Global Production Network (GPN)

This article discusses the concept of Global Production Network (GPN) and its impact on the global market. It explores the interconnection between operations, transactions, and roles involved in the distribution, production, and consumption of goods and services. The article focuses on the example of Apple's iPhone to illustrate the global production network.

GLOBAL PRODUCTION NETWORK (GPN)

GLOBAL PRODUCTION NETWORK (GPN)
Table of Contents
Introduction......................................................................................................................................2
Main body........................................................................................................................................2
Conclusion.......................................................................................................................................9
Reference list.................................................................................................................................10
Page 1 of 13

GLOBAL PRODUCTION NETWORK (GPN)
Introduction
The world today is built on the notions of globalization. It is rather important for the different
countries on the planet to take part in the global market in order to enhance their economic
standards and expand their markets to foreign nations. Globalization has helped these nations to
merge into one huge global market where all international operations can take place in a fair
way. However, there always lies a tremendous amount of pressure on the organizations of the
nations in order to be able to engage with the market in its political, economic and social aspects
or issues as well. This is an issue in sectors like pharmaceutical drugs, coffee, branded clothing,
technological products, and more where the retailers or the producers are being accused of being
unfair to the developers, makers or growers. This kind of entanglement is part of the global
production networks or GPN that is an interconnection between the operations, transactions, and
roles involved in the distributions, production as well as consumption of goods and services in
the global market.
The concepts of global productions network or GPN and global value chain or GVC relies on the
regional as well as the global production, control, and coordination by the transnational
organizations or TNCs, which are geographically and functionally divided or fragmented. We
live in a GVC/GPN world and they are the backbone of the world economy. In such a case it is
easier to point out that the value chain of the company Apple and specifically of its product; the
iPhones are stretched as far and wide into various geographical locations with East Asia being
their largest supplier concentration. Although the company Apple reaps most of the profit
earned, there are thousands of organizations, suppliers and enterprises that are linked to the
production of the item. The paper discusses the whole process in details with a focus on the GNP
of an iPhone.
Main body
Labors of creation and global distribution
When a company decides to manufacture and produce an item, then there are a number of steps
that the firm has to go through first (Curran et al., 2018). However, it does not stop with the
production of the item and neither does it start at the production unit of the company site. Before
Page 2 of 13

GLOBAL PRODUCTION NETWORK (GPN)
and after the production there are a number of significant aspects that the companies have to
keep into consideration so that the product is a success in the world market. The products
manufactured by Apple such as iPhones, iPads, iPods, etc., go through the same processes as
well. The concepts of subcontracting, offshoring and outsourcing have emerged as significant
terms as they represent important activities of successful production and distribution of goods
(Graham et al.,2017). The concept of outsourcing is a well-used notion where the company
decides to buy any kind of products or services form some other company and not produce it
themselves. Apple has contracts with the organizations of various countries in order to provide
them with items that will be incorporated into the making of an iPhone or an iPad. It has
connections and trade deals with countries like Japan, Korea, and Germany as well as in different
parts of the United States of America where the headquarters of the company lie (Smith, 2015).
Apple gets products like flash memory, baseband, FEM, power IC application processor
function, audio codec, camera module, application processor, touch screen, RF transceiver,
memory MCP, and many more such components at varied prices from different companies of
these countries. Companies like Samsung, Toshiba, Infineon, Numonyx, Murata, Cirrus Logic,
Broadcom, Dialog Semiconductor, and others provide Apple with these components in exchange
for the economy (Yeung, 2015).
Figure 1: Global Production Network
Page 3 of 13

