1. Running head: Intel
Intel and International Business
Joshua R. Norris
BUS-334-SB
California Baptist University

2. Intel
Executive Summary
Headquartered in Santa Clara, California, United States of America, Intel is a
multinational corporation that specializes in semiconductor chips and microprocessors. They have
onsite operations in countries all over the world and their two leading customers overseas are
China and Taiwan. This project will discuss the seven forces that affect international business
and how Intel’s business behavior is influenced by them.
The seven international environmental forces to be covered in this report are:
sociocultural; natural resources and environmental sustainability; political; trade; legal;
international monetary system and; financial forces. Because China is a major consumer of Intel
products and because Intel has such a high volume of facilities throughout China, China will be
the country most focused on in this report. This includes the legal and political issues that Intel
most likely faced when establishing each operating site in China and those issues that they likely
continue to manage in China on a regular basis.
In terms of ethics, Intel had a major debacle in 1994, when its latest Pentium processor of
the time was found to have a major computing flaw. Intel covered up this flaw for roughly six
months before owning up to it. This was an issue not only because they attempted to hide it, but
because even after the issue was made public, they did not take appropriate actions in order to
ensure that their customers were adequately cared for and their good name maintained. Because
competing companies were destined to launch their own Pentium class processors the year
following this incident, Intel could have easily put themselves out of business and certainly
minimized their advantage over their competition.
Additional potential ethical questions will be covered regarding the concept of investing in
United States’ industrial commons and adhering to promises of job creation within Arizona, in
2

3. Intel
exchange for government grants and subsidies for the establishment of a high-tech facility in
Chandler, Arizona. In the end, Intel took appropriate actions in order to not only handle its
mistakes, but they apparently learned from them too. Intel is now revered as one of the most
ethical companies in their industry, worldwide and they require that their vendors emulate and
adhere to Intel’s code of ethics as well.
Intel and International Business
Intel was the brain child of Robert Noyce and Gordon Moore (Intel Facts, 2014).
According to Intel’s interactive timeline, the two scientists left their employment with Fairchild
Semiconductor in 1968 and began a new company under the incorporation of NM Electronics.
Noyce and Moore would later purchase the rights to the name Intel from an old company that
went by Intelco (Intel Timeline, 2014). “By 1971, they had introduced the world’s first
microprocessor.” (Intel Timeline, 2014). Intel has since become one of the largest producers of
microprocessors and they operate right here on American soil; headquartered in Santa Clara,
California. Though roughly 55% of Intel’s employees reside right here in the United States (US),
Intel had “82,500 employees worldwide (2010 data)” (Intel Facts, 2014) in 2010.
The semiconductor mogul was selected for this project because they have been around the
block when it comes to working with businesses and governments overseas. Also, they had a
major ethics quandary in 1994 that could have ruined them as a company and could have hindered
them from becoming what it is today; the leading company in processor innovation globally. One
final touch to this company that made them a perfect selection is the fact that they are currently
and have been for the past many years, labeled as one of the most ethical companies in their class.
Ethisphere ranked them one of the world’s most ethical companies (World’s Most Ethical
Companies, 2014). After all, you don’t get to remain king of the mountain without learning from
3

4. Intel
your mistakes and having a trick or two up your sleeve. Right? Let’s talk about the forces that
exist within international business; how Intel is affected by those international forces and the
ethical element(s) that Intel must consider throughout their global operations.
Seven International Environmental Forces
Throughout this course, we have learned about the seven forces that effect international
business. Those forces are: sociocultural; natural resources and environmental sustainability;
political; trade; legal; the international monetary system and; financial. Sociocultural forces are
everything from the culture of a demographic target and the culture of the base of operations for a
business. Culture has an effect on all functions of business, whether we are talking about
marketing, human resources or production; accounting and finance or preferred leadership styles.
If a company wishes to sell something to a culturally different nation than that of their existing
markets, they must learn what makes that culture uniquely different from others who use their
product(s) or service(s). If a company wishes to open up shop overseas and wishes to have it
managed efficiently, they need to station someone onsite who can relate to the nationals who
would become human assets to that facility; that way the employees are understood and
understand the direction given to them by said manager.
Natural resources and environmental sustainability are important to international business
because, well, the show must go on. This means that a strategic site of operation would need to
be one which has everything that operation needs currently and may need in the future.
Furthermore, it is important that those resources are going to be available and reliable in order to
not only begin operations, but to continue them as well. A good example in the text was choosing
a site which had the correct geographical location and a climate with the topology that would
allow for enough property to build on and access to the resources around it.
4

