Monday, March 13, 2006

A billion-dollar question!

A question that has fascinated me of late is the following one. Let me provide a stylized example.

Suppose you were a CEO of an electronics company. You want to set up a manufacturing centre driven by X needs. The world is your board of choices. I am talking of precise location and not only of countries. How would you choose a particular location? What is your calculus of decision-making? What ups the stake is the billions of money that are involved.

There are so many factors that influence your decision. Let me point out a few. Infrastructure; the particular industry environment of electronics firms; regulatory and legal issues; macro-economy and finally, the political element. Most decision-making on this count is based on rigorous analysis of a few factors and subjective estimation of others. An example of the former is the industry environment and of the latter is an assessment of the political element. Do companies do a risk analysis of all these factors for their investment? If not, how should they do it?

To give you a flavour of the reasoning behind the question, read an account of Intel's site selection decision in Latin America.

I will keep you posted on the answer to this question as I find out more. If you have any thoughts or ideas, I would be glad to know.

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