GLOBAL PRODUCTION NETWORK (GPN)
(Source: Smith, 2015)
There is a transnational relocation of the service as well as manufacturing activities either
through in-house offshoring or through international outsourcing activities. It is pursued by the
company for a number of reasons that involves the pursuit for flexibility that is greater than
usual, risk avoidance through the diversification of location as well the cost reduction to keep the
profitability increasing in a stable way. The combined result of the aspects of offshoring and
outsourcing brings a substantial amount of changes in international business and trade (Kobrin,
2019). The value chains have been sliced up for various tasks going to different units for
efficient production of items. While the iPhones, iPads and the iPods are designed as well as
marketed by the company Apple, the production of the item other than the software and the
design takes place outside the US. There are nine different companies all over the world that
supplies and produces the different parts of the item and its components too. Although the
iPhone belongs to the category of a high-tech item or product, the manufacturing of the item has
reversed the pattern of trading altogether for financial reasons (Fuller and Phelps, 2017). The
phones are assembled in the developing countries too as labor charge in these areas are cheaper
and easily available than it is in a developed country like America.
The half of the full or total value of the complete process of production is taken by the firm that
leads in the production of the item in the company Apple. There is the cost of labor and the
process of manufacture of the various parts of the phone. It shows the relationship between the
labor and the capital of the global economy (Strange and Zucchella, 2017). The material cost
involved in the production of the phones is more than the cost of human input that is part of the
labor. The largest supplier concentration in the world for the supply of parts and components lies
in East Asia. The focus of the value chain lies in the upper tiers and especially on the factories
that are registered as well as on the supplier firms of East Asia that are immensely powerful.
Foxconn is one such giant in the sector of electronics (Werner, 2016). The value chains comprise
thousands of companies as well as enterprises that are involved in the process of production of
the Apple products, however, all of them are not suppliers that are registered. Then there are the
subcontractors that work under these suppliers who are primary and they fall in the second tier.
There are other operating units as well that forms the less visible sections of the chain of supply
to the leading firm, Apple. These sections are extended to the other tiers and are responsible for
Page 4 of 13

GLOBAL PRODUCTION NETWORK (GPN)
the production of all the raw materials that are required to make a phone in the industry of
electronics and the production units include mineral coltan (Van and Weisman, 2016).
Figure 2: Countries involved in production
(Source: Smith, 2015)
These production units are, however, excluded from being depicted in the value chains of
manufacture, production, and distribution of the item (Bairand Palpacuer, 2015). The lead firm
owns as well as controls some firms of production directly and the others are the arm's-length
subcontracting firms. Most of the times the situation is such that the workers who are placed in
the lower tiers of the supply chain or in the home settings and informal units are completely
unaware of what they have participated in and what is the final destination of all the items that
they have contributed in developing (Coe and Starting, 2015). These labors are controlled by the
lead firm or the supplier firm. The exploitation of these labors is part of the supply chain of firms
like Apple in the manufacturing of an iPhone. There is the use of the force of labor and there are
the student interns who are unpaid as well as the child labors. The negotiation of the distribution
of the profits earned by the sale of the handset is distributed between the suppliers to retain the
subscribers and attain more of them as well (Coe and Starting, 2015). The success of the
company lies in the concept of the global production network or on the value chains that
contribute to the workers, the shareholders as well as the economy of the United States of
America.
Institutional arrangements adapted to achieve GPN
Apple has been able to conduct productivity and acknowledgment globally with the adoption of
challenging factors. It ensures capacity building, recruiting right candidates, exploring new-
techs, the understanding economic climate of countries and favoring the interests globally, with
high-end product quality. Capacity building has been there a primary factor that helps in
Page 5 of 13

GLOBAL PRODUCTION NETWORK (GPN)
strengthening effectiveness, interest, profit, and impacts to develop sustainability over time (Los,
Timmer and de Vries, 2015). The second most important factor becomes the structured policies,
regulations, system, and processes that helped in reaching the number one among the
competitive market.The institution of Apple is renowned based on its legislated plan and ways to
manage their activities under coordinative efforts. This has further been aggravated by fulfilling
their mandates. So, institutional arrangements for quality building ensure proper plan and
management of productivity in a holistic manner (Criscuolo and Timmis, 2018).
The major area of the capacity building has been the structured policies that enable the authority
to keep records of stock regarding what is happening and how the team can provide guidance
where necessary that is aligned with productivity and customer fulfillment. Over the years,
Apple has been tracking progress by adapting with new and strategic approaches in meeting the
emerging needs. This is done by delivering timely performance targets using strategic indicators
that help to ensure adequacy of action of Apple. With its orientation regarding tech-use and
high-quality software ensured profitable fields and completeness fulfilling the objective of the
convention formulated (Los et al., 2015). This has certainly been achieved with systematic,
segmented, holistic and sustainable efforts made by the experienced and qualified team. Their
team has been contributing in a coordinated manner followed under the governance of the CEO
to achieve the attainable goals, globally.
The concept of membership has helped in connecting customers all around the world. The
membership helps to reconcile easily with MSIs generated certification (Dawley et al., 2019).
The idea of membership helps in building status and provides special benefits. Apart from
building trust, it fosters new collaborations with shareholders. Providing license membership has
helped to provide benefits to iPhone, iPods, and MacBook for the world at large. This has
influenced members all around the world to avail the special license drawn under Apple for
better tracking and productivity. For example, under the licensing membership card, it allows
tracking system of phone, when lost; also it repairs damage or internal issues at lesser or no
process. Such authenticated license card and membership allowed investing more for higher
productivity. It can be seen as an alternative model of Apple to initiate and create a community
of support (Smith, 2015). It also has taken a step to join IATI through which greater services
should be provided.
Page 6 of 13

