The Creation and Increase of Value Added in the Value Chain and Its
Impact on the Price
IRSHAD KARIMLI1, ELCHIN EYVAZOV1, REYHAN AZIZOVA2, VILDAN RIZAYEVA1,
OPHELYA MAZANOVA3
1Department of International Economy, Azerbaijan State Economy University, AZERBAIJAN
2Department of Digital Economy, Azerbaijan State Economy University, AZERBAIJAN
3E-Management Center, Azerbaijan State Economy University, AZERBAIJAN
Abstract: - In order to characterize the process of the value chain scientifically and empirically, both at the
international and regional, and local levels, and the sequence of its rings, it is first necessary to clarify the
interconnected stages (rings of the chain) of reproduction. By studying the chain connection of the stages of
reproduction, the sequence of formation and expansion of the value chain can be clarified.
The article examines a series of links from the acquisition of primary raw materials, their processing, storage,
distribution, supply, and sale, depending on the scale of the value chain in the direction of achieving the result
of economic activity. It is proposed that this chain is formed based on common principles in individual
countries and regions of the world, and even at the international level. The type of economic activity performed
in each ring of the chain faces certain costs, the process of conversion of costs takes place, and because of the
activity of each ring in the chain, the product gains added value. The process of value creation and increase in
value in such a logistical movement has been clarified and a scientific conclusion has been drawn out.
Key-Words: - value chain, national value-added, foreign value-added, value creation, value increase, logistics
movement, Gross Domestic Product (GDP), Cotton lint, Azerbaijan.
Received: June 29, 2022. Revised: October 21, 2022. Accepted: November 18, 2022. Published: December 21, 2022.
1 Introduction
The modern international economic system has been
formed as a natural-historical process and is
gradually developing into a global economic
complex. Such a system is formed as a union of all
stages, sectors, and industries of the dynamically
interconnected international process of reproduction,
creating a living economic mechanism of the
international economy, [1], [2], [3], [4], [5].
Of course, international markets are of
exceptional importance as the construction of such
an economic mechanism.
The chain of reproduction, which is the
theoretical basis of the problem of the expansion of
the value chain, and the factors influencing the
interaction of the rings of this chain with each other
must be identified.
This clarifies the whole sequence of how the
value of the rings in the chain arises and increases,
as well as the question of the creation of value-
added, the exact definition of value-added as the
product passes from one ring to another, and how to
become a constant quantity.
By revealing the current state and prospects of
the interconnection of value chainrings, it is possible
to specify the increase and expansion of value added
of national origin, along with the creation of value-
added of external origin along the rings of the chain.
This allows us to determine which ring in the overall
value chain is most important to invest in.
1.1 The Sequence of Value Formation in the
Movement of the Product along the Rings of
the Value Chain
In general, the interconnection that reflects the unity
of the whole process related to the production,
supply, processing, sale, and consumption of Gross
Domestic Product (GDP), but separately to any
product group and intra-group product type, itself
corresponds to the stages or rings of the process
(chain) of reproduction.
Such a process has similar features at the
international level, as well as within every country
or region of the world, investigated by general
methodological research methods.
In this sense, all firms and companies engaged
in the production, processing, distribution, and sale
of GDP at all levels establish mutual logistics
relations based on agreements concluded with each
other.
In modern times, the establishment of such
relations involves a chain of reproduction that unites
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1967
Volume 19, 2022
economic entities engaged in the production,
processing, distribution, and sale of raw materials,
equipment, and suppliers of finished products and
creates the value chain at the basis of this process.
A value chain is a chain of syllogism that
complements the value of one of the costs involved
in the formation, quantification of value in the
production, processing, distribution, and sale of any
product, product group, or GDP as a whole.
Although the Gross Domestic Product (GDP)
and Gross National Product (GNP) of each country
are different, if the calculation of the costs of both
value chain rings is based on the final product, then
the double (repeat) calculation should be clarified.
In double accounting, recalculation of the cost
of products in the movement of national products
from production to final consumption occurs, in this
case, the value of intermediate products is included
in the final value for the second time and thus leads
to artificially inflating the final value of the product.
To clarify all such cases and make concrete
conclusions, the initial product (raw materials,
products) formed in the movement of the product on
the rings of the value chain, intermediate product
(re-manufactured or re-sold), final product -
products that go to the consumption of a specific
consumer (production and personal consumption),
and finally, the process of creating and increasing
the value of the finished product only for sale and
supply (to the population and public needs) must be
accurately recorded [6].
