Intel is still one of the main players in the semiconductor industry since bringing out microprocessors. Its dominating role is, of course, on the main one hand because of its first mover advantage but on the other side mostly because of its high investments in R&D which enables Intel to release constantly better microprocessors. However if Intel wishes to hold on to its competitive gain and its own high R&D spending, it must build plants outside the United States in order to save costs. In 1996 Intel's collection of international development plants includes sites in Israel, Ireland, China and the Philippines, to be able to reduce the risk of only investing heavily in a single region and corresponding to this to diversify. Intel considers Latin America as another site location because "the spot offers relatively low labor costs as well as logistical advantages for exporting to america or European countries" Thus the stock is designed to be conducted as an offshore plant. The research study about Intel's Site Selection Decision in Latin America shows plainly that the process of international site selection is associated with a lot of different methods, periods of countries' analysis and evaluations. But each one of these are essential and necessary to be able to purchase the right location and gain lasting and competitive advantages. In the next our group will take the position of Ted Telford, the one full-time person in Intel Corporation's worldwide site selection team, to recommend Intel's headquarter, where you can build the assemblage and testing service in Latin America. This includes a explanation of Intel's site selection criteria, the genuine site selection process and a recommendation for the future site selection process.
The decision for an international creation site must be well considered because it is a visible investment which sometimes even chooses about the business's future. Therefore every site selection process should start with this is of conditions which the countries are examined and compared with one another. Furthermore the identified criteria should be positioned according to the importance for the company.
For an extremely organized site selection process, Intel was considering a few concrete factors pursuing. In an article, Ted Telford mentioned these varieties of elements as central concerns.
Political and economic stability
Labor unions and labor regulations
Infrastructure (e. g. transport infrastructure and costs - roads and international airports only, the availability and consistency of the electrical power supply, etc)
Government support (e. g. the government's corporate taxation rates, duty incentives)
Availability of complex personnel and designers to staff the proposed plant
Grapping cost advantages, quality management, and superior degree of technology over competition, encouraging site was asked to relatively match complete factors. We summarized how those factors would affect on obtaining Intel's goals.
Political and economic stability
From the past, the reason why Intel got hesitated to purchase Latin America was that there is political and monetary uncertainties. Beneath the political uncertainty, the key concerns are the risk of radical changes of monetary policy, laws and regulations, and polices, and the security issues. Since guaranteeing creation facilities will play critical roles at least for many years, those probabilities of obscure changes will be likely to be negative for Intel. The way to identifying the politics issues could be to scrutinize the personality and style of president, political parties, current politics issues, the procedure of changes of regime or government, countrywide perception in conditions of politics, etc. With regards to security problems, sometimes, hijacking happens in Mexico, therefore, Intel should be equipped for safety ideas as well as contingency ideas. Monetary stabilities can be referenced as two basic view points; is the health of current economic climate, the other is the capability of coping with global companies. For determining each impact, Intel might conduct several studies such as monitoring macro/micro overall economy index, other MNEs' business conditions, interviewing with related involvers, and so forth. Similar with the political stability,
Labor unions and labor regulations
Labor issues could be the main factor to Intel since Intel's encouraging development facilities won't do only product, it'll choose the functions of R&D and assessment, which has intensely dependency on recruiting. What Intel must consider is 1) if be being labor unions which Intel officially prohibits, 2) labor costs, 3) romance and culture between labor and management, 4) related federal government regulations, and so forth. In the same way, labor issues should be dealt with with a long-term view point. Intel should judge each concern with a certain conditions they decided. For instance, Intel will be able to classify things whether or not they can convert current situations into revised circumstances that happen to be favorable, profitable, and feasible to them. With regards to labor unions, we imagine the culture and custom of labor unions will not be easy to be modified by only 1 global company's work. It really is a national concern. To more appropriate evaluation and analysis, planning a given period time to grab must-achieved goals specifically will be helpful. On the path to changing circumstances, collaboration with labor unions, help to reform labor systems, and so on can be considered for Intel.