GLOBAL PRODUCTION NETWORK (GPN)
In 2010, among 54 countries in the world, it has raged high-end quality approach gaining with an
increase of 36% by 2015. With the usher of new tech-choices, additional storage, good quality
screen, high-quality software functionality, and easy user process reflected the quality productive
programmatic approaches across the different levels (Criscuolo and Timmis, 2018).With this, it
can be concluded that apart from the rage of youth in using Apple products, authenticated
product, diverse range and styles, and high-end technological aspects has reached to arise the
GPN bars.
Capture value distribution and benefits of GNP
The concept of Global Production network involves also the capture of value which pertains to
the value chain regarding any product or service. The Global Production networks have emerged
as the very foundation of the world economy as transnational companies have been able to
spread their business worldwide. In this context, the capture of value is to be studied with respect
to strategic coupling and autonomy of products and services. As we study about iPhone, one of
the most renowned and most distributed products globally, the strategic coupling adopted by
iPhone to increase its overall global production network is worth mentioning (Helfen, Schüßler
and Sydow, 2018).
Figure 3: Performance of GPN
(Source: Amador and Cabral, 2016)
As the global production theory is based on global commodity chain and the supply chain, it has
been observed that the capture of value is distributed unevenly throughout the GPN through a
linear path, and is geographically segregated all over the Global Production Network(GPN)
(Amador and Cabral, 2016). The involvement of any geographical location in GPN paves the
way for profit and cost gains for any product or service. The concept of value capture is of
Page 7 of 13

GLOBAL PRODUCTION NETWORK (GPN)
foremost significance in case of firms engaged in GPN as well as the locations and societies
connected by the respective GPNs (Lee and Gereffi, 2015). According to recent observations, it
has been seen that although the parts of iPhone are assembled in China, most of its supply, as
well as value chain, is benefited by the USA where the main headquarters of Apple is located.
The reason is that assembling parts of iPhone has lesser value as compared to product design,
software development, product management, marketing which is mostly done in the US (Burger
et al., 2018). The largest share of value in the case of Global production networks is mainly
captured by parent companies and the location where the parent organization has its structure.
The distribution and capture of value in the context of iPhone is mainly profited by Apple in the
USA although Japan, Korea, China, and Taiwan contribute substantially to the supply and value
chain of iPhone’s Global Production Network, the profits gained from the same is enviably low
as compared to the USA(Santoni and Taglioni2015).
The gross profit gained by Korean suppliers like LG and Samsung accounts for about five
percent to seven percent of the total sales of the iPhone and iPad. Both LG and Samsung provide
the display and memory chips of the Apple devices and still, the value captured by them is fewer
compared to Apple. There are no known suppliers from China which supplies parts of the iPhone
or iPad to Apple. Contrary to facts generally established, it has been seen that China benefits
only from the wages paid to it for the assembling and manufacturing of selected parts either an
iPhone or iPad. Therefore the value captured is a very tiny amount that gets added up to the
Chinese economy(Santoni and Taglioni 2015).
According to Coe and Yeung (2015), in order for value capture to benefit a firm, the value in
terms of profits from the supply chain should be retained within the firm or its subsidiaries
within the concerned geographical location. In the global production network, the suppliers in a
value chain are at the mercy of owner firms, and therefore they can be anytime replaced by any
other supplier in this ever increasing competitive market(Gereffi and Lee, 2016).
For example- Apple has replaced a renowned Silicon Valley Chip manufacturer with Samsung to
produce one of its key microprocessors. Most of Apple's iPhone components are manufactured
offshore and therefore, the profit it gains from the sale of iPhone are predominantly transferred
from the value chain to Apple which in turn becomes beneficiary for its employees and
stakeholders (Gereffi and Lee, 2016).
Page 8 of 13

