J.M. Textiles

Abstract

James Ryan is operations manager for Latin America for a transnational corporation in the textile industry. Mr. Ryan has been asked to recommend a location for a new company plant in Central America. The two alternatives presented in the case are Guatemala and Costa Rica. At the beginning of the case, Mr. Ryan refers to a series of key criteria, including labor costs, political stability, infrastructure, labor relations, and the parent company's degree of investment diversification. In addition, the case describes the political, economic, social, and demographic characteristics of Guatemala and Costa Rica. It also compares the two countries' export incentive packages, including free trade zones and access to international markets. The case also includes information about the size and operational requirements of the new facilities the company wishes to develop. Thus, it is possible to match what each country has to offer with what the company requires. The case study provides sufficient information to evaluate the relative costs of operating in Guatemala versus Costa Rica. It also furnishes enough data to compare items that are difficult to quantify, such as public utility efficiency, business climate, political, financial, and social stability, and other relevant factors. The principal aim of the case is to develop the key elements that must be considered in making international location decisions for new manufacturing installations of transnational firms. In this case, profitability considerations must be viewed in the context of each country's available resources and degree of country risk. The case also may be used to conduct an economic analysis, comparing the employment benefits that a transnational corporation can bring to a country, and what incentives the country can offer the corporation.