the same time, it is important to emphasize that companies prefer to associate with companies that have already acquired some kind of competitiveness. This imposes the fact that value chains do not increase competitiveness, but competitiveness improves the performance of chains.

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Published

2021-12-15

How to Cite

Sabotic, Z. (2021). GLOBAL VALUE CHAINS AND THE COMPETITIVENESS OF SMALL AND MEDIUM ENTERPRISES. KNOWLEDGE - International Journal , 49(1), 105–111. Retrieved from https://ikm.mk/ojs/index.php/kij/article/view/4625