GLOBAL PRODUCTION NETWORK (GPN)
When discussing the value chain, the concept of strategic coupling is worth mentioning.
Strategic coupling is known to have helped in shaping up regional economic development in case
of Global production network of any product, and the iPhone is no different. Strategic coupling
refers to a process which is dynamic in nature, and through which several factors in cities and
regions coordinate according to interests in the overall global economy.Strategic coupling is
important for policymakers, public authorities who ensure regional assets get the attention from
foreign investors, and the value gets captured domestically promoting indigenous manufacture
and production (Amador and Cabral, 2016).
Strategic coupling by firms is of three types: indigenous coupling, functional coupling, and
structural coupling. Indigenous coupling involves local or regional firms who participate in the
GPN by going out of their domestic location. Firms like these are autonomous and mostly
capture a considerable share of the generated value of the GPN. Functional coupling involves
companies or firms of a region that are in adherence to the needs of a Global production network
of any product or service. The autonomy and capture of value in such type of coupling are lesser
compared to indigenous coupling (Yeung and Coe, 2015).
Structural coupling involves firms of a particular region helping the concerned region to connect
to a GPN so that assets of the region could be tapped and utilized. In this type of coupling
autonomy and capture of value is lesser for regional firms. According to observations by
renowned economists, transnational companies like Apple generally indulge in the indigenous
coupling. Specialized suppliers and general suppliers indulge in functional coupling and
structural coupling respectively to participate in the GPN (Yeung and Coe, 2015).
Capture of value in parent organizations like Apple happen when parent firms maintain control
over design, development, distribution channels and also the final sales and retail network
(McGrath-Champet al., 2015). Although in terms of Global Production Network, the concept of
the value chain is integrated only at the upper levels, parent organizations and leading firms
generally hire resources from domestic locations so as to reduce the production and
manufacturing costs and to gain a surplus in terms of value. Developing countries have an
advantage in terms of labor, which enables them to have higher import prices, and in turn, they
accept equalized profit rates (Quentin and Campling, 2018).
Higher surplus value is produced which gets accumulated in the countries having a lower wage
which results in the ultimate capture of value and results in both economic as well as social
Page 9 of 13

GLOBAL PRODUCTION NETWORK (GPN)
conflicts amongst developed and developing nations. In this way, it can be said that the capture
of value gets benefited by mostly parent organizations as the phenomenon is unevenly
distributed in the global production network (Neilson et al., 2018).
Conclusion
The paper already details the value chain of the production of the products by Apple, especially
the iPhone and all the enterprises, labor organizations, and suppliers involved with the
manufacturing of the products all over the world. Apple is a well-known and successful
multinational firm that does business all over the world and hasmonopolized the market of
technological devices for a long time. However, there are certain exploitations that take place
within the value chain, which have been discussed along with the fact that the mother company
in itself earns the most profit. There have already been detailed researches on the number and the
types of labors who face unfair value in countries of the east of Asia like China.
The institution of the concept is built upon the creation of value but the transformation of non-
material as well as material to services and product. There is the element of verticality or
linearity in the structure always. From production to distribution and the process of final
consumption, have all been discussed along with the conventional aspects of a supply chain.
Therefore, it can be said that the significance of the GPN/GVC is vital in the contemporary
world but the distribution of profit has to be focused on, that various NGOs around the world, as
well as companies like Apple, take part in for balanced development.
Page 10 of 13

