Smile Curve Research Articles

Capability mapping to improve manufacturing network performance: how a factory can target growth

PurposeThis paper explores growth opportunities for a contract manufacturer (CM), which operates a global virtual manufacturing network (GVMN). The Swiss factory should play a profitable role in the holding's competitive strategy, in spite of lower-cost alternatives within its network.Design/methodology/approachThe study applied a design science method over a period of two years of collaboration with the partner firm to complete three iterations of solution incubation and refinement.FindingsThe design artefact is a growth strategy for a CM with independently-managed, heterogeneous sites. A novel capability mapping tool reveals competitive advantage by deploying the GVMN as an order fulfilment system. Engineering and sales are integrated with production to project higher revenue streams in multiple locations including Switzerland.Research limitations/implicationsThe research expands the operations management (OM) focus on optimization and continuous improvement. Results indicate that local and global manufacturing capabilities can be configured to target network performance, implying that the smile curve flattens in certain GVMN configurations. The exploratory case study is limited by a lack of statistical generalizability and is specific to the contract electronics manufacturing industry.Practical implicationsManaging manufacturing as a network can restore feed-forward and feedback loops, which are disrupted by de-verticalization and externalization. The visualization positions a Swiss plant in an inimitable role, serving growth accounts, which require co-development. The order fulfilment strategy and capability maps can be adapted to other GVMNs.Social implicationsThe study presents an alternative to shuttering high-cost locations using performance improvements instead of protectionist interventions. This could have a material impact on de-industrialization in developed nations like Switzerland.Originality/valueThe strategy innovation originates in practice. Its synthesis drew on multiple disciplines to position OM as a strategic lever for competing in global value chains (GVCs). The author finds alternatives to the internationalization logic of cost arbitrage and adds to developed country studies. This is an OM contribution to the broader debate on globalization dominated by the social sciences.

Digital smile design as a tool in the planning of porcelain laminate veneers restoration

ABSTRACT Digital smile design is an important tool for esthetic planning in dentistry as it facilitates ease of communication between professionals and patients. This clinical report has the objective of describing a clinical procedure involving digital smile design for the placement of porcelain laminate veneer restorations. The digital smile design included dental and facial analyzes. The smile curve was drawn and a dental ruler was used to delimitate the spaces between each tooth. An approximate simulation of the smile was generated using Adobe Photoshop software. For esthetic and functional evaluation of the digital plan was created a diagnostic waxing and mock-up. The laminate veneers were made with feldspathic porcelain. Digital smile design was essential for successful planning because it enabled better patient contact with the end result. This case demonstrates the importance of this tool in esthetic dentistry.

Research on Internet Development and the Value-added Path of Manufacturing Value

In the context of the rapid development of global value chain theory, “Internet” as the main feature of digital trade has bred greater opportunities for international cooperation and has become a driving force for the reconstruction of global value chains. This paper studies the relationship between the development of the Internet and the reconstruction of the value chain, verifies the evolution path of the industry’s added value through theoretical derivation, and answers the impact of the development of the Internet on the evolution path of the smile curve. The results show that the “smile curve” is not a necessary feature of the upgrade of the manufacturing value chain. Some industrial value chain upgrades the form of a “Muslim curve”, and the Internet can affect the value added of the manufacturing industry’s export value through three ways.

Quantitative analysis of the smile curve - Empirical analysis targeted for the Japanese food and manufacturing industries

This study targeted the food and manufacturing industries in Japan. We analyse profitability using the concepts of upstream, midstream, and downstream industries and clarify the relationship between the B-to-B and B-to-C rates and operating income margin profitability. Then, we analyse the relationship between the B-to-B rate and profitability using the extended input-output table and economic census. Our results show that the food industry has a smile curve, and the profitability of midstream industry is low. For the manufacturing industry, we verified that the higher the B-to-C rate, the lower the level of profitability, and as the B-to-B rate exceeds 0.8, it is shown that profitability tends to be high in industries with a higher B-to-B rate.

Quantitative analysis of the smile curve - empirical analysis targeted for the Japanese food and manufacturing industries

Quantitative analysis of the smile curve - empirical analysis targeted for the Japanese food and manufacturing industries

The Value-added Creation Effect of Global Value Chain Participation: Industry-level Evidence from APEC Member Economies

