CP-ALL and the Case of Value Web Creation

Abstract

How should convenience store operators like Thailand’s CP-ALL construct its value chains? What does economic theory teach us about an under-modelled area of management theory (namely value chains)? In this paper, we use a seemingly unrelated economic model analysing Vietnam to tell us something about the conglomerates running convenience stores licenses like CP-ALL. We find that convenience stores may not want to raise capital from Thai banks and the Bangkok stock market when labour productivity exceeds capital’s. We also find that inefficiencies inherent in Thai markets may significantly reduce the optimal size of a convenience store operator like CP-ALL. These operators may also (counter-intuitively) need to give up a significant share of their profits to “value service providers” when the cost of capital falls. As such, counter to the usual World Bank nostrums, improvements in Bangkok’s stock market and banks may actually hurt firms like CP-ALL.