GLOBAL PRODUCTION NETWORK (GPN)
Reference list
Amador, J. and Cabral, S., 2016. Global value chains: A survey of drivers and measures. Journal
of Economic Surveys, 30(2), pp.278-301.
Bair, J. and Palpacuer, F., 2015. CSR beyond the corporation: contested governance in global
value chains. Global Networks, 15(s1), pp.S1-S19.
Burger, A., Jindra, B., Marek, P. and Rojec, M., 2018. Functional upgrading and value capture of
multinational subsidiaries. Journal of International Management, 24(2), pp.108-122.
Coe, N.M. and Starting, J., 2015. 10 Labour and Global Production Networks: Mapping
Variegated Landscapes of Agency. Putting Labour in its Place: Labour Process Analysis and
Global Value Chains, p.171.
Criscuolo, C. and Timmis, J., 2018. The Changing Structure of Global Value Chains: Are
Central Hubs Key for Productivity?. International Productivity Monitor, (34), pp.64-80.
Curran, L., Nadvi, K. and Campling, L., 2018. The influence of tariff regimes on global
production networks (GPNs). Journal of Economic Geography.
Dawley, S., Mackinnon, D. and Pollock, R., 2019.Creating strategic couplings in global
production networks: regional institutions and lead firm investment in the Humber region,
UK.Journal of Economic Geography.
Fuller, C. and Phelps, N.A., 2017. Revisiting the multinational enterprise in global production
networks.Journal of Economic Geography, 18(1), pp.139-161.
Gereffi, G. and Lee, J., 2016. Economic and social upgrading in global value chains and
industrial clusters: Why governance matters. Journal of Business Ethics, 133(1), pp.25-38.
Graham, M., Hjorth, I. and Lehdonvirta, V., 2017. Digital labour and development: impacts of
global digital labour platforms and the gig economy on worker livelihoods. Transfer: European
Review of Labour and Research, 23(2), pp.135-162.
Helfen, M., Schüßler, E. and Sydow, J., 2018. How can employment relations in global value
networks be managed towards social responsibility?.Human Relations, 71(12), pp.1640-1665.
Kobrin, S.J., 2019. Global Production Networks, Territoriality, and Political Authority.The
Oxford Handbook of Management in Emerging Markets, p.333.
Page 11 of 13

GLOBAL PRODUCTION NETWORK (GPN)
Lee, J. and Gereffi, G., 2015. Global value chains, rising power firms and economic and social
upgrading. Critical perspectives on international business, 11(3/4), pp.319-339.
Los, B., Timmer, M. and de Vries, G., 2015. Global value chains:‘FactoryWorld’is
emerging. The age of global value chains: Maps and policy issues, pp.36-47.
McGrath-Champ, S., Rainnie, A., Pickren, G. and Herod, A., 2015. Global destruction networks,
the labour process and employment relations. Journal of Industrial Relations, 57(4), pp.624-640.
Neilson, J., Pritchard, B., Fold, N. and Dwiartama, A., 2018. Lead firms in the cocoa–chocolate
global production network: an assessment of the deductive capabilities of GPN 2.0. Economic
Geography, 94(4), pp.400-424.
Quentin, D. and Campling, L., 2018. Global inequality chains: integrating mechanisms of value
distribution into analyses of global production. Global Networks, 18(1), pp.33-56.
Santoni, G. and Taglioni, D., 2015. Networks and structural integration in global value
chains. The age of global value chains, pp.68-84.
Smith, A., 2015. The state, institutional frameworks and the dynamics of capital in global
production networks.Progress in Human Geography, 39(3), pp.290-315.
Strange, R. and Zucchella, A., 2017.Industry 4.0, global value chains and international
business. Multinational Business Review, 25(3), pp.174-184.
Van Holt, T. and Weisman, W., 2016.Global production network mapping for transforming
socio-ecological systems.Current Opinion in Environmental Sustainability, 20, pp.61-66.
Werner, M., 2016. Global production networks and uneven development: Exploring geographies
of devaluation, disinvestment, and exclusion. Geography Compass, 10(11), pp.457-469.
Yeung, H.W.C. and Coe, N., 2015. Toward a dynamic theory of global production
networks.Economic Geography, 91(1), pp.29-58.
Yeung, H.W.C., 2015. Regional development in the global economy: A dynamic perspective of
strategic coupling in global production networks. Regional Science Policy & Practice, 7(1),
pp.1-23.
Page 12 of 13