We analyze the value-added creation effect of GVC participation by applying a standard fixed effects regression model analysis with economy-wide country-industry data. We use OECD Inter-country Input-Output Tables covering 64 countries (21 APEC members and 43 non-APEC members) and 35 industries (1 Agriculture, forestry and fishing, 3 Mining, 16 Manufacturing, and 15 Service) between 2005 and 2015. We find that APEC member economies’ participation in GVC activities is not distinct from non-APEC member economies but the causal relationship between GVC participation and created domestic value-added is much stronger in APEC member economies. More specifically, from the qualitative evaluation on statistical data, we find that backward linkage has been stronger than forward linkage and both have been recently decreasing. The APEC industries’ upstream positions in production line have been slightly more distinguished than non-APEC industries. From the econometric regression analysis, we find that forward participation in GVCs is more desirable than backward participation in terms of creating domestic value-added. We also find that the industry position in middle stages of production line in contrast to earlier and later stages creates higher domestic value-added per output unit. This implies that the firm-specific conventional U-shaped “Smile Curve Hypothesis” is not applicable at the economy-wide country-industry level, especially in APEC member economies. This finding supports that manufacturing industries are still a major driving force for less developed APEC member economies to move up the development ladder. Considering that gains from GVC participation are diversified across industries and upgrading country-industry positions in GVCs is competitive among the interconnected countries, we strongly recommend for APEC member economies to construct effective domestic value chains and coordinate with other members during their process of upgrading GVC participation.

Testing the Smile Curve: Functional Specialisation and Value Creation in GVCs

This paper addresses the ‘smile curve hypothesis’ which suggests that the potential for generating value added varies significantly across the value chain with the production stage being the least promising segment. Based on granular greenfield FDI data a metric is developed that allows capturing the functional specialisation of countries in global value chains at the industry level. The measure not only provides new insights into the specialisation of countries as ‘factory economies’ or ‘headquarter economies’ but is also used to test and confirm econometrically the smile curve hypothesis by showing that countries specialised in the production stage of the value chains tend to generate less value added per unit of output produced than those specialised as headquarter economies.

Measuring Smile Curves in Global Value Chains

AbstractThe logic of the ‘smile curve’ in the context of global value chains (GVCs) has been widely used in case studies of individual firms, but rarely identified at the country‐industry level by using real data. This paper puts forward a proposal, based on an inter‐country input–output model, to consistently measure both the gain of value added and the position of countries and industries when they join GVCs. This allows for better identification and mapping of economy‐wide smile curves in a given conceptual value chain. Using the World Input‐Output Tables, we identify the Information and Communications Technology exports‐related smile curves for China and the United States (US), which provide an intuitive and visual representation of who gains value added and jobs through joining GVCs, and to what extent. Further insight into the distributional implications of GVC expansion, based on our analysis of labour markets for China and the US, provides a strong support for the so‐called ‘Paradoxical Pair of Concerns’ between developed and developing countries. Our empirical results show that gains through joining GVCs may vary greatly across different skill levels of labour domestically, a fact that has, at least in part, been a driver of the backlash against globalization and the rise of trade protectionism.

Salaries and the logic of national income distribution in a market economy – described using a simple model

The level of prosperity available is the value of what is produced in the economy. This is a general truth, while the level of well-being of community members is a consequence of the value added and the rules and mechanisms of national income distribution. The purpose of the paper is to show the macroeconomic principles of the division of the generated GDP value, based on the example of a simple model of the economy in a classic style: the economy is presented as the Great Bakery, which produces loaves of bread shared between employees and its owner, the Baker. The author uses this model to demonstrate the consequences of the division of the generated surplus, which is the Baker’s profit from three sources: development-oriented investments and the savings associated with them, the public sector and exportation. The author shows the structural consequences of reducing wages and shifting the tax burdens to the employees. He proves that the reduction of labor costs should be accompanied by an increase in the tax burdens imposed on companies – the Baker in his model. These rules of division have macroeconomic consequences and the author shows the effects for Poland’s position in a group of countries, presented as international comparisons (mainly OECD countries). The author shows that one of the key factors determining prosperity is the place of industry in the product development cycles produced by the global division of production. The amount of added value obtained at various stages of these production cycles is illustrated by the so-called smile curve. The author shows the international division of labor has led to the location of the industries of post-communist countries, including Poland, around the minimum of this curve. This causes the average level of wages and, consequently, welfare to be low. The analysis leads to the conclusion that a policy of structural changes is needed, one that will shape this division so that the country regains full production cycles and thus strengthens its economy. The author discusses the simplified thesis formulated by Jeffrey Sachs that sustainable development is the most important for prosperity. The author justifies the thesis that it is not so much development as the amount of added value generated by industry and the mechanisms of its distribution, and points out that, as Justin Yifu Lin observes, it is the structural changes which will lead to an increase in added value and modifications in the principles of its distribution, so as to increase social well-being.

Re-Evaluating the ‘Smile Curve’ in Relation to Outsourcing Industrialization

ABSTRACT In this paper, we argue that the widely used concept of the value-added driven ‘smile curve’ in the international business literature, which often illustrates a zero-sum game between interdependent nations in the global supply chain, requires revisiting. In particular, the U-shaped smile curve for the distribution of profitability among partners can be inverted if firms from the developing economies manage to obtain high productivity from their workers and have no high entry costs to the midstream industries that specialize in global supply chains. We construct an economic model and find that the theories proposed in the paper are broadly consistent with the empirical evidence. Our findings have some important implications for the current debate on industrialization strategies with particular reference to outsourcing industrialization for developing countries.

