Case study: Building a cluster: Electronics and Information Technology in Costa Rica

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Q1: The reason why President Figueres have concluded that it was necessary for Costa Rica to develop a new economic strategy – promote high-technology clusters Costa Rica was a Central American country and its primary economy was based on agriculture, textiles, and tourism. The reason for the new government brought a new economic development is because at that time, Costa Rica faced some threats and also they have some unique competition advantages, which as the President said :” We needed a national strategy that moved beyond cheap labor and exploiting our natural resources. We wanted to compete based on productivity, efficiency, and technology….” President Figueres also recognized that Latin American and global economy were rapidly changing, so he didn’t want to miss the right moment being part of the change. 1) Strength • Costa Rica is located in Central America; pretty close to US. • Best education system in Central America with the highest literacy rate. • English was widely spoken. • Computer and Internet users increased continuously. • Government was focused on science and technology development. • The country enjoyed a political stability with half a century of peace and democracy. 2) Weakness • A country with only 3.5 million inhabitants and a narrow domestic market. • Agriculture was Costa Rica’s primary economy in early 1990s. But the agricultural sector, compared with other domestic products in GDP structure, had gradually diminished its economic importance. 3) Opportunities • The Costa Rican economy already showed the initial signs of sophisticated electronics exports and some software companies had been formed. • Many IT companies outsourced to Southeast Asia and now these companies are searching for other potential manufacturing locations. 4) Threat • There was high inflation rate in the first half

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