1. Examine Apple’s current position on the company’s ethical and social responsibilities, and determine whether or not the company has met these responsibilities. Provide two (2) examples that support your position.
Since the time British and Chinese journalists revealed about the labor law violations at the Apple supplier factories in 2006, Apple publishes annual reports on the working and environmental conditions in its supply chain (Purnell, Dou and Wakabayashi, 2014). In the 2012 Progress Report of Apple, the company mentions about its commitment to maintain the highest standards of ethical and social responsibility throughout its supply base. It has formulated a Code of Conduct for the suppliers following which the suppliers are required to provide safe working conditions, treat workers with respect and use environmentally safe manufacturing processes during the production of Apple products. Apple's audit programs are conducted throughout its supply chain at all levels. In order to make the audit programs full-proof, Apple conducts many surprise audits every year in addition to the schedule audits by visiting the suppliers unannounced to inspect the facility and meet the employees immediately (Apple Inc., 2012).
Despite the frequents audit programs conducted by the company at the suppliers and other efforts like educating the employees about labor rights taken by the company to ensure better working conditions, in recent years, however, a number of times, Apple suppliers' violation of the Code of Conduct has come into the news. In 2012, Apple's biggest supplier Foxconn was found to be guilty of violating the labor laws by making employees work overtime and a staggering rate of suicides among the workers due to work stress. Recently in 2014, the supplier of metal casings for Apple iPads, Catcher Technology, a Taiwan based company, has also been alleged of violating the labor rights and workplace safety. It has been reported that Catcher Technology has made its employees work excessive overtime up to 100 hours a month, work on their feet more than 10 hours a day, 6 days a week, and handle toxic chemicals without appropriate protective clothing at its Suqian plant in China (Cough and Chen, 2014). Furthermore, Catcher was found guilty of polluting the environment by dumping its industrial wastes, including oils and metal scraps into a sewer, some of which end up in a river near the factory of Suqian.
Apple's own progress report shows that more than 28% cases, the suppliers do not comply with the wage and benefit standards. About 38% cases, supplier practices do not comply with the juvenile protection standards, and over 41% cases, supply practices do not conform to the ergonomic standards. About half of the 55 suppliers that went through a focused environmental audit in 2012 violated the company's standards (Nova and Shapiro, 2013). Though the 2012 annual progress report of Apple claims that if the supplier don't live up to their standards, Apple stops working with them (Apple Inc., 2012). However, in practice, it has been seen that despite Foxconn's rampant violation of labor and human right practices for the last seven years, Apple has been doing business with it without any interruption. The same picture is seen with the other suppliers of Apple alleged of violating the labor and human rights laws. The latest findings along with Apple’s not acting in accordance with its own claim shows that it has miserably failed to meet its ethical and social responsibility.
2. Determine the impact that the publication of ethics and social responsibilities violations made by Apple’s suppliers has had on Apple’s reputation. Support your response with examples of the impact in question.
The reputation of a company as an ethical business institution is instrumental for its success. The reputation damage can make the customers, stakeholders and society at large to lose trust in the core components of corporate performance of the company. There are three primary factors that lead to the reputation damage of a business. Firstly, the reputation of a company may get hit if its products and services fall short of the expectations of the customers. Secondly, poor employee conduct can mar the reputation of a company. Thirdly, social or environmental harm impacts the reputation of a company (Regester Larkin, 2011). Apple’s reputation is largely hit by the third factor, its failure to conform to its own ethical code of conduct. In a society, a business house, which is a corporate citizen, must act in accordance with certain social norms, respecting the rights of others and the environment in which it operates. It should also follow the values that it promotes within its organizations. However, Apple seems not to follow any of the values it promotes.