Depending on the method of use, the method of
approach can be both an intermediate and a final
product of the same name.
In this sense, a realistic and correct approach to
calculating the final value that is consistently
formed in the movement of the product in the rings
of the value chain can be considered a reliable way
to calculate the incremental value of each ring in the
chain.
This approach should be used not only for the
accurate calculation of individual product groups
and intra-group products but also for the amount of
the country's GDP, the value of imports, and exports
in foreign trade, which helps to avoid double
counting.
The production of primary, intermediate, and
final products in different rings of the value chain of
products produced in the petrochemical, as well as
in light and food sub-sectors of the processing
industry of Azerbaijan must go through the
logistical stages of several countries.
The experience of recent years shows that the
increase in world market prices for finished products
of Azerbaijan's light and petrochemical industries,
such as clothing, is influenced by the increase in
production costs of intermediate products such as
raw cotton, wool, silk, linen, naphtha (polyethylene,
propylene), which are the primary rings in the value
chain and increase of production costs of
intermediate products such as cotton lint, yarn,
fabric, and the added value in those productions (see
Fig.1).
By reducing the production costs of primary raw
materials and intermediate products, which are the
basis of the final market price of products produced
by the petrochemical, light, and food industries, the
added value created by these costs can also be
reduced.
Fig. 1: National value-added tariffs on exports in the
year 2019
Source: World Bank Country and Lending Groups –
World Bank Data Help Desk.
As long as Azerbaijan belongs to the group of
developing countries, the country's companies and
firms should move from the increasing added value
rings to the value-added rings in the global value
chain, expand the participation rate in those rings,
and activate technological and socio-economic
factors that affect participation growth. Such a
development trend reveals itself in the modern
international economy, high value-added industries
are gradually shifting from industrialized to
developing countries through global economic
change.
Fig. 2: Agricultural
Source: World Bank Country and Lending Groups –
World Bank Data Help Desk.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1968
The names of the indicators mentioned in Figure
2 are factual. As global and local statistics are not
provided, in order to carry out the calculation in a
logical sequence, the numbers representing those
indicators are given approximately.
Among the non-oil sectors, agriculture and
animal husbandry, light and food sub-sectors of the
industry have almost enough production in the first
rings of the global value chain, while in traditional
foreign markets the prices of these products
sometimes remain stable and sometimes increase.
In our opinion, the production of new brands of
these products, their processing by international
standards, storage, packaging, transportation, large-
scale investment in modern technology, and
innovation of value-added stages should be divided
into optimal proportions for the main value-added
rings.
The focus should be on the optimal distribution
of investment resources between the created value
and rising value rings in the global value chain.
Investments should focus not only on the value and
price of the products to be created in the production
process but also on utility, design, and adaptation to
consumer tastes, and desires so that products can
enter the domestic and foreign markets without
hindrance.
This allows not only to compete in the market
but also to outperform competitors in highly
profitable markets and gain more market share. In
this sense, the last stages of product development in
the global value chain, value-added operations such
as transport, sorting, packaging, evaluation, design,
and advertising, in turn, require more investment in
information and communication technologies (ICT),
[6].
The experience of many production units
engaged in the creation of all components of the
light industry in Azerbaijan (due to the current state
of expenditures on value chains) shows that the
increase in the final cost of clothing among the rings
of the value chain completed in the country is
primarily raw materials (raw cotton, wool, silk and
linen farms) and then the impact of spinning and
weaving farms (spinning and weaving mills) is very
large (see the Fig. 1).
In this vein, it is necessary to reduce the added
value created by the above-mentioned components
of raw materials and intermediate products, which
are the basis of the final cost of clothing, and to
increase labor productivity through modernization
of the modern technological base of production in
these rings.
Although yarns and fabrics made from natural
raw materials and cotton lint are the leading
intermediate products in the production of clothing,
modern technology enables the use of synthetic
yarns and fabrics woven from these yarns, along
with natural yarns. In the case of value rings, their
use as an intermediate product can have a direct
impact on cost savings (even up to 50% in some
cases). It can directly affect the reduction of the
cost of manufactured clothing.
2 Literature Review
The direction of a global scientific and experimental
approach to the process of creating and increasing
value for specific product groups was achieved by a
researcher who focused on the research of
Azerbaijani economist Anar Rzayev [6].
