Intel Costa Rica Case Study

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Managing Across Borders: Intel in Costa Rica
Under the tough and demanding Andrew S. Grove, Intel drove employees to higher and higher levels of motivation and performance…. Bizarrely, but quite typically, Grove instigated a much-hated system called 'the late list'. He got irritated by early morning meetings that didn't begin on time and insisted on security staff getting signatures from anybody who arrived after eight o'clock…. Yet this was the same company where open argument and confrontation, often vigorous in the extreme, were an operating principle. And it was the same company in which relatively lowly engineers, acting on their own initiative, created a magical innovation, the allconquering microprocessor. DeBono and Heller Most of the (native Costa Rican) "Ticos" are very conservative individuals who don't usually welcome "strange" or different ideas. The country's economy has grown incredibly in the past years, but the culture still retains conservative tendencies. A lot of foreigners view the Ticos as lacking initiative and as being passive. They also complain of the lack of punctuality and of quick decision-making. However, the positive aspects of the Tico identity are the friendliness and hospitality that most people transmit. Costa Ricans are extremely social. Infocostarica Intel Corporation in the late 1990’s faced the immense challenge of building an assembly and test facility in Costa Rica from the ground up within a year. The start-up would be led by a small group of ex-patriot managers, who were counting on timely operations so that Intel could meet customer demand and achieve its revenue targets. However, there were substantial concerns. Could the steepest manufacturing ramp ever demanded of an Intel assembly and test facility be achieved by a relatively young and inexperienced workforce with distinctive social norms? Could the company attract the engineering talent that it would need to sustain operations, and, if not, what should it do to compensate? Above all, should Intel rely on the corporate-wide management philosophies and operating principles which drove its success globally? Or, should it seek ways to accommodate local customs and market conditions?

Project Background
Intel Corporation aimed to be the world’s leading supplier to the Internet economy. Semiconductor manufacturing is a highly competitive global industry, where companies compete on the basis of price, quality, and product availability. Intel is a manufacturing intensive company, in which fabricated wafers manufactured primarily in the United States are sent to overseas assembly and test facilities, then shipped to customers. The Costa Rica facility would complement highly successful assembly operations in Malaysia, the Philippines, and China. The primary driver of this strategy was labor cost containment. A senior planner outlined the criteria Costa Rica satisfied in order to be selected for the project, which was expected to add over $500 million in investment to the local economy (Intel and its local suppliers): © 2005 Hult International Business School. Prepared by Robert Anthony for class discussion only. Based on library sources.

First and foremost, we look for good infrastructure: air-cargo capacity, surface transportation systems, the water and water treatment systems, the electrical power system, and stable telecommunications. That is the first tier. The second tier involves evaluating the business operating environment. What are the permitting requirements? Are they able to do "fast-track" permitting? Since our manufacturing process often changes, do they have flexible procedures that govern reconfiguration or expansion of a plant? What type of investment programs are available for the capital intensive type of production that we typically bring to our host countries. Finally, a factor that is very important to us is the capability of the local educational institutions to develop, and maintain over time, a technical...
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