5. Intel
The political, legal and trade forces are perhaps one of the most important factors and to
me, form a triad of potential trouble. These three can be an international business’s best friend or
their worst nightmare. With international business, a manager must not only deal with the political
arena of its headquarters; it must too worry about political issues that arise overseas. One political
situation that I can think of might be an American company who is attempting to operate a factory
within the borders of a government which requires that the site of operations be co-owned by a
company who is national to their country. A major reason that the legal system is crucial is
because the laws that are practiced in the US are not always existent in other countries overseas
and certainly are not enforced in such cases. Though the US is well known for attempting to
practice extraterritoriality, there is nothing that it can guarantee to its multinational corporations
when US laws are broken on another nation’s soil. Lastly, the trade regulations, which are both
legally and politically driven, tend to be volatile and often unpredictable.
The trade regulations on US soil could be helpful to the exporting of goods, but the trade
regulations of the nation for which the product(s) is destined might be too strict to make it
profitable to continue to do business in trade with them. In an extreme case, the US might have
strict rules for what a company intends to export and the receiving nation might have equally
cumbersome regulations on such imports. Types of obstacles that are potentially faced by
international trade could be in the form of tariffs, which are levies or duty taxes and in the form of
nontariff barriers, such as quantitative (quotas), voluntary export restraints (VERs), and orderly
marketing arrangements. According to the text, there are also non-quantitative nontariff barriers,
which could be “classified under three major headings: (1) direct government participation in
trade, (2) customs and other administrative procedures, and (3) standards.” (Ball, et at, 2013).
5

6. Intel
The compounding barriers of exporting from one nation to another may cause a business to
change where they make a product or too whom they sell their product(s).
Perhaps most complex of the seven forces, the international monetary system is six on our
list. To help with the complexities of international monetary business, the International Monetary
Fund (IMF) provides “rules of the international monetary system “game.”” (Ball, et al, 2013). The
floating exchange rate system was recently updated by the IMF to include eight categories, such
as exchange arrangement with no separate legal tender, which is when one nation adopts the
currency of another. According to the text, coordination of seven countries (G7) and their central
banking institutions are becoming “a key factor in the foreign exchange (FX markets.” (Ball, et al,
2013). Occasionally including Russia as an eighth party (G8), their combined efforts seem to have
staved off potential global monetary disaster in 2008 and are aiding with the current financial
crisis that we are witnessing now.
The seventh international environmental force is the financial. Though closely related to
the international monetary system, the financial force is that of funding operations and investments
for overseas operations. When an international business is operating overseas, the must deal with
exchange rate forecasting in order to navigate monetary policies and fiscal policies that are in
effect from both shores (domestic and foreign). There are also currency exchange controls, taxes,
inflation and interest rates, and balance of payments that need to be considered. The balance of
payments, according to the text, is “a record of a country’s transactions with the rest of the
world.” (Ball, et al, 2013). This can tell an international business manager whether or not their
country’s currency is looking to strengthen or weaken in the eyes of the international monetary
market.
Intel and the Seven Forces
6

7. Intel
So how does Intel interact with these international environmental forces? To be honest,
their products do not seem to be as greatly affected by sociocultural matters in terms of their
products themselves; their products are basic necessity for other products, which are then geared
toward the sociocultural needs of others. Where it would affect them as a multinational
corporation is in human resources. Rick Newman of US News reported that Intel made $44
billion in 2011 and that 85 percent of it was from overseas. According to Newman, Taiwan and
China are the two major buyers of Intel processors (Newman, 2011), making sociocultural forces
a major thing for them in regards to establishing professional relations with the two oversea
nations. Intel has several onsite operations in China, making the human resources element of this
force a key factor. A visit to Intel’s website resulted in a list of the following facilities that they
have in China: Beijing, the capital of China, is home to one of Intel's labs, research centers, and
sales and marketing offices; Chengdu- This assembly testing facility, which has four factories and
two general-purpose buildings, assembles chipsets using Intel's most advanced packaging
technology; Dalian- Intel’s 300-millimeter wafer fabrication facility in the coastal Northeast China
city of Dalian is Intel’s first wafer fab in China; Shanghai- Intel's three major facilities in Shanghai
include manufacturing, labs, software development, and sales and marketing AND; Shenzhen-
Intel’s sales and marketing office in the Shenzhen Special Economic Zone provides world-class
support (Intel in China Locations, 2014). Intel’s decision to occupy these locations in China was a
good decision. Those areas are integral to China and are well known for having the human capital
that Intel would need for its high-tech, sophisticated products.
Because Intel has such a prominent presence on Chinese soil and because they sell so
much product to them, the political and legal forces of international business are also strong. One
thing that Intel would have needed to do before considering opening their first onsite operation in
7

