Essay on Intel’s Site Selection Decision in Latin America
Q1. Why is Intel interested in investing internationally? Why does the company want to invest in Latin America?
The speed of competition in the microprocessor segment of hardware industry is very intensive. According to Moore’s law, the power of microprocessors which is pushed by the laws of competitive market doubles every 18 months (Nelson, 2000). Intel is the market leader and in order to retain its leadership, the company needs to invest into R&D and open new centers of production simultaneously. International investments allow Intel to get the most of international specialization and diversify its production; Intel can use the advantages of different regions such as engineering achievements and management talents in the United States, availability of supplies and labor in Asia, etc.
Since investing both into R&D and expanding manufacturing volumes is expensive, Intel has to consider new locations with lower manufacturing costs. Latin America has a number of advantages in this sense: low cost of labor, availability of labor, logistical and time closeness to the United States (Nelson, 2000). In addition, Intel already had several centers in Asia but did not enter Latin America yet, so it would be a reasonable step towards improving international diversification of the business.
Q2. What characteristics does the company seek in a country where it will locate its investment?
It is reasonable to pay attention to the following factors in the target country: economic and political stability, labor regulations and labor unions, the presence and availability of educated/skilled workforce and the country’s infrastructure. For some companies, it might be necessary to assess the demand for a particular product or service; yet, for Intel, in the considered case, local demand was not important since the microprocessors were intended for export (Nelson, 2000).
The characteristics required from the country selected for locating the investments also include: low or at least moderate level of criminal activity, good (or at least neutral) attitude to expatriates, low level of corruption, the absence of other security risks such as elevated criminal activity, good roads/airports and the availability of transportation means (cars, trucks, planes). One of the important aspects for choosing the country for virtually any company is the level of taxation, taxes for international investors and the presence of tax incentives for the considered business. In addition, it is necessary to consider the impact of cultural factors on future collaboration (for example, using Hofstede’s model of cultural dimensions and differences).
Q3. What are the pros of each country on Intel’s short list?
There were 4 countries on Intel’s short-list: Costa Rica, Brazil, Chile and Mexico (Nelson, 2000). The pros of Costa Rica included: political stability, availability of talented engineers and the presence of a powerful technology-focused organization (CINDE) in the country (Nelson, 2000). Additional advantages of Costa Rica included educational flexibility, low level of labor unionization, good level of general English proficiency and generous incentives for investors. With regard to Brazil, key advantages were: high availability of technical personnel, tax incentives for computer industry (yet no tax exemptions), the presence of many other technology companies and good infrastructure.
The pros of Chile for Intel were advanced infrastructure, sophisticated engineering training programs and low unionization (Nelson, 2000). Finally, the advantages of Mexico included a very advantageous location in Mexican Silicon Valley, the presence of many other large computing companies in this area, the presence of expatriates, great infrastructure, impressive supply of skilled engineers and technicians and governmental support of technological investments.
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