There is a need to elucidate the components of
each of the import and export values included in the
global value chain by dividing them into national
and foreign value-added, and to elaborate an
econometric model of cross-country, intersectoral
balance, which includes these components, [11].
American economist Robert Koopman and his
colleagues defined the mechanism of division of
exports into components and set forward an
appropriate calculation methodology, [11].
According to the methodology, the value of the
country's total exports is divided into two
components: "domestic value added (DVA)" and
"foreign value added (FVA)”.
It is also considered that the national value
added is re-exported into direct value-added exports
and indirect value-added exports.
The relationship between the value of exports
and imports of individual countries in the global
value chain and the assessment of their impact on
the development of the international economy has
led to various studies.
Researchers in Western countries, for example,
professor M. Timmer used a new approach, the
category of "global import intensity”, that
characterizes the import capacity of the product,
[18].
According to the researcher, this category is
calculated not based on the division of imports into
production, but based on "costs-output" schedules.
That is, along with the import of goods and
services included in the final consumption, the
import of intermediate goods and services is also
taken into consideration.
The importance of research in the field of
evaluation of foreign trade in terms of value-added
involves the acquisition of new knowledge,
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1969
understanding of some processes that are difficult to
detect by traditional methods of foreign trade, and
providing additional information for analysis.
With the deepening of the international
specialization, the cooperation between countries
and regions becomes stronger, industrialized
countries have more capital-intensive, high-value-
added activities, and developing countries have
more labor-intensive, high-value-added industries,
[7]. Some other relevant studies can be found in
[14], [15], [16], [20], [21].
3 Methodology and Evaluation
The purpose of the article is to determine the
possibility of the participation of economic subjects
of Azerbaijan in the regional and global value chain.
The advanced experience of the modern textile
industry has shown that consumers highly
appreciate the quality, consumer value, and
usefulness of garments made from fabrics based on
a mixture of natural and artificial fibers on new and
progressive technological machines, [8].
The correct choice of technology to produce
intermediate products is one of the factors that
strongly affect the cost of cotton lint, yarn, and
fabric, which are intermediate products of natural
and artificial origin.
Cotton lint and yarns made of synthetic
materials based on the technological achievements
of the modern petrochemical industry, along with
natural cotton lint and yarns, have a superior
position in this selection.
Synthetic materials are obtained from a very
efficient intermediate product called naphtha.
Although naphtha is not produced in the
petrochemical industry of Azerbaijan, at all
accounts, the final products produced from this
intermediate product play a very important role in
the domestic and foreign trade turnover of the
country. Because the mentioned raw material is
produced in the “Star” processing zone of the
“Patkin” petrochemical complex in Turkey, with the
participation of SOCAR's $ 5.7 billion capital.
“Star” processes 10 million tons of crude oil
annually and produces 1.6 million tons of naphtha in
a year.
At present, Azerbaijan exports more than 30%
of its domestic demand with this raw material.
This raw material is used by the textile industry of
Azerbaijan to produce synthetic yarns, fabrics,
various textiles and clothing products, and many
other intermediate and final industrial products.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1970
Table 1. Production of clothing products in the textile industry of Azerbaijan in 2005-2020
№
Products
2005
2010
2015
2017
2018
2019
2020
1
Raw Cotton (thousand
tons)
196,6
38,2
35,2
207,5
233,6
295,3
356.7
2
Cotton lint (thousand tons)
56,0
11,4
6,6
37,9
61,0
85,0
97,8
3
Ready-made cotton fabrics
(thousand sq. m.)
3099
1104
9596
16830,2
19314,4
21098,0
21723
4
Finished silk fabrics
(thousand sq. m.)
437,2
735,8
272,4
274,5
40,7
103,2
135,7
5
Cotton bed- linen
(thousand pieces)
562
125
228
372,6
580,7
610,5
637,5
6
Knitted socks (thousand
pairs)
2969
2004
3739
1991
2367,8
3248,9
4025,3
7
Polyethylene and
Propylene (thousand tons)
54,5
54,3
103.7
141,6
93
95.5
97.2
Source: author’s work.
Table 2. Comparison of Raw Cotton with other three products
№
Products
2005
2010
2015
2017
2018
2019
2020
1
Raw Cotton (thousand
tons)
196,6
38,2
35,2
207,5
233,6
295,3
356.7
2
Cotton lint (thousand tons)
56,0
11,4
6,6
37,9
61,0
85,0
97,8
3
Ready-made cotton fabrics
(thousand sq. m.)