According to the truth, in terms of infrastructure, Intel was more focusing on vehicles infrastructure and costs and electrical energy source. All materials and components are transported by aircraft so that Intel was asked to make sure sufficient daily plane tickets and related facilities such as airports, appropriate plane schedules, etc. After unloading them from aircraft, those are sent by trucks on the road. That is why air travel and ground transportation, both of these are very needed for Intel. We think Intel was considering more about the infrastructure (e. g. airport, roads, etc) alternatively than working costs (e. g. transportation fees, delivery contracts, etc. ) The electrical energy supply is directly linked to continuous well produce. If we concern the situation that products are stopped due to lack of the electrical energy supply, it'll be great damage to Intel. Since most Latin American countries are popular for an abundant supply of Natural resources, if Intel will try to get into a country which does not have resources, the cost of electrical supply could be a sensitive subject.
In our circumstance, each nation's authorities offered diverse bonuses to Intel such as overall or partial taxation for a limited time, free land, revised, created, or removed restrictions (e. g. FDI guidelines, rates of interest for MNEs), other well business conditions, and so forth. What Intel should make sure is 1) given proposals are ideal and how affects to Intel, which means Intel should choose what they must take or not, 2) whether or not those government will keep those contracts, and 3) government's determination to support Intel. We suggest, although exemption from taxation is good, Intel determine additional costs as well. Pursuing only cut down the tax might not do trade-off with other costs we mentioned before.
Availability of technical personnel and technicians to staff the suggested plant
As we mentioned before why recruiting are essential for Intel, how Intel hires local employees having requisite specialized skills, not global ones, is a crucial subject. Indeed, some countries experienced had already retain authorized skilled employees, the others had not. No matter what those countries had, it needs to be also taken care of within long-term perspective. If Intel can foster required employees in a brief period, they do not need to consider those employees at the stage of site selection. What Intel has to consider is 1) the number of existing essential employees, 2) the salary covering of relevant employees in each countries, 3) education system, 4) federal support, 5) terms skills, and so forth. On the path to changing circumstances, collaboration with universities, aid to reform education system, etc can be considered for Intel.
The goal to build a plant in Latin America means at the same time that Intel has to consider 20 different countries and check their potential. But the desk research add up to Mexico, Chile, Brazil and Costa Rica, our group decided to investigate a bit broader and found Argentina which also seems to be promising.
2. 1. Columbia Colombian federal government within the last 50 years has jammed to the fight against military guerrilla. Activities of the overdue 90s, equipped guerrilla causes from areas enlarged a dangerous situation BOGOTA. Colombia confronted serious problems in current economic climate, because the political confidence of federal is significantly weakened. 1998-2002 years FARC and the federal government initiated peace discussions as a disorder around 51, 000 rectangular kilometres of land was well worth from the federal government of President Pastrana had ceded. Ceded to the FARC in Sanya on safe-heaven, the massive expansion of drug trafficking and stockpiling weapons and food, and, taking benefit of the spot as basics for kidnapping negotiations started. For the mid-2000s, the guerrilla pushes as a base for hill and rural areas, and the routine looks back, however the focus whatsoever without harm, and guaranteed with large-scale medicine trafficking to fund the purchase and are equipped with latest weapons in the foreseeable future a significant period. It is not easy to combat guerrilla forces seems to be. Global political instability of the major investment organizations seem to act as a poor incentive. The Colombian federal has maintained a comparatively complex wage system. Recently the government ensures labor market overall flexibility, to simplify the wage layer, the regular work time and job overall flexibility are making the change system. Colombian Constitution, all employees of their to freedom of connection and collective bargaining is allowed, however, not the labor union and does not impose obligations. Just the meantime, the Colombian federal government implicitly has conducted anti-union procedures, which the primary union market leaders behind the assassination are known. The last union leader wiped out in Colombia since 1986 only about 3, 800 people, the union that the crackdown on leftist guerrillas to dismiss this reach show was given help. Foreign shareholders are interested primarily in the areas of Bogota, Medellin's. Development of infrastructure for overseas investment here can be called positive. Bogota is located in the inland in the guts, all major land via roads may have been. Also on the outskirts of Bogota's El Dorado international airport in Colombia as a significant airport terminal to connect the major international cities are dished up by regular airlines. The greatest commercial city of Medellin in Colombia than in Bogota is situated closer to the seacoast. Medellin is passed to the main land transport, this is a direct connection to the Buenaventura interface and railway has been. Medellin is close to the Olaya airport terminal and Rionegro(free trade area) remains near the Jose Maria Cordoba International airport, so overseas companies will become a confident investment.