After the Foxconn issue of its Jabil plant came into the picture in 2011, Apple took a number of measures to protect its reputation. It started publishing the audit reports in the Apple Responsibility Report annually, making it available to the public. It tightened its audit programs by taking a number of unannounced visits to the supplier facilities in order to investigate the real picture. The audits take place at every level of its supply chain, including the assembly lines and component suppliers. In order to be more transparent about its manufacturing processes, it joined the Fair Labor Association (FLA) to make the FLA auditing team to measure the performance of its suppliers independently. However, it is believed that the FLA has generated audit reports not based on the actual conditions, but more on the basis of the wishes of the Apple top management (Sethi, 2012). In 2011, immediately after the FLA report came out about the Foxconn working conditions, a revelation made in a British News Paper by the British and Chinese journalists that nothing much has improved as regards the working conditions, whereas the audit report of the FLA suggested otherwise.
When any report as regards the violation of labor laws and human rights connected to a large organization like Apple comes into the news, initially, it creates a huge hoopla among the public and media, but as the initial interest of the public die down, the significance of the issue take a back seat, and again this issue gets buried under other emerging issues. This way, it does not impact the sales and profitability of the involved parties. Therefore, even though Apple’s reputation gets hit immediately after such issues come into the forefront, in the long run, however, such issues do not leave much impact on its business.
3. Suggest two (2) methods that Apple can utilize to ensure that its suppliers adhere to wage and benefits standards going forward. Justify your response.
Apple is the largest electronics company in the world. If it wants to enforce some ethically and socially responsible practices, then it can easily do so by adopting a few strategies. Apple first should create a minimum wage and benefits criteria for its suppliers. It created that a long time back in 2007, but till today, many suppliers violate the wage and benefits directives of Apple One in their business practices. This happens because Apple and its suppliers for having worked together for a long time have grown reliant on each other for the operation of the business. For example, Foxconn, which was the biggest supplier of Apple products, used to supply more than 90% of the raw materials and parts for the Apple’s goods (Sethi, 2012). Thereby, Apple was extremely dependent on Foxconn for its products. However, in recent years, Apple’s strategy of risk diversification has reduced its reliance on a handful of suppliers. Now that Apple has shifted to a number of suppliers for its products across many countries, in the case of the violation of wage, benefits and overtime guidelines by any supplier, Apple can sever ties with that supplier for any further business.
In many cases, workers are exploited as regards wages and benefits because of their lack of knowledge about the labor laws and human rights. In 2013, China Labor Watch, a labor rights group in China, reported that Pegatron Corp, a supplier of Apple, forced the workers to work for 66-69 hours a week on an average, whereas the legal limit for the same is only 49 hours. In fact, even the pregnant women were made to work 11 hours a day, more than the legal limit of 8 hours. Also, many workers work at a rate below the minimum wage, and sometimes, workers are forced to work overtime without pay (Huffington Post, 2013). Such things happen because most of these workers are not familiar with the labor laws, and they fear losing their jobs if they don't work accordingly. Apple has designed an array of training programs to educate workers about their fundamental rights as workers, local laws, occupational health and safety and the Supplier Code of Conduct of Apple. There are over one million workers today who have been educated already about their rights. Apart from the training programs, Apple can also introduce a process for escalating matters regarding the violation of human rights, wage and benefits so that when the workers are unduly pressured by the suppliers to work beyond the legal limit, they can report these incidents to the Apple management directly.
4. Determine whether or not you believe that Apple’s customers would be willing to pay more for its products if Apple had to increase selling prices in order to provide better wages and benefits for suppliers’ workers. Provide a rationale for your position.
Apple is known for producing niche and innovative products the selling price of which are already at the top end of the segment. Apple buyers buy Apple products knowing that the Apple products are more expensive than the competitive products in the market. Apple has a brand reputation that ensures superior quality and value of its products. Over the years, Apple has earned the reputation of being an innovator. With market beating products like iPad, iPod, MacBook, and iPhones, all launched much ahead the competitive products, Apple has been able to create a large group of loyal followers. These followers don't only buy Apple products because of innovation, but they also feel a part of the Apple brand and the company as a whole. If Apple takes some ethical and social steps to improve the working conditions of the labors by increasing the wage and benefits of the workers, then it will affect the bottom line of the company as Apple needs to pay more to its suppliers, which if Apple decides to pass on to the customers, then the overall price of the Apple products will go up. As we have seen above, even if the price of the Apple products goes up, because of its brand reputation and loyal customer base, there will be a minimal impact on its revenue. Another point to take into account here is that almost 90% of the profits made in the smartphone industry is taken away by Apple alone, which means that Apple has a higher margin, and hence, Apple can introduce the ethical and socially responsible measures without increasing the price of its end products. Its profitability will come down, but still as a company, Apple will remain more profitable than the competitors.
5. Analyze Apple’s current overall marketing strategy. Recommend two (2) actions that Apple can take in order to improve its competitive advantage in the global marketplace. Support your response with examples of instances where your recommendations yielded the desired results.
Therefore, Apple needs to take a two pronged strategy in order to continue its growth and retain the position as a market leader. First, it needs to invest heavily in the research and development areas to understand the future customer trends and their expectations, and then work on developing those products ahead of the competition. Currently, the majority of the Apple revenues is generated from only two products, iPhone and iPad. Before these lose their images as premium products in the smartphone and tablet segment, Apple should come up with newer products. iTV may be the next big thing for Apple. Apple touches individuals through its products currently, but it can become a part of its customers’ family with the successful introduction and penetration of iTV. Also, it can introduce other products like iWatch that can act as a new value addition to its iPhone line of business, and thus, extend the overall product lifecycle of iPhone. Secondly, Apple should also expand into newer markets. Currently, Apple is present across the globe, but the majority of its revenue comes from the North American market. Its heavy reliance on North America may not be good in the long run. Apple should more aggressively get into the developing markets like China and India and establish itself as a major player. Currently, Apple has less than 15% market share in China and less than 2% in India (Edwards, 2014). Both of these markets are going to be one of the largest mobile markets in the coming years. Also, the growth of the South-East Asian markets as well as Brazil, Russia and South African markets provides Apple with great market opportunities. If Apple can diversify its revenue by introducing more innovative products from different markets, then it will continue to dominate the electronics industry for many years to come.
References
Regester Larkin. (2011). The long-term value of reputation to business. Retrieved on 1st November 2014 from <http://www.regesterlarkin.com/uploads/the_longterm_value_ofreputation_to_business.pdf>
Cough, N. and Chen, B.X. (2014). Groups Accuse Apple Supplier in China of Labor Violations. The New York Times. Retrieved on 1st November 2014 from <http://www.nytimes.com/2014/09/05/business/Apple-Supplier-Is-Accused-of-Labor-Violations.html?_r=0>
Apple Inc. (2012). Apple Supplier Responsibility 2012 Progress Report. Retrieved on 1st November 2014 from <https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2012_Progress_Report.pdf>
Purnell, N., Dou, E. and Wakabayashi, D. (2014). Report Alleges Labor Violations at Apple Supplier in China. The Wall Street Journal. Retrieved on 1st November 2014 from <http://online.wsj.com/articles/report-alleges-labor-violations-at-apple-supplier-in-china-1409845953>
Nova, S. and Shapiro, I. (2013). Apple’s self-reporting on suppliers’ labor practices shows violations remain common. Economic Policy Institute. Retrieved on 1st November 2014 from <http://www.epi.org/publication/apples-reporting-suppliers-labor-practices/>
Sethi, S.P. (2012). Two Faces of Apple. Carnegie Council. Retrieved on 1st November 2014 from <http://www.carnegiecouncil.org/publications/ethics_online/0068.html>
Huffington Post (2013). Apple Supplier Accused Of Labor Abuses By China Watchdog. Retrieved on 1st November 2014 from <http://www.huffingtonpost.com/2013/07/29/apple-supplier-accused-of-labor-abuses_n_3669526.html>
Edwards, J. (2014). Ugly Data For Apple Shows How Desperately It Needs iPhone 6 To Be A Hit. Business Insider. Retrieved on 1st November 2014 from <http://www.businessinsider.com/android-ios-market-share-data-and-apples-iphone-6-2014-8>
