Success in the shadow of Etna

The Sicilian port city of Catania, dominated by Mount Etna, Europe's biggest active volcano, is being transformed into a Mediterranean Silicon Valley. And the 'Etna Valley', as it is already being called, is rapidly changing the old stereotype image of the island at the tip of Italy.

'Catania has become the most competitive place in Europe for high-tech investments,' argues Pasquale Pistorio, the Sicilian chairman of ST Microelectronics. This Franco-Italian group has rapidly grown to become Europe's largest and the world's number six, after Intel, Toshiba and Motorola, under Mr Pistorio's leadership.

A former Motorola senior executive, he invested in Catania because he felt from the start that the Sicilian city had all the ingredients to develop into a competitive high-tech centre. Like California's Silicon Valley, the city had a good university working closely with a leading enterprise. In turn, this provided the basis for stimulating new entrepreneurial, research and academic activities.

Although Italy's deep south is not California, incentives provided by the European Union, the Italian government and local organisations, as well as Mr Pistorio's personal commitment, helped Catania grow into a high-technology centre.

Mr Pistorio remembers when he first joined the company 20 years ago. The Catania plant was losing a lot of money. But the island also had a well-educated population and offered high-tech companies what Mr Pistorio calls 'ample brain power resources'.

When there are few jobs, young people tend to study more. Thanks partly to its high unemployment rate, the island had a large supply of intellectual labour. And Mr Pistorio encouraged studying with ST Microelectronics working with Catania University, running advanced courses in its facilities and employing many of the graduates.

Thanks to the high rate of unemployment and government and EU incentives, Mr Pistorio quickly found that brain-power cost significantly less in Sicily than elsewhere in Europe. The results have exceeded all expectations.

Background

Marcia Lee Jeans is based in New York. Its brand is well known in the United States. The jeans sell in the upper price ranges and appeal to fashion conscious people aged 15 to 40. They are distributed in major department stores throughout the country. At present, the jeans are made in the US by a number of factories on the East coast, none of which are owned by Marcia Lee Jeans. Competition in this segment of the market is strong, so the company has to keep costs as low as possible in order to remain profitable.

In the next 10 years, Marcia Lee plans to expand in Europe and Southeast Asia so that it becomes a global company. To do this, it has decided to build its own factory in an overseas country. The factory will have approximately 2,000 workers who will produce the jeans. These workers will be recruited locally. Denim, the raw material which is used to make the jeans, will be imported from several countries.

The company is considering four countries as a location for the factory. There is some information about each country on page 105. They are code named А, В, С and D.