The Colombian authorities on foreign investment and national treatment ideas are explained. The Colombian federal was create specifically for free-trade zone, 1) Bogota, 2) Rionegro (Medellin), 3) Pacific (Cali), 4) La Gandelaria (Cartagena), 5) Quindio, 6) Santa Marta, 7) Cucuta, 8) Barranquila, 9) Cartagena, 10) Palmaseca (Cali) and 10 are installed in 10 locations. About FTZ companies have been granted tax incentives to gammyeondeung. Especially in neuro-scientific duty Income deductible expenditures, Exempt Income, Tax Discount offers various bonuses to foreign companies are. These incentves will act as a positive component to INTEL.
The Colombian federal government regularly invests in the government budget for education and recruiting. Approximately 2. 5%of GDP in 1980 invested in education, but about 4 percent of GDP committed to 2003. The rate of education spending is higher. However, the training system is a centralized procedure, as the quality of rural instructors and teaching facilities are very poor. Yet the supply of technological manpower is insufficient. Foreign companies committed to specialized training for local staff.
2. 2. Argentina
Argentina, for decades a political and economical instability has had. First, politically 50-60's previous Chief executive Juan Peron of Argentina's populist plans and leaking phenomena triggered by stigma, which Peron federal policies that distort the marketplace economy was awful. After the left functions and right-wing political parties, political parties opposing the military coup and coming into power repeated several times and was subjected to political instability. Coup d'etat, equipped violence, social revolution and politics reform have been through many liberal, corporatist. Populist, anarchist, socialist, communist ground-breaking, totalitarian, neo-liberal ideologies of the various chapters of the experiment may be confronted with a turbulent background is not. The military services coup was subjected to several times, especially the economic problems experienced in 2001, three presidents, including the marvelous changes that needed to suffer politics instability. Luckily for us, twists and changes by the end of 2003 for the new authorities needed office kireucheunereu Nestor was to change the national credit debt, get basic order of culture is moving. However, the successor to Leader Nestor Hernandez's partner, Christina, was elected chief executive by a worker based on the extensive support of leftist politics and the politics of nationalism, populism is working. 2001 nationwide financial situation and the IMF bailout: the default experience has been. 950 billion in 2001 to declare the forfeiture of the country as rendered nearly bankrupt market of Argentina Chief executive Nestor arrived to ability in 2003 and then little by little began to recover. Initial 22% capacity to dalhadeon 8. 5% unemployment rate dropped 8-9 percent gross annual GDP expansion also was repeated. However, the recent declining economical growth and increasing inflation, Leader Cristina is possessing back. Her partner, a crucial role in the election, but development will be handed.
Argentina's labor problems have complicated factors which may have historically not the government's reforms are holding back again on. Argentina historically dominated rule, depending on how the countrywide union's ability to choose what was the typical. For the needs with their giving, it recognizes that these details. Piketteroraneun unemployed Federation to press the government and companies, which induced disrespect to consume now, as property, health care is demanding and has been waging violent protests. 150 pesos monthly, the government with their bills and free medical benefits, but done, the circumstances of the claims keeps growing. But the accessibility of foreign workers are strictly limited by foreign permanent resident visa if their job is not available in the country is given only to skilled workers. Luckily for us, the work of foreign managers and technicians are allowed to get into quickly, Intel influx of excellent semiconductor technicians seem not to be a huge problem.
Argentina has a developed system of transportation infrastructure: more than 231, 300 kilometers of roads, one of the major rail networks in the world (31, 409 a long way), 25 seaports and 38 river jacks and 58 airports (23 international). A lot more than 25 airlines offer direct plane tickets from Argentina to over 40 destinations on five continents. In addition, it is in place an insurance plan of investment in the infrastructure area under a tactical plan of expansion which provides increased gas move capacity of 30%, an increase of electricity technology by more than 72% increase of 60% of paved roads in the time 2003-2011.
