Created by :
M.RIDO MULIA PUTRA
|INTERNATIONAL MANAGEMENT | |FACULTY OF ECONOMY | |ANDALAS UNIVERSITY | |2009 - 2010 |
Hewlett-Packard in Singapore
Background (Case Summary)
In the late 1960s, Hewlett-Packard was looking around Asia for low-cost location to produce electronic components that were to be manufactured using labor intensive processes. The company looked at several Asian locations and eventually settled on Singapore, opening its first factory there in 1970. Although Singapore did not have the lowest labor costs ini the region, costs were low relative to north America. Plus, the singapore location had several important benefits that could not be found at many other locations in Asia. The educational level of the local workforce was high. English was widely spoken. The government of singapore seemed stable and commited to economic development, and the city state had one of the better developed infrastructures in the region, including good communication and transportation networks and a rapidly developing industrial and commercial base. HP also extracted favorable terms from the singapore goverment with regard to taxes, tariffs, and subsidies.
To begin with, the plan manufactured only basic componets. The combination of low labor costs and a favorable tax regime helped to make this plant profitable early. In 1973, HP transferred the manufacture of one of its basic handheld calculators from the united states to singapore. The objective was to reduce manufacturing costs, which the singapore factory was quickly able to do. Increasingly confident in the capability of the singapore factory to handle entire products, as opposed to just componets, HP’s management transferred other products to singapore over the next few years including keyboards, solid-state displays, and integrated circuits. However, all these products were still designed, developed, and initially produced in the united states.
The plant’s status shifted in the early 1980s when HP embarked on a worldwide campaign to boost product quality and reduce costs. HP transferred the production of its HP41C handheld calculator to singapore, the managers at the singapore plant were given the goal of substantially reducing manufacturing costs. They agued that this could be achieved only if they were allowed to redesign the product so it could be manufactured at a lower overall costs. HP’s central management agreed, and 20 engineers from the singapore facility were transferred to the united states for one year to learn how to design application specific integrated circuits. They then brought this expertise back to singapore and set about...