Intel: Strategic Decisions in Locating a New Assembly and Test Plant (A) Harvard Case Solution & Analysis

India: Chennai

India was ranked high on the sitesthat hold potential capacity for constructing an assembly testing plant. With an underdeveloped infrastructure and an unemployment rate of 10% the educational services in the country were lagged due to rising population, however, the customs, corporate and income tax has been reduced by the government to bring growth in the country. Furthermore, the company’s intellectual property rights stood 72% with a moderate rating overall. The foreign direct investment as a percentage of the country’s GDP was 0.80%, with U.S. again being one of the main sources of FDI and electrical equipment being the sector for high FDI. The power and sewerage in the area weren’t developed and ready for construction yet a promise was made to fulfill them. According to the Exhibit 4 (Selected Data for Potential AT plant Sites) and Exhibit 5 (Key commercial Indicators and World development Indicators):

  1. The mean tariff rate as per 2004 for all goods in the trading sector is 28.3%.
  2. Investment in energy for the country with private participation is 909,830,000.
  3. Investment in Transport with private participation is 1,526,510,000.
  4. The Port of Chennai located at the Coast of Bay of Bengal carried an annual cargo of47.2 million tons.
  5. There is power supply is divided: independent public feeder feeds continuously whereas the captive power plant that runs at a rate of $0.11/kWh.

Thailand: Amata Industrial Estate Parks

With a very few regulation in the country Thailand represents a good opportunity for the company to construct its new facility. The company had been named in the top 20 economies by the World Bank in 2005 for its ease of conducting business. The workforce seemed literate with a literacy rate of 90% yet with a very low unemployment rate of 2.1% which shows that it would be difficult to attract labor from the country. The country lacked expertise in capital intensive and high skill requiring industries yet the labor costs were high when compared with China. The Government there at china is unstable and is subject to on and off criticism from Human rights organizations. Adding to the fire is the unsafe geography of the country with continuous attacks of natural disasters. Some facts that further help in the criterion evaluation of Intel and the country’s specificity with respectto the establishment of the new facility are as follows:

  1. The country’s foreign direct investment as a part of GDP as per 2004 is 2.30%, with U.S as one of the main sources of foreign investment in the electronics sector.
  2. The mean tariff rate as per 2004 for all goods in the trading sector is 11.50%.
  3. Investment in energy for the country with private participation is 1,609,260,000.
  4. Investment in Transport with private participation is 241,600,000.
  5. The Laem Chabang Deep Sea Port is a drawback and therefore not a viable option to consider as it is 46km away from the site where the facility is going to be constructed and thus raising transportations costs.
  6. The power supply is also insufficient in the country with the flowingrate of $0.08/kWh. This too is not fixed and is subject to load factor.

Vietnam: Ho Chi Minh City

With an annual growth rate of 7%, the country has more than 50% of female populationthat were young and undeveloped. Therefore the region lacked skilled workforce yet the southern region was westernizing and the Government was also in full support of them. The average monthly salary of the labors there, was $60 to $80 per month which was way too less but engineers earned up to $400 to $500 per month.

There was aggressive injecting of foreign investment in the region as one sees in China along with attracting healthy investments for the electronics sector in the nation. However, the country was subject to corruption and illegal practices. The area lacked is leadership and if Intel plans to pursue an option here it could only do this by either training the individuals on to leadership skills or it can call its Vietnamese team from U.S to operate in here giving the training costs that the company would incur. Another important drawback to consider was the Creek on the site, which was to be removed if the company plans to construct its new facility here..................................

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