In overdue 2008 the international financial crisis in Argentina damaged by the economical downturn, Argentina, the federal government has centered on protecting local industry. Also, duty measures for international companies is very poor condition, Disaster Economic Work 1989 (Economic Emergency Legislation, Decree No. 23697) announced, on existing and new investment finance of the Treasury and the central lender can affect Industrial Promotion (Industrial Campaign Law, Regulation No. 21608 of 1977) were suspended all incentives and subsidies, 1991, 1993, two years suspended again in 1995 declared measures to stop the application of such incentives have been.
Argentina is internationally known for its highly qualified human resources. The country rates second in the region for its literacy rates and institution life expectancy, attaining levels similar to those of Spain, Italy and Israel (Keep an eye on Global Education, UNESCO, 2008). More than 87, 000 graduates of tertiary level students and 6, 200 graduate 106 graduates of universities around the country will join the labor market on a yearly basis, with Argentina the first country in Latin America in terms of entrance rate to tertiary education. The British terms is also the best in the region, as reflected by the results of examinations of the School of Cambridge, which put Argentina not only over countries such as Brazil, Chile and Mexico but also from Spain, France, Indonesia and Italy (Cambridge ESOL, 2007). Argentine pros are distinguished for its capacity for technological innovation. The number of researchers and technicians focused on research and development, measured per million people, is higher than Brazil, Chile, Mexico and Uruguay (UNESCO, 2008).
2. 3. The consequence of this evaluation
Although both Colombia and Argentina offer some very nice advantages, at the end the negatives outweigh and it is understandable why the site selection doesn't consider them any further and target more on Costa Rica, Brazil, Chile and Mexico.
3. 1. Political and economical stability
The site selection team did a field trip to each country to be able to get a better understanding and also measure the countries properly. The team inspected in each country how well it fulfills the defined criteria.
In conditions of political and economic stableness, Costa Rica offers the best conditions. The unitary demographic politics system ensures political balance since 1948. During that time the government didn't only abolish the navy but also established a proper working interpersonal welfare system with special focus on education and health insurance. Another advantage of Costa Rica is CINDE, a powerful investment promotion firm which is very enthusiastic about attracting Intel to construct the plant. . One of the primary reasons for that could be the World Standard banks proposal for CINDE at appealing to electronics firms to the country for creating clusters among the companies. This may lead to more interactive relationships with the companies operating in Costa Rica and appeal to new companies too.
Despite all these appealing factors Intel was worried that their huge investment of $300-500 million would overburden Costa Rica's small overall economy. Although CINDE is a great supporter for Intel, by offering good solution or are even willing to make a deal with Costa Rica's administration to improve the some regulations and only Intel, Intel was bothered what could happen if CINDE will dissolute. Furthermore the management of Intel will not want special treatment from the countries or government authorities as the politics conditions might change in the future creating problems for Intel.
In compare to Costa Rica Brazil's substantial industry wouldn't be overstrained by the investment. The fact that many global companies have built plants in Brazil demonstrates that it includes a wonderful environment and politics stableness. However Brazil's legal complexity and the actual fact that Brazil hasn't such a huge need to entice many further overseas companies, since its market is almost saturated, won't give Intel any chance to get bonuses or bigger advantages than in Costa Rica. Moreover the security concern, in form of hijacking and episodes scared Intel.
Chile as a democratic republic with a president and its long and close associations to america fulfills Intel's required standards.
Guadalajara in Mexico is counted as a second silicon valley and would meet most of Intel's criteria. Also all the already settled foreign firms show Guadalajara's attractiveness. But the reality the government would even loose some restrictions, alarms Intel because it contributes to some unpredictability and a lack of transparency.
3. 2. Labor unions and labor regulations
Costa Rica confrontation with the unions are dealing with problems wisely. For example, Solidaridad was set up, It really is a government-sponsored activity to create special voluntary organizations as an alternative to mo confrontational, industry-wide unions. Country wide collective bargaining system, especially through, wage levels are out flexibly changed. The government actively handle this conflict with the unions are cutting down. In addition, only 7% of private-sector staff belong to labor unions, so labr issue is very little problem in Costa Rica.