8. Intel
China, is find proper legal counsel. This is because, according to Dan Harris of Harris & Moure,
PLLC, China requires there to be a resident company of China to go into the operations as a joint
venture (Harris, 2010). Without proper legal insight and an ironclad legal contract, Intel could
very well have invested in a muliti-million dollar operation in China and end up not having control
over a single task within that operation. Also, Intel would need to know how much of their trade
secrets would be protected under the Chinese legal system. There is little detail available as to the
legal support that Intel has in China, or the political influence, but it seems that things must being
going well enough to decide to open up multiple facilities.
Having onsite operations in China probably cuts down on the trade issues for Intel that
other international businesses have because they produce the majority of their products to be sold
there in the same country, China. Since China is one of the two leading consumers of Intel
products, it makes sense to have a presence there. The area that this might become an issue for
Intel is whether or not they need to import materials to China that are not readily available there
already. In which case, they would need to be well versed in the trade import regulations for
China as well as the export regulations of the origin nation from whence they came. According to
the US-China Business Council (USCBC), the exchange rate from US to China is leveling out a
bit from previous years, but the renminbi (China’s currency) is valued at a lower rate than the US
dollar (US-China Trade Agenda, 2013). What that means for Intel is that production is
significantly cheaper for them to produce there. Also, the USCBC indicated in their report that
China is growing as a domestic market for companies, like Intel, who have onsite operations with
the intention of selling to them locally. By keeping local operations, Intel is subject to any
financial forces that China imposes on local businesses, but because China is known for unfair
8

9. Intel
import regulatory tactics anyway, Intel is most likely better off with any taxations, inflation and
interest rates that they might see there.
Intel’s Ethical Debacle
In 1994, Intel experienced an ethical situation which brewed into a major public relations
nightmare for them. According to David Kirkpatrick of Fortune magazine, Intel’s Pentium
processor, had a flaw that, “in rare cases” (Kirkpatrick, 1994), caused mathematical errors.
Though Intel’s stance at the time was that only complex math problems of scientists could result
in such problems, Kirkpatrick pointed out that “the errors might conceivably affect business
people designing currency trades, insurance contracts, and even bridges.” (Kirkpatrick, 1994). In
his article, Kirkpatrick established that the public view of Intel’s handling of this debacle was less
than adequate. Though the Chief Executive Officer (CEO) of Intel, Andy Grove, eventually
established that Intel would replace the defective chips with properly reworked ones, Kirkpatrick
reported “That was too little too late, according to the loquacious denizens of the Internet.”
(Kirkpatrick, 1994).
Intel failed to act ethically when faced with two problems during this event: 1) they knew
about the flaw in their product for roughly six months before they were forced to face it when a
third party discovered it AND; 2) they did not take appropriate actions in order to amend to
problem that their flawed product had or could have caused their customers. According to an
article from North Carolina State University (NCSU), Intel knew about the bug problem six
months before the public found out about it, and they did nothing (Pentium FP Bugs, 2014). The
NCSU article had the following to add in regards to ethics:
“The company violated many of the code of ethics that engineers from all
branches adhere to. First and foremost any product offered to the public comes
9

10. Intel
with a guarantee to be free from design error. If such an error becomes apparent
by its users, the company that issued the product must take the proper steps to
insure the problem is fixed. Intel let the bottom line come between the company
and its ethics. Intel made a grave decision in part do to a lack of ethics by the
decision makers as well as the workers that discoverd the bug. It is not enough to
fix the problem on all new models. The company should have had leadership that
was bright enough to realize the ethical issues and make the right decisions.”
(Pentium FP Bugs, 2014).
Perhaps most important in this situation that Intel would later regret, was the fact that
competing businesses were beginning to launch Pentium class processors into the market that very
next year. According to Dan Ness regarding Intel’s competition, as quoted by Kirkpatrick, “Now
when any of these guys call PC makers it should be a lot easier to get a return phone call.”
(Kirkpatrick, 1994). Though Intel seems to be running well ahead of the pack these days, they
might have given a lot of room for competitive businesses to catch up and this kind of blunder
could have ruined the company at such a delicate time of operation. When a customer no longer
has faith in a product and its creator, they start looking for something better and more dependable
and it seems that after this dilemma, Intel picked up on that real quick.
Another ethical issue that faces Intel these days is whether or not they are responsible for
maintaining operations in the US; more specifically, its operations in Arizona. According to an
article in PC magazine, Intel recently completed a new high-tech facility in Chandler, Arizona,
only to decide not to use it at all (Poeter, 2014). “The chip giant received $3.3 million in state tax
credits from Arizona for creating about 1,000 new permanent jobs with Fab 42” said Poeter’s
article (Poeter, 2014). But instead, Intel made the decision to maintain its operations in their
10

