13 January 2022

California

Problem Statement: To find a new location for setting up a new plant in overseas countries with
the primary objective of reducing costs.

The process began by keeping several key points in mind before shortlisting the final countries.
Latin America has been moving from ideas of traditional protectionism to open markets. These
countries wish to pursue globalisation and gain money by exporting their products. Intel can gain
an advantage from the new emerging economies because of relaxed reforms. Close proximity to
the USA can help logistics and reduce costs. Setting up our plant in one of these countries will
help us gain a strategic advantage over our competitors as 100% of products will be exported to
the US.

In the initial stage of desk research, the team gathered information on the financial, socio,
political and labour conditions of different countries in Latin America. The team finally chose
Mexico, Chile and Brazil from the long list of countries. We rejected a lot of countries on these
parameters, and Venezuela was eliminated on the grounds of being financially unstable. In late
1995, CINDE, Costa Rica's Investment Promotion Agency, met us in Silicon Valley and gave a
presentation on the potential of Costa Rica as a prospective country. CINDE is a private body
free from government interference and is working to change the landscape of Costa Rica.
CINDE was created with support from USAID and received funding from the World Bank.
CINDE looked like a trustworthy private lobby backed by USAID, funded by the World Bank,
and had a commitment from the President of Costa Rica and guidance from Michael Porter from
Harvard. Keeping this in mind, Costa Rica wax included in the potential list.

After the initial screening, the team went to different countries to check the ground reality and
decide if the country was a good investment option. Before visiting these countries, I wrote
detailed letters to the relevant government officials of the shortlisted countries, informing them
of the reason for our visit and the details we would require. The key points mentioned in the
letter revolved around: technical personnel and engineers, labour unions and labour regulations,
Transportation infrastructure and costs; The availability of the electrical power supply and The
government's corporate taxation rate. These requests were forwarded from a position of strength
as the countries would benefit from the establishment of the plant and would increase the living
standard of its people. It would also increase the country's foreign investment and boost the
economy of the emerging nation.

The first country we visited was Costa Rica, a late entrant to the list. The country initially
attracted a lot of doubts from our end as it has a tiny population of only 3.5 million people, but
once we got there, we saw the nation's reality. CINDE was prepared for us, and they had done
their homework; they had answers for every question and showed signs to change for the better.
The country has a stable government and works towards the welfare of its citizens. The
confidence in the country had been boosted because of the establishment of high-tech companies
such as Motorola and DSC Communications. The flexibility of the government was seen when
they needed educated engineers. The government was willing to change the ITCR curriculum to
make better-trained graduates. The country also has better English proficiency than other
countries, which will help in training. The government also showed its flexibility when it brought
the open-air policy. Only 7% of private sector workers are part of unions, which gives very little
power to these unions, which aligns with our needs. The country has a solidarity movement
which would allow the plant to function smoothly. Their government is willing to modify its
policy for our benefit and other companies, but it will still be slightly more significant than other
countries. The government is also ready to provide incentives to us.

The second country, Brazil, has a huge population, but the government is unwilling to give us
many incentives. Sao Paulo is a great option, but the governor is keeping a tight hold on us.
There were abundant educated people in the nation, but labour unions were very powerful.
Although we can get a 50% reduction in corporate tax, the added benefits required for employees
would shoot up costs. There is the availability of electricity and infrastructure but also numerous
taxes involved, which acts as a negative. The officials were opposed to the people at CINDE,
uninterested, and there was also the problem of hijacking trucks.

Chile was the following country in line. It had good technical training programs and
infrastructure. The distance between Santiago and the US was more significant than in other
countries. There was only a 12% unionised workforce, making unskilled labour very cheap.
However, the salary of trained personnel was equal to the US. There was also a capital control
policy to limit capital movement during economic volatility, which is a concern for us.

The final country, Mexico, had always acted as a troublemaker for the US. SEPROE officials
from Mexico also spread the word about investment in Mexico and encouraged foreign
investment. They were ready to give free land to us and were prepared to subsidise training for
Intel employees. Electricity and labour costs are less in Mexico, but labour unions are negative
for us. SEPROE wished to provide relaxations to us but not alter policies for all. SEPROE
wanted us to be there and be a part of their growth.

Based on all the above observations, I would suggest Costa Rica is the most favourable country,
followed by Mexico, because of its proximity to the US and good infrastructure. Chile comes
third in the preference list as although it has increased costs; it has proper infrastructure and
training facilities. The least favourable country is Brazil which has numerous hindrances because
of unfavourable government policies.

Regards,
Ted Telford