The labor union in Brazil is not more powerful than those in other Latin American countries, but much powerful than those in Costa Rica. Central personnel' Union (CUT), one of most combative Brazil's labor federations, was related to the Employees' Get together(PT), which managed some point out in Brazil. And labor cost in Brazil is usually greater than in other Latin American countries because many welfare and benefits are offered to Regular personnel, such as paid vacation trips, long maternity leaves.
There never have been been around confrontational labor unions in Chile, since powerful labor unions have been inhibited by pressure of federal government. And only 12% of workers are unionized now. But Labor cost, especially wages for trained employees, which Intel needed most, aren't as cheaper than other Latin American Countries. The starting salary for an engineer is between $30, 000-$40, 000, which is almost same from what it might be in america. Intel could retain technically trained employees in Costa Rica or Mexico for almost half that amount.
Many companies in Mexico ensure harmonious labor relationships by working with company unions referred to ad sindicatos blancos ("White unions"). White unions are much much easier to use than a lot more combative, confrontational unions that existed in many companies in Mexico. However the government legislation about building a union conflicts with Intel's insurance policy which is about devoid of unions all over the world. Mexico's fedral regulation mentioned that if at the least 20 employees in a given company made a decision to form a union, the company would be asked to acknowledge it.
3. 3. Infrastructure
In an airport condition, Costa Rica has enough center to fulfill Intel's need. Moreover they are found in nearest place among the list of candidates. It takes just three hours to U. S. but now, Intel is hard to use daily struggle in Costa Rica. As Intel import and export all over the world, it can be problems. But Intel can use their own airline due to wide open sky system on Costa Rica, this may be solve the problem somehow. Electrical Energy is more expensive than others. It costs $0. 07~$0. 09 per kilowatt-hour. From the special agreement, Costa Rica government promised to supply electricity on $0. 05 per kilowatt-hour.
Brazil has a durability on infrastructure. Therefore a great deal of international companies have performed here before Intel has touch with them. Naturally, airport also does not have big trouble to use business. On electrical energy, their standard cost is realistic. That's why Brazil has a perfect condition on these factors.
Above all, Chile is too much from U. S. It takes almost 12 time by airplane. Further, Scarcity of direct flights is more serious problem. If we consider importance of R&D assistance with headquarter, Chile can't get good quality.
Golden triangle of Mexico (Mexico City, Guadalajara and Monterrey) has good condition for business. As a number of flights and capacity is sufficient, air transport is all right. Especially Mexico's electricity cost is attractive. It costs $0. 02 per kilowatt-hour, not even half of Costa Rica's special cost.
3. 4. Federal government support - the government's corporate taxation rates, taxes incentives, laws
There are professional parks in Costa Rica with free trade area position. In these areas, companies dont pay tasks on brought in parts. Another edge is the fact that companies are exempt from income tax for eight years. Even after eight years they were able to offer 75% exemption, if more than 25% of investment were reinvested following the fourth 12 months. The Costa Rican federal is willing to utilize Intel without breaking its laws.
The authorities offered a Successful Process Legislation (PPB) incentive for companies buying R&D. You may still find a great many other unfavorable fees for companies in Brazil e. g. the Brazil cost and infamous taxes. Sao Paolo seems not to lure ventures either.
Chiles government was not in a position to offer incentives for Intel regarding investments. Really the only incentives Chile could offer were located in the poor region of the united states, which Intel had not been interested about.
Mexico has bonuses ready for companies at the state of hawaii level. These bonuses included free land and subsidized training for employees. The federal government struggles to offer any income tax exemptions or fiscal incentives.
3. 5. Option of technical employees and technical engineers to staff the suggested plant
Costa Rica is eager to develop an overall complex level in the country. The curriculum is going to be modified and a special certification program created to produce the requisite numbers of technicians. The level of English language effectiveness among the population in Costa Rica is relatively high.
A disadvantage is that Costa Rica is lacking mid level technicians, which are crucial for the place. When planning about the sufficient amount of personnel for the seed, Intel didnt want any special treatment from Costa Rican federal government as it might cause problems to the company in the foreseeable future.
Brazil and the prospective area in Sao Paolo has satisfactory amount of complex staff for the vegetable. There's a famous technological university in the area (UNICAMP), which would provide more professional staff to the plant than what Intel may find in Costa Rica e. g.
