Business decisions could sometimes be controversial. Some of them could even lead to global scandals, and huge losses if the choice was universally disapproved. A few months ago, in December 2017, the results of a test by John Poole from Primitive Labs had shown that due to battery wear-out, Apple software blocked the overly powerful processor slowing down the gadget to save it from shutdowns and fast charge depletion (Poole, 2017). These data sparked a huge scandal with many major newspapers reporting that Apple has admitted this fact and is working on a new software version that will let users decide on slowing their phones down (Kelly, 2018). To my mind, the decision of Apple to slow down its customer’s devices without their knowledge and consent is a vivid example of a bad business decision.
A definition of ‘good’ in this particular situation will be the absence of losses for the company both reputational and financial. Since almost every company pursues profit by selling goods and services, it is interested in the absence of situations that incorporate losses.
(1, Premise) First of all, by opting to curb the performance of the processors on iPhone models Apple violated the provisions of both the U.S. contract law by concealing the information about possible flaws in battery life and their actions that the company took to amend that. The U.S. contract law identifies such fact as ‘fraudulent concealment.’ Such an act is defined as deliberate non-telling of material facts that the other party could not possibly be aware of and that have caused damage to this party (Fraudulent Concealment, n.d.