Question:
Revisit the short case on how locations in developing nations are challenging the dominance of more traditional Western locations for high-tech research and manufacturing, most notably Silicon Valley (page 160).
The two examples in the short case are Bangalore in India and Shanghai in China. The short case concentrates on the advantages of locations like this. However, it does not consider the disadvantages and risks of locating in developing countries. Make a list of all the factors you would recommend a multi-national corporation to take into account in assessing the disadvantages and risks of locating in developing countries. Use this list to compare Bangalore and China for a multi-national computer corporation,
(a) Siting its research and development facility;
(b) Siting a new manufacturing facility.
Transcribed Image Text:
Short case Developing nations challenge Silicon Valley
Similar companies with similar needs often cluster together
in the same location. For example, knitted garment
manufacturers dominate parts of Northern Italy. Perhaps
the most famous location cluster is in the area south of
San Francisco, know as Silicon Valley, acknowledged as
the most important intellectual and commercial hub of
high-tech business. Yet Silicon Valley is being challenged
by up-and-coming locations, especially in developing
countries. Here are two examples.
Bangalore in India has for many years been attractive
in the computer industry. Back in the 1980s the area
attracted software code-writing business from Western
multi-nationals drawn by the ready availability of well-
educated, low-cost English-speaking software
technicians. Now the area has attracted even more, and
even more sophisticated, business. Companies such as
Intel, Sun Microsystems, Texas Instruments and Cisco
have a presence in the area and are using their Bangalore
development centres to tackle cutting-edge projects. The
biggest draw is still India's pool of high-quality, low-cost
software engineers. Each year Bangalore alone graduates
25,000 computer science engineers, almost the number
who graduate in the entire USA. More significantly, the
average wage of a top-class graduate software engineer
is a fraction of that in the USA. Nor is there any lack of
multi-national experience. For years Western (especially
US) high-tech companies have employed senior Indian-
born engineers. Equipped with Silicon Valley experience,
some of these engineers are happy to return home to
manage development teams.
The high-tech research and development activities
around Shanghai in China do not have the pedigree of
those in India, but are increasingly seen as significant in
the global technology industry. Over the next ten years,
China will become a ferociously formidable competitor for
companies that run the entire length of the technology
food chain,' according to Michael J. Moritz, a Californian
venture-capital firm specializing in high-tech businesses.
And although most industry commentators admit that
China has far to go, the combination of the availability of a
highly skilled and well-educated workforce, often at even
lower cost than India, together with the Chinese
government's encouragement of joint ventures with multi-
nationals, is seen as a big impetus to high-tech growth.
Multi-nationals such as Alkatel, the French telecom giant,
and Matsushita, Japan's largest consumer electronics
company, as well as chip manufacturer Intel are all
investing in research and development facilities.
Questions
1 Do you think that the factors which attract high-tech
companies to these developing nation locations are
going to be as important in ten years' time?
2 What advantage do Silicon Valley locations still have
over their challengers in developing nations?
Source: Getty Images/AFP