3099
1104
9596
16830,2
19314,4
21098,0
21723
4
Cotton bed- linen
(thousand pieces)
562
125
228
372,6
580,7
610,5
637,5
Source: author’s work.
Let's consider the description of the comparison
according to the table:
Fig. 3: Comparison of Raw Cotton with other three
products..
Source: author’s work
In the research work, a multidimensional regression
model was built to compare the production of raw
cotton with the production of cotton wool, ready-
made cotton fabrics, and cotton bed linen for the
period 2005-2020 in the production of clothing
products in the textile industry.
As can be seen from Table 3 and 4, the results of
the analysis are fulfilled.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1971
Table 3. Regression statistics
Regression statistics
Multiple R
0,984091479
R- the square
0,968436039
Normalized R- square
0,936872078
standard error
30,4243259
Observations
7
Analysis of variance
Source: author’s work.
Table 4. Dispersion statistics
Dispersion statistics
df
SS
MS
F
Значимость F
Regression
3
85200,59547
28400,19849
30,68170192
0,00942932
Remainder
3
2776,918819
925,6396065
Total
6
87977,51429
Source: author’s work.
Table 5. Regression model
Factor
Regression equation
Coeff.
client of
determination
R
Norma
lazed
R
square
Durbin-
Watson
coefficient
Std.
Error of
the
Estimate
Cotton
Y = 3,23 + 2,71X1 + 0,002X2 + 0,04X3
R2 =0,96
R=0,98
R=0,93
DW= 2,85
36,95
Source: author’s work.
In the study, a multivariate regression model was
built based on the results of a comparative analysis
of the production of raw cotton with the production
of cotton wool, ready-made cotton fabrics, and
cotton bed linen.
The regression equation shows that a linear
correlation dependence has been determined
between the considered indicators of the economic
system.
Based on the data in table 1 in the MS Excel
program, we performed a forecast analysis for the
next years.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1972
Table 6. Tendency 2023-2029
Product/
Year
Raw
Cotton
(thousand
tons)
Cotton lint
(thousand
tons)
Ready-
made
cotton
fabrics
(thousand
sq. m.)
Finished
silk
fabrics
(thousand
sq. m.)
Cotton
bed- linen
(thousand
pieces)
Knitted
socks
(thousand
pairs)
Polyethylene
and
Propylene
(thousand
tons)
2005
196,6
56
3099
437,2
562
2969
54,5
2010
38,2
11,4
1104
735,8
125
2004
54,3
2015
35,2
6,6
9596
272,4
228
3739
103,7
2017
207,5
37,9
16830,2
274,5
372,6
1991
141,6
2018
233,6
61
19314,4
40,7
580,7
2367,8
93
2019
295,3
85
21098
103,2
610,5
3248,9
95,5
2020
356,7
97,8
21723
135,7
637,5
4025,3
97,2
Tendency
2023
291,1655
77,68328
18001,69
166,7661
519,9663
3019,717
91,47034
2024
303,0086
80,98298
18584,98
152,1672
529,1499
3033,63
91,47898
2025
314,8518
84,28268
19168,27
137,5683
538,3335
3047,543
91,48762
2026
326,6949
87,58238
19751,55
122,9694
547,5171
3061,455
91,49626
2027
338,538
90,88209
20334,84
108,3706
556,7007
3075,368
91,5049
2028
350,3812
94,18179
20918,12
93,77166
565,8843
3089,281
91,51354
2029
362,2243
97,48149
21501,41
79,17276
575,0679
3103,193
91,52217
Source: author’s work.
Based on the data for 2005-2020, the forecast for
2023-2029 was calculated.
Table 7. Rost 2023-2029
Product/
Year
Raw
Cotton
(thousand
tons)
Cotton lint
(thousand
tons)
Ready-made
cotton
fabrics
(thousand
sq. m.)
Finished
silk fabrics
(thousand
sq. m.)
