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

1. Political: “issues affecting our international vendors could materially adversely affect our business and financial performance.”(Page 8.)

Intel operates in an industry, which is comprised of products involving high research and development costs, continuous product improvement and new innovations. The companies in the industry are having high economies of scale and are knowledge based. It helps both the service and manufacturing sectors in the growth process. Intel is positioned as a leading company with its ability to adapt to technological changes and its strong relations with other businesses who are major buyers of integrated circuits. The industry in which it operates is very competitive and comes with high risks as

Bombardier quickly realized that their aggressive acquisition strategy had become a much more expensive endeavor. By creating a silo environment, they created inefficiencies throughout the entire supply chain. Systems did not communicate, creating process delays, low inventory turnovers, price inconsistencies, and multiple bills of materials. They also had to hire personal to maintain multiple legacy systems.

From pioneering in memory DRAM semicon to exiting the low-margin DRAM market – Intel was primarily a Memory semicon manufacturer before it entered microprocessors in 1980s. Its added value in the memory industry in 1970s was very high because of its advances in MOS process to produce DRAM. However, with increase in competition and the advancement of Japanese conglomerates in the memory industry Intel was forced to play a chasing game to improve performance and reduce costs. In the mid-1980s, Intel’s market share in the core memory business was <1%, however it was continuing to invest in this domain. They finally exited the DRAM market, which was more of a cash burner with low-margins.

Another area that BAA also identified as a major source of risk going into the project was the Information Technology (IT) systems that would go into T5. The head of systems for BAA, Nick Gaines stressed that the IT systems represented the largest risk to the entire project ( Illet, 2006).This is further supported by the fact that T5 underwent 6 months of testing prior to it’s opening, most of which was to do with its IT systems integration including the baggage system (BBC, 2007b)

What are the strategic risks and benefits of outsourcing production of the Temecula plant to contract manufacturers in China?

The company did not perform as well as they should have been able to. There were multiple areas where problems arose, such as the technical architecture of the IT system, relying only on the 3rd party, Qdata, to monitor their IT infrastructure, keeping out of date manuals, and not maintaining their emergency procedures.

• What mistakes happen during the designing project/mobilization phases? How did these mistakes impact the first 6 weeks of the project? Why is Chen finding the situation so difficult?

Intel is in the process of expanding its business and is ready to start up an assembly and test factory in Costa Rica. Similar factories have been built in Malaysia and the Philippines and have proven to be very successful. The employees and management are excited to start

A third failure in understanding the operational environment occurred when Sears coordinated the delivery of rice from Haidho to the stricken area in Sarkhan. His lack of understanding of the Sarkhanese and communist tactics was reciprocated by his subordinates. The latter became evident when the rice bags were labeled as if coming from the communists and no USIS employee realized what it meant. In addition, there was no effort from US employees to talk or interact with locals at the destination. The confusion led the Sarkhanese to believe that the rice bags in fact were provided by the communists.

The issues that Alcan was facing were numerous to say the least. The fact that the leadership in the IT side had been vacant for more than a year was very problematic. Another large chunk of the infrastructure issue revolved around how decentralized the business groups that made up Alcan were. “Every business group was completely independent, with its own strategic IT plan, infrastructure choices based on its specific needs, and IT applications and services. Each group had its own IT organization that pursued its objectives based on the group’s needs and orientation. Groups’ needs, like their activities, were highly diversified. Over the years, this culture of autonomy had been reinforced by mergers and acquisitions” (Bernier & Dube & Roy, 2009). Another issue that was identified was that Alcan had more than one thousand information systems, and many of these systems managed information that was financial. It completely makes it difficult to comprehend how you would even attempt to be able to work with over 1,000 systems within Alcan. Another identified issue was that there was a problem with accessible skills which were insufficient, and crudely positioned to meet requirements of the information technology infrastructure. This also resulted in these needs not being evaluated, identified, or even compensated in a similar way as other various business groups. Instead the outsourced providers instead minimized the deficiencies

Which Countries are involved in this case? Describe the diplomatic relations between those countries? Are there any trade agreements, policies, sanctions, political circumstances, or diplomatic issues which would impact management’s decision to enter the market?

The company was too reliant on orders from the US Government. They need to expand its operations into other areas.

Since 1998, Intel has developed and used an e-business strategy to maintain relationships with its customers, employees and suppliers. The company's goal is to become a 100% ‘e-business enabled' corporation. In terms of the value chain concept, Intel has reaped tangible benefits in the volume of business it does on the Web, as well as created savings of time and money for both itself and its customers.

Secondly, the company's growing complexity was choking it and was a big cause of concern. Adding more bricks made products harder to assemble, forecasts harder to determine, and inventory harder to manage. The complexity had a multiplier effect that went through the entire supply chain