Intel Case Sample

Intel: Strategic Decisions in Locating a New Assembly and Test Plant

Question 1: What criteria would you use to select the site for Intel’s plant in 2005? Why? From my point of view, one of the most important criteria which Intel should consider is the cost factor. Intel should choose a location with low cost of operations especially low labour cost. Thus, the company would decrease its costs and increase its profits and its free play when setting the price. Furthermore, Intel should look for a location which offers many opportunities to do business internationally. As a consequence, it will be easier for the company to expand its market and to gain many other business partners all over the world. Another important point is the supply of resources. If the supply of resources in the selected location is insufficient the company has to expect a loss of profit. Closely related to the supply of resources Intel should locate its new plant in a country with low cost of import and export and a good infrastructure. Both points are important for the transport of missing items for example. Moreover, the company should bear in mind that factories of competitors which are located near the chosen location might limit the possibilities to fix advantageous contracts with suppliers. In addition, Intel should choose a location where the employees meet the required expectations concerning qualification and skills. Thus, Intel would save additional costs concerning staff training. Another important point, is the political stability of the country. Corruption, problems with laws concerning the protection of intellectual property etc. might endanger the success of the whole company. Furthermore, security and environmental conditions play an important role as well. The risk of natural disaster which could lead to the destruction of the whole plant and thus, to huge losses of the company should be drawn into consideration. Knowledge about the country, its government and its leadership might be useful as well. Question 2: Where would you build the new plant? Why? I personally prefer China. The first and most obvious reason why to choose China are the low cost. Low labour costs in combination with an ambitious and well educated workforce provide huge cost saving potential. Moreover, Intel has already experience in doing business in China since the company has already built several plants in Shanghai and Chengdu. In addition, the rapidly expanding industrial complex offers many opportunities to fix advantageous contracts with suppliers and beneficial

cooperation with other companies. In contrast to other locations in Asia, the infrastructure in China is good which ensures the supply of important items. Besides, China offers tax breaks which represents a huge cost saving potential as well. On the other hand, the restrictions and limits when doing business in China cannot be neglected. China imposes tariffs and restricts foreign countries to certain sale regions which limits the opportunities of Intel to expand. Furthermore, China required some companies to enter joint ventures with Chinese companies in the past. This might lead to unfavourable contracts with companies which do not fit in the general concept of Intel. But in my opinion, the advantages outweigh the disadvantages. From all the potential locations Dalian seems to be the most favourable one. India for example still has to deal with an unstable government and with slow progress on much-needed economic reforms. In addition, the infrastructure of India is still under-capitalized which makes the supply of important items difficult. Fraud and corruption are still wide spread in Vietnam which makes it nearly impossible to do business there. As in India, the governmental situation is not stable as well. Besides, Thailand has to deal with natural disasters such as flooding. The disadvantages in China are not as serious as in the other countries, in my opinion. Question 3: If you were Intel, what would you ask from the government of your chosen location? Why? I would ask for tax break for the first few years during the construction of the new plant. In addition, I would try to convince China to loosen their restrictions and barriers to certain areas. Furthermore, I would try to find out more about the joint ventures with Chines companies and I would definitely not sign a contract which includes an obligation of a joint venture with a Chinese company without my agreement.