11. Intel
existing Arizona facilities “as a simple matter of finding a more efficient means of getting to
14nm production at existing facilities.” (Poeter, 2014). This could have been a major ethical
problem for Intel, had Arizona officials felt that Intel reneged on their deal to provide more jobs.
Luckily, “Intel has in fact kept its end of that deal, adding more than 1,000 new workers to its
payroll in the state—they just work at other Intel manufacturing facilities in the area, according to
Mulloy.” (Poeter, 2014).
Now that Intel has this high-tech facility on US soil, it is likely that they will make use of it
for future advancements in their industry, which too aids in a quest for establishing industrial
commons for innovation in the US. According to the authors of Producing Prosperity “Businesses
need to recognize that manufacturing is not the disposable commodity they thought; rather, it is a
capability that brings competitive advantage. They should be investing in the local commons
because it is in their best interests to do so.” (Pisano & Shih, 2012). It will be interesting to see
what kind of industrial commons may begin to seed itself in Chandler, Arizona, when vendors
necessary for Intel’s upcoming innovations begin to set up shop next door. After reading Pisano
and Shih’s position on industrial commons and innovation in a field such as Intel’s, it is safe to say
that this facility was a step in the right direction for Intel.
Putting It All Together
Intel has a major global operation going on and they have the infrastructure in place to
maintain their thrown as king of the mountain. Their decision to be one of the most ethically
managed businesses is bold and refreshing. Just reading about their mission statement and position
on ethical operation will draw other business’s to do business with them and will create trust
between their consumers and the products that have Intel’s name on the packaging. Though some
businesses might see savings in cutting corners, Intel will have a better profit in the long run when
11

12. Intel
they are sitting atop a foundation of trust and loyalty. As far as their operations overseas, they
seem to have a good handle on location strategies for their onsite installations and their targets for
importing and exporting instead.
12

13. Intel
References
Ball, D. A., Geringer, J. M., McNett, J. M., & Minor, M. S. (2013). International business: the
challenge of global competition (13th ed.). New York: McGraw-Hill/Irwin.
Intel Timeline: A History of Innovation. (n.d.). Intel. Retrieved April 20, 2014, from
http://www.intel.com/content/www/us/en/history/historic-timeline.html
Kirkpatrick, D. (1994). Intel's Tainted Tylenol?. Fortune, 130(13), 23-24.
Pisano, G. P., & Shih, W. C. (2012). Producing prosperity: why America needs a manufacturing
renaissance. Boston, Mass.: Harvard Business Press.
World’s Most Ethical Companies – Honorees. (n.d.). Ethisphere. Retrieved April 21, 2014, from
http://ethisphere.com/worlds-most-ethical/wme-honorees/
Pentium FP Bugs. (n.d.). Pentium FP Bugs. Retrieved April 21, 2014, from
http://ethics.csc.ncsu.edu/risks/reliability/pentium/study.php
Harris, D. (2010, November 2). China Legal Issues For Business. The Ten Minute Version..
China Law Blog. Retrieved April 25, 2014, from
http://www.chinalawblog.com/2010/11/china_legal_issues_for_business_the_ten_
Newman, R. (2011, June 30). Why U.S. Companies Aren't So American Anymore - US News.
US News RSS. Retrieved April 21, 2014, from
http://money.usnews.com/money/blogs/flowchart/2011/06/30/why-us-companies-arent-
so-american-anymore
13

14. Intel
US-China Trade Agenda. (2013, May 30). Home. Retrieved April 25, 2014, from
https://www.uschina.org/reports/trade-agenda-may-30-2013#US%20Companies%20in
%20China:%20In%20it%20to%20Win...Market%20Share
Poeter, D. (2014, January 15). Intel Scraps Plans to Open Cutting-Edge Arizona Chip Plant.
PCMAG. Retrieved April 20, 2014, from
http://www.pcmag.com/article2/0,2817,2429600,00.asp
Intel Facts. (n.d.). Intel. Retrieved April 20, 2014, from
http://www.intel.com/content/www/us/en/company-overview/company-facts.html
Intel in China Locations. (n.d.). Intel. Retrieved April 25, 2014, from
http://www.intel.com/content/www/us/en/jobs/locations/china/sites.html
14