Cotton
bed- linen
(thousand
pieces)
Knitted
socks
(thousand
pairs)
Polyethylene
and Propylene
(thousand
tons)
2005
196,6
56
3099
437,2
562
2969
54,5
2010
38,2
11,4
1104
735,8
125
2004
54,3
2015
35,2
6,6
9596
272,4
228
3739
103,7
2017
207,5
37,9
16830,2
274,5
372,6
1991
141,6
2018
233,6
61
19314,4
40,7
580,7
2367,8
93
2019
295,3
85
21098
103,2
610,5
3248,9
95,5
2020
356,7
97,8
21723
135,7
637,5
4025,3
97,2
ROST
2023
263,5405
69,98648
16641,14
200,8192
498,5449
2987,265
91,45019
2024
283,5969
75,57454
17628,93
176,0959
514,0974
3010,826
91,46482
2025
305,1797
81,58787
18691,91
149,491
530,8334
3036,18
91,48057
2026
328,405
88,05884
19835,77
120,8615
548,8432
3063,464
91,49751
2027
353,3978
95,02227
21066,69
90,05308
568,2235
3092,824
91,51574
2028
380,2927
102,5157
22391,29
56,90007
589,0787
3124,419
91,53535
2029
409,2343
110,5793
23816,7
21,224
611,5211
3158,418
91,55646
Source: author’s work.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1973
Fig. 4: 2005-2029 growth by years.
Source: author’s work.
Due to the current level of development of the
chemical and light industry in Azerbaijan, the
export of components necessary for the production
of clothing products outside the country, the
globalization of the movement of products through
the rings of the value chain, in its turn, has
strengthened the dependence of the textile industry
on external factors.
First, with the deepening of the international
division of labor and the formation of the
international system of production, the value chain
based on the internal relations of the process of
reproduction is also globalizing. Certain regions
and countries of the world are specialized in the
preparation of raw materials, intermediate products,
components, and the final product to produce a
final product that will be ready for consumption.
The value-added consistency and price increase
in the rings of the value chain for a particular
product group or intra-group product types.
As any product group or intra-group product
released by Azerbaijan's light and food industries
progresses along the rings of the value chain, the
process of increasing value added of national origin
takes place along with the increase in value added
of foreign origin depending on the nature of each
ring and it is very important to keep this process
accurate.
First, it is possible to correctly determine the
amount of value added by the national capital of the
country, along with the value added by the foreign
capital involved in the value rings chain for each
product group, [12],[13].
More importantly, it is possible to clarify the
difference in the amount of any product group
produced in Azerbaijan by distinguishing between
a product of foreign origin increased by foreign
capital and a product of national origin increased
by national capital.
To carry out the research in a scientific article
to a greater or lesser degree and at the same time to
simplify it, it is necessary to take a group of
products so it could be possible to observe how and
to what extent the value-added increases in each
ring by moving through the initial production chain
of that product, passing through all the rings of the
value chain.
In our opinion, the clothing product group can
be a more visual example, and this product can
collectively include light industry sub-sectors such
as the production of cotton lint, spinning, weaving,
and sewing products. The process of quantifying
the total cost of clothing, and thus the formation of
its price, ends when the value chain of food
products passes through the rings of the value chain
as the final and finished product of the light
industry, [17].
In this process, in addition to the producers
necessary for the organization of clothing
production, there are participating economic
entities engaged in procurement, supply,
distribution, warehousing, trade, and commerce. It
can be considered worthy to give the process
expressed in terms of flexibility and experience, as
well as relative figures, with the schematic
description given below (See Fig. 1).
As can be seen from Fig. 1, the location and
position of all economic structures (chainrings) of
the light industry clothing group operating in
connection with the production, procurement,
supply, distribution warehouses, sales, and
consumption are described.
In general, it is clear that the formation of the
final price of a group of garments or any type of
clothing within the group, which is included in the
consumption of the population, is formed by the
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1974
cost of each ring in the value chain and the quantity
of the final value spent on all the rings.
Although the process of formation looks like
economically isolated rings, in all cases it is
inseparable from each other, the member resembles
a chain completed in unity.
Though the combination of 21 rings in a chain
of 7 spheres of activity is reminding of a more
complex networked system, in any case, the whole
value chain is connected in two large semi-
networks for simplicity: value-creating and value-
increasing rings and spheres of activity (see Fig. 1).
The purpose of classifying with such a
grouping is to determine the location and role of the
rings of the value chain in the formation of the
market price of a group of clothing goods.
Fig. 5: Formation of the price of clothing components in connection with the emergence and increase of contact
value on the rings of the value chain of the garment product group.
Source: author’s work.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1975
It can be considered a very important scientific
and practical approach to clarify in which ring or
union of rings the value is created, and in which the
process of value increases.
