Although Apple is a well-known American company, its products should be recognized as the global products, because most of their components are manufactured in the other countries. For example, approximately 90% of iPhone components are produced in China, Germany, Taiwan, Korea, Japan, etc. (Hill 33). Apple’s offshore manufacturing helped 43,000 American employees to focus on the high-skilled work such as product design and software engineering (Hill 33).
Apple’s decision to move production and assembly to China and other countries was based on several presumptions. Firstly, the labor costs are much lower in China and other developing countries than in the USA. However, for Apple it was more important that the overseas partners could work faster and the production could be increased or decreased relatively quickly. Moreover, there are many Chinese engineers who would like to work for Apple. In the USA it would be difficult to find 200,000 workers and 8,700 engineers immediately. Finally, industrial clusters in China provide access to the large number of suppliers and Apple may be sure that the production will not suffer, because there will be always sufficient labor force and subcontractors (Hill 33-34).
Apple received many advantages after outsourcing the assembly to the other countries. The costs of production can be significantly reduced (Hill 35). However, as it was written above not only the wages are lower in China, it is the production that is much faster. In the competitive market environment and the demand-driven economy it is important to be innovative not only in terms of the launched products, but also in terms of the business processes. Nevertheless, Apple should carefully assess all the risks of offshore manufacturing. The companies usually take advantage of the globalization of production if the quality of the factors of production is high (Hill 37). However, in China and other developing countries the labor force is not as skillful as in the developed countries, so special attention should be given to the control of the quality of the assembled iPhones. Another risk is the reputation damage due to the poor working conditions in the Chinese factories (Hill 34).
There are many stakeholders that have won from Apple’s decision to outsource the production. They are overseas workers, companies and governments, American and international customers, transport companies, etc. Stakeholders that lost are the American factories, the local low-skilled workers and partly the American economy, because the money flows to China instead of being invested into the capacities in the USA.
The main ethical problem associated with outsourcing is that the sub-contractors pay very little attention to the working conditions in which the factory staff has to work every day. In order to meet the deadline or increase the output, the people are required to work long hours for little wages. In order to reduce the ethical risks, Apple should control the sub-contractors better: inspect the factories, invest into the safety training of the overseas workers and of course control the wages that are paid to the workers.
The effect of Apple’s outsourcing on the American economy is hard to assess. Production in the USA would contribute to U.S. low-skilled jobs and exports. At the same time, the labor costs are a very small part of iPhone’s cost structure and equal to 3.6%. The real value lies in the design and component development that are based in the USA (Schuman). So Apple’s outsourcing has an insignificant negative effect on the US economy and the company uses fully the opportunities that the global economy provides nowadays.
Works Cited
Schuman, M. Is the iPhone bad for the American Economy? Time Magazine. 11 January
2011. Web. 19 February 2016
Hill, C. International Business: Competing in the Global Marketplace. McGraw-Hill
Education; 10 edition. 10 February 2014. Print.