Chile has the sufficient amount of the specialized staff. However, the labor cost for educated engineers the particular seed requires is very high looking at to other Latin American countries. As the labor cost is in tests and assembling vegetable is between 25-30 % of the total costs, Chile has a huge disadvantage involving this factor.
Hundreds of consumer electronics companies have previously established their crops in Guadalajara, Mexico where Intel was likely to establish its plant as well. The labor cost in Mexico was low and it provided a large way to obtain skilled designers and technicians.
3. 6. The result of the evaluation
In conclusion the broad analysis comes to the next result.
Costa Rica reflects acceptable level atlanta divorce attorneys aspect we looked into. That is why our group advises this country as a proper location for first manufacturing facility in Latin America. Though in certain factor other countries have a better condition, our decision is dependant on a total level.
Costa Rica is the sole proper country concerning political and cost-effective stability
Stability is fundamental of constant operating. Costa Rica has unitary politics system and stable public process. By relating these factors to government favour, Intel could easily get positive expectation. Brazil's Politics is also comparatively stable. But credited to federal politics system their condition is too complicated. In addition general public security is not reliable as well. Mexico is not clear to deal with the process. It could make Intel wait to get.
Considering Intel is very hypersensitive on labor issue, Costa Rica can get amazing analysis in this part. Labor union is not basic in Costa Rica and most terms of legislation are company-favorable. The part of union signing up for is not saturated in Chile as well. Still, higher level of salary would be hurdle for company.
Candidates have adequate degree of infrastructure except Chile. Chile is uncomfortable to utilize air-cargo. Although Costa Rica's expensive electricity is crucial, this problem will be solved by special agreement with authorities.
If Intel invests in Costa Rica, they can get exceptional duty incentive. It offers import obligations and corporation tax. Otherwise others do not show special and concrete favor on federal government level. It shows how Costa Rica wishes to get Intel's investment.
Brazil, Chile, Mexico satisfy the level of Intel's need. Especially Mexico's low labor cost appears more attractive. Normally Chile's high labor cost is weakness. Now Costa Rica doesn't have enough technicians Intel needs. However their education system seems lively to cope with this issue. And Costa Ricans have strength on British. Nonetheless forecast of Costa Rica upon this factor is positive, the procedure should be monitored
For the last time our group wants to emphasize that people strongly suggest Intel's headquarter to purchase Costa Rica as all the reason why and quarrels above support clearly this decision.
Futhermore some suggestions for the future site selection process also needs to be recommended to Intel's headquarter since International production is a key element of Intel's technique to stay competitive and keep maintaining the role of the marketplace leader.
First of most a data bottom part should be established in which the collected information about different countries is preserved. The countries should also be ranked according to the highest future probable, however at exactly the same time the countries' negatives should be emphasized. A data platform organized in this way helps the reconsideration of each country at a later date. Every new site selection process should then get started with the reconsideration of the countries in the databases, by verifying the reality of the countries' previous disadvantages. Thus if this technique doesn't offer a good solution, information about new countries have to be collected to be able to check and measure the country. In the event study, Mexico experienced only a weakness in taxation incentives and in the labor union, so Intel only need to check in the reconsideration process for another site selection, if the Mexican administration launched some fiscal bonuses or if the white union has proved to be a opportunity to ensure a harmonious labor romance. If one point or even both points have been changed, Mexico would be a perfect location to make the new seed. Second Intel could think of by using a kind of bench marketing approach through the country evaluation. Which means Intel could have a look where its competitors or related industries run an international production site and then reap the benefits of their experiences which they have previously made. Their info might become more credible and provide more perception than directly asking the government for the mandatory information, as Ted Telford performed in a letter to each authorities. Since every authorities is enthusiastic about a foreign vegetable and the assets which can be related to that, there is the risk that the foreign government will embellish or even conceal some facts in order to succeed the foreign investment. As a last suggestion, Intel's headquarter could consider building a training center for all international sites to be able to overcome the issues which the herb in Malaysia faced. Although this implies a huge investment and high operating costs, it is suitable because Intel could ensure that the employees in the new factory have the mandatory qualification. At the same time Intel guarantees that the existing sites maintain competitive, so that at the end less new plant life have to be build because the existing plants don't need to be substituted.