Empirical analysis and strategy suggestions on the value-added capacity of photovoltaic industry value chain in China

Energy is the foundation and driving force of modernization. Renewable energy has been developed with the help of global environmental awareness. In recent years, supported by the relevant national industrial policies, China's photovoltaic market has developed rapidly and its production capacity is huge. However, the core of supporting the sustainable development of an industry lies in the continuous appreciation of the value of itself. In order to correctly understand the status quo and problems of PV industry value chain in China, based on the “Smile Curve” theory, taking the gross profit rate of PV industry listed companies as sample variables from 2015 to 2017, the research finds that its value chain shows a gradually deepening smile. And to explore the extent to which gross profit margin is affected by various factors, 15 variables are selected from six aspects: internal innovation power, growth potential, profitability, operational efficiency, scale strength and external environment, the Stepwise Regression method is used to determine the optimal model first. Further use Principal Component Analysis to confirm the motivations affecting the value-added of listed companies in the PV industry in the upper, middle and down reaches. The results indicate that only 6 variables have significant effects on the gross profit margin of the PV industry value chain, and there are big diversities in the main influencing factors of the value-added capacity of PV companies in different links, so they should seek their own value-added breakthroughs.

Analysis of Walnut Industry Development in Guangyuan Based on "Smiling Curve"

Based on the Smiling Curve, this paper analyzed the promotion of walnut zonation plantation in Guangyuan, the advantages in the rapid increase of area, yield and output value, and the marketing promotion through technological innovations (e.g. selective breeding and pest control) and brand building. This paper revealed the fact that the walnut industry in Guangyuan had achieved remarkable results, but at the same time, some problems were still existing, such as low rate of improved varieties, focusing on planting but neglecting management, slow development of new main bodies, weak technology research and development in the industrial chain, fewer intensive processed products, changes in cost-benefit and consumption tendency, against which, targeted countermeasures were proposed: carrying out supply side reform of walnut industry chain, industry association + standard, learning from the experience of USA California Walnut Industry Association, strengthening functions of intermediary organizations, and establishing brand and quality monitoring system; increasing support efforts and innovating support mechanism, helping the cultivation of new-type business main bodies, and improving the quality of specialized cooperative organizations; insisting on variety improvement, and paying attention to tackling key problems in scientific research of industrial chain; walnut industry + internet, and combining the walnut forest and the tourism.

Strategy Positioning and Path Choice in the Development of AMI

This paper analyzes the theory of strategy and positioning, provides basic framework of strategy positioning and development path of advanced manufacturing industry (AMI). Through the theoretical analysis of strategic positioning, based on the strategic logic of becoming manufacturing power and strategic positioning of advanced manufacturing, propose a basic framework of path choice in the development of AMI. The overall strategic path of the AMI can be regarded as a synthesis between industrial strategic positions, the strategic goal and the two-way movement of the smile curve of manufacturing.

An Inquiry into the Division of the Gains in Global Supply Chains-Theory and Evidence

This paper studies the mechanism of the division of the gains in high-tech global supply chains. Motivated by the empirical observation which is widely discussed in international business literature so called “smile curve”, this paper demonstrates in a theoretical model that whether or not the U-shaped pattern (smile curve) of profit sharing along the high-tech supply chains is valid or not depends on the competing forces between two effects. The first effect is called market power gap effect and the other one is called entry cost gap effect. It is shown in this paper that if both effects for upstream (downstream) firms dominate the counterpart effects for midstream firms, then the U-shaped division of the gains in high-tech supply chains is valid. We employ the WIOD data industry level to test our theoretical predictions and we found that the empirical results are broadly consistent with the theories proposed in the paper. The empirical results in the end are also robust when we apply to US-firm level data.

Competitive advantage and the transformation of value chains over time: The example of a South Korean diversified business group, 1953–2013

We examine the historical evolution of different elements in value chains that create value-added and competitive advantage. This is achieved by using the conceptual model of the ‘smile curve’ with a longitudinal case study of a diversified business group, CJ Group, a former affiliated firm of Samsung Group. We found that the value-added structure graph in the industrialisation period displayed an ‘upside-down U shape’, indicating that production and manufacturing were the most value-adding sectors. However, in the more recent knowledge-based economy period, the graph shows a quite different shape, indicating R&D, firm infrastructure, manufacturing, logistics, service, and marketing as sources of value-added. This shows that competitive advantage diversified into other fields to fit with the changed economy. We also investigate what type of organisational structure, strategy, and capabilities were adopted for organisational change. We found an evolution, with an unrelated diversification strategy by altering capabilities from contacts and generic to organisational and technological capabilities.

The smile curve at the firm level: Where value is added along supply chains

In this paper, we investigate at the firm-level where value is added along supply chains on a sample of about 2 million firms in the European Union. In line with the hypothesis of a ‘smile curve’, we detect a non-linear U-shaped relationship between the value added content of a firm and its distance from final consumption. Tasks at the early and late stages of the supply chains generate higher value added, possibly due to a higher knowledge-intensity, after controlling for firm heterogeneity. Importantly, our work shows that it is possible to exploit firm-level databases for an empirical microfoundation of value generation, which is useful for understanding the possibly unequal benefits of participating in global value chains.

Domestic Value Creation in the Involvement in Global Value Chains: The Case of Chinese Economy

This paper examines how the Chinese economy has been involved in global value chains from the perspective of domestic value creation, by using the OECD value-added-trade data (OECD TiVA database). This study contributes to the existing literature by decomposing the domestic value creation into a direct effect from export industries and an indirect effect from the other supporting industries. The empirical estimation first identified the ?smile curve? in the ?indirect? domestic value creation in total manufactures as the average pattern of the Asian GVCs development paths, in which the domestic value share to exports declines at the early development stage and regains itself at the later stage with the turning point being at 1,830 US dollars as per capita GDP. Then the analysis confirmed the position of Chinese economy, which has already passed the Asian average turning point and has entered the phase of regaining the domestic value share to exports. Finally, the analysis found that the domestic value creation in China has originated from the development of supporting industries, in particular, service industries, which might reflect the progress in basic infrastructure there.

The Smile Curvee: Where Value Is Added Along Supply Chains

In this paper we analyze where value is added along supply chains on a sample of more than 2 million of firms in the European Union. We detect a non-linear U-shaped relationship between the value added generated by firms and their position on a productive sequence, for which tasks at the top and at the bottom show higher value added. Our findings are in line with previous hypotheses on the existence of a so-called 'smile curve', resumed by both business and economic studies and discussed at length in international fora. Our results are robust to different empirical strategies for flexible functional forms. As far as we know, ours is the first firm-level successful attempt to test for value generation along supply chains. Further, we find empirical support for a phenomenon of domestic retention of value added by MNEs, which may prefer keeping at home the tasks at higher potential to safeguard present and future competitive advantages. By country, intermediate stages of production are at higher value when performed by foreign affiliates, whereas domestic producers retain higher value at the very top and at the very bottom of the supply chain, organized either as independent suppliers or as domestic affiliates. Although an economic theory is still missing for explaining how and why value generation is non-linear along a typical technological sequence, here we argue that a microfoundation with firm-level data is useful for understanding the growth potential of specialization patterns by countries along different segments of world supply chains.

User Satisfaction Based Vehicle Navigation System Design

The main objective of this study is to investigate real factors affecting the user satisfaction of VND so as to find solutions for the above mentioned issues. In order to achieve such objective, this research has integrated factor analysis, fuzzy theory and Decision Making Trial and Evaluation Laboratory (DEMATEL) to construct innovative and stringent data analysis architecture. Such structure can effectively sort out factors and delete fuzzy factors during human decision making process, in other words, the information needed for R&D decision making can be more accurately provided. Empirical experimental results show that the investment on the reduction of the failure rate of the product and the providing of more convenient and accurate map data updating service will all be helpful to the enhancement of brand image and such business operation strategy of moving towards the right end of smile curve is the key for an enterprise to keep innovative and to keep competitive.

'Smile Curve': Where Value is Added Along Supply Chains

In this paper we analyze where value is added along supply chains on a sample of more than 2 million of firms in the European Union. We detect a non-linear U-shaped relationship between the value added generated by firms and their position on a productive sequence, for which tasks at the top and at the bottom show higher value added. Our findings are in line with previous hypotheses on the existence of a so-called 'smile curve', resumed by both business and economic studies and discussed at length in international fora. Our results are robust to different empirical strategies for flexible functional forms. As far as we know, ours is the first firm-level successful attempt to test for value generation along supply chains. Further, we find empirical support for a phenomenon of domestic retention of value added by MNEs, which may prefer keeping at home the tasks at higher potential to safeguard present and future competitive advantages. By country, intermediate stages of production are at higher value when performed by foreign as liates, whereas domestic producers retain higher value at the very top and at the very bottom of the supply chain, organized either as independent suppliers or as domestic affiliates. Although an economic theory is still missing for explaining how and why value generation is non-linear along a typical technological sequence, here we argue that a microfoundation with firm-level data is useful for understanding the growth potential of countries' specialization patterns along different segments of supply chains.