The 5 main semi-networks connecting 15 rings,
such as procurement, supply, production, and
processing, which create value in the value chain in
connection with the formation of the final market
price of clothing, are the primary movement of the
light industry, starting with agriculture and animal
husbandry and continuing in the cotton lint,
spinning, weaving, and sewing farms, enters the
second large semi-network, which increase value.
Although the network is not a single production
process, in all cases it undertakes to ensure that the
garment is suitable for final consumption,
operations necessary to complete the production
process, i.e., carrying out works that make it
necessary for the production process to continue in
circulation. These are transportation, warehousing,
sorting, packaging, advertising, evaluation,
preparation of clothes for sale, and other production
operations.
Farming units, that represent the unity of each
ring in the value chain and the corresponding rings,
engaged in one or another type of labor, for
example, producers of cotton lint, wool, silk, linen,
fabric, and sewing respectively spend the required
amount of working time and a certain amount of
costs in the formation of the final cost of clothing
These costs are shown in Fig. 1 with approximate
figures. However, the progress of the value chain
on the increasing dynamics of value added in the
rings can be expressed in both relative (%) and
absolute (amount) indicators.
If we take 1 as a unit of measurement for the
initial cost of expenses, incurred by the
procurement agency, supplier, and farmer related to
the production of raw cotton, wool, silk, or linen,
which are the primary rings in the formation of the
quantity of cost based on the final market price of
garments, the additional cost of subsequent
operations related to the production of the next cost
will be 1.5 units, the value added of the yarn
production will be 2.5 units and thus 3.5 units for
weavers, 4.0 units for garment workers, and
respectively for the distribution warehouse and
trade will be 4.5 and 4.7 units.
4 Discussion
One of the main features of the added value in the
last rings of the value chain is to make a distinction
between farms that create value-added and increase
value-added along the rings of the value chain in
the movement of clothing from production to
consumption and thus it is possible to specify the
farms that are reflected in the union of rings, which
can affect the increase or decrease in the value and
price of clothing, [9].
This allows us to find ways to influence price
fluctuations by reducing costs and increasing
productivity in any ring in the value chain, both
creating and increasing value.
Procurement and supply chains associated with
a single production process and its chain should be
considered as a joint activity of the components of
a single process, when calculating value-added,
costs should be accounted for separately for each
ring and thus the produced product and the costs
associated with the movement of the subsequent
rings in the value chain must be clarified and
accounted for [11].
According to the substantiation of the
government of Azerbaijan, the transition period
ended in Azerbaijan since the middle of 2000, and
Azerbaijan is developing via a market economy,
[10].
It is true that every country in the South
Caucasus has its own property, but in any case, the
volume of GDP and foreign exchange reserves of
Azerbaijan's natural and economic potential is
much higher than the combined indicators of
Georgia and Armenia.
Currently, Azerbaijan has foreign exchange
reserves in the amount of 55 billion US dollars. In
this sense, it is very attractive for international
credit organizations in the country, [10].
5 Conclusion and Recommendation
The favorable geographical location of the territory
of Azerbaijan in terms of natural-climatic, fertile
soil, underground resources, and so on has allowed
the formation of not only national and regional but
also global value chains of products and services
that create national value added. In particular,
production services related to light, petrochemical
products, pharmaceuticals, agriculture, organization
of furniture production, warehousing, sorting,
packaging, pricing, and advertising of export-
import goods tend to become more active.
The formation of such important rings in the
global value chain in the territory of Azerbaijan
envisages the international service of the South
Caucasus, Central Asia, Turkey, the Gulf countries,
China, Pakistan, and India, where more than a
billion people live. Thus, the rings in the global
value chain have the opportunity to serve as the
main logistics hub of the Caspian Basin and the
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1976
region around the Zangazur Corridor, being part of
a large international transport trade network
connecting Europe and Asia, serving the European
and Asian markets [19].
It is necessary to specify and evaluate the rings
(rings of the chain that the countries participate in)
that create and increase value by the rings of the
global value chain. In this sense, the value-added
rings in the global value chain are the procurement
and supply chains that stand alongside the
international production chain and the activities of
various firms and companies that are the subjects of
these rings.
These firms and companies enter global exports
and imports and participate in the creation of global
value added by producing certain parts and
components of the finished product that will be
included in the final consumption by the
international division of the production process.
The rapid growth of value added takes place in
the value rings of light and food semi-finished
products, which are one of the most important areas
of Azerbaijan's non-oil industry, [6].
Although such a situation can be seen in the
dynamics of value-added growth in the value chain
rings of products produced by the light industry,
such as cotton lint, spinning, weaving, and sewing,
it does not in all cases reflect the full value of the
product in all rings in the chain and the costs
incurred in each ring [6].
Costs should be studied not only in the light
and food industries but at the macro level, taking
into account the total costs incurred in all sectors of
the value chain of products released in all sectors
and industries of the economy in general. The
supply chain should be considered in the
production process not only as a primary ring in the
chain but also as an intrinsic ring between the
procurement and supply chain.
References:
[1] Alderson, W. (1949). Scope and place of
wholesaling in the United States. Journal of
Marketing, 14(2), 145–155.
https://doi.org/10.2307/1247888
[2] Aldin, N., & Stahre, F. (2003). Electronic
commerce, marketing channels, and logistics
platformsa wholesaler perspective. European
Journal of Operational Research, 144(2),
270–279. https://doi.org/10.1016/S0377-
2217(02)00393-4
[3] Huseyngulu Baghirov, Yusif A. Humbatov,
Samira Abdullayeva, Musluma M. Aslanova,
Sevda Seyidova. "Development of human
capital and the economy in Azerbaijan in the
context of the Russian-Ukrainian war" ,
Journal of Eastern European and Central
Asian Research (JEECAR), 2022
[4] Akhundov Sh. A. The Alphabet of Marketing.
Baku, 2006.
[5] Valiyev D.A. Azerbaijan's Integration into
the Global Economy. Baku, 2008.
[6] Rzayev A.Y. Statistical №4, News Baku.
2022.
[7] Karimli I. A., Suleymanov N. M., Funda
mentals of National Economy - Baku, 2001,
308 p.
[8] Karimli I.A., Economics: Current Problems
and Real Approaches. Baku: - 2013, 505
pages.
[9] Karimli I.A., Improving currency control
over Azerbaijan's import-export operations.
Tax journal of Azerbaijan. 1(133) 2017.
[10] Karimli I.A., Structural model of economic
development of Azerbaijan: challenges and
outlooks Economic and Social Development.,
Baku 14-15 February 2019
[11] Koopman R, Give Credit where Credit is
Due. Tracing Value Added in Global
Production Chains, 2010, 58 p.
[12] Kiese M. Regionale Clusterpolitik in
Deutschland. Bestandsaufnahme und
interregional Vergleich im Spannungsfeld
von Theories und Praxis. Marburg:
Metropolis-Verlag,2012– 52 s
[13] Sergeva Z.Kh. The Role of Chemical Parks
in the Development of Innovative
Technologies in the Field of Carbohydrate
Processing. Vesting Kazan. Technol.
University- 2012 No. 15
[14] Stephenson S. Services and Global Value
Chains//World Economic Forum, Geneva
Switzerland-2012-p.18-23
[15] N.K. Akhmedov, A.H. Sofiyev. "Asymptotic
analysis of three-dimensional problem of
elasticity theory for radially inhomogeneous
transversally - isotropic thin hollow
spheres", Thin-Walled Structures, 2019
[16] Hans Wilhelm Windhorst, Changing patterns
of global and European egg trade-2014,
WING
[17] Ovchinnikov G.P. International Economics
Study Guide. - publishing house Mikhailov
V.F., 1999.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1977
[18] Timmer M.P. An Anatomy of the Global
Trade Slowdown based on the WIOD2016
Release. [Electronic resource]/B., Stehrer R.,
de Vries G.J.//Groningen, University of
Groningen. GGDC Research Memorandum.
Number 162. 2016. 65 p.
[19] Ibrahimov, M., V. Zaharov, E. Stryabkova,
M. Kochergin, S Mehriban, On the
international experience of establishing
growth poles. Economic and Social
Development, Baku 14-15 February 2019
[20] Zhang Q. A comparison between coal-to-
olefins and oil-based ethylene in, China: An
economic and environmental perspective/Hu
S., Chen D. //-Journal of Cleaner Production
- 2017 – 165 - p.1351-1360
[21] Haciyev F., Taxation factors in stimulating
export potential in the Republic of
Azerbaijan. Tax journal of
Azerbaijan.1(133)2017.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.e
n_US
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.176
Irshad Karimli, Elchin Eyvazov,
Reyhan Azizova, Vildan Rizayeva,
Ophelya Mazanova
E-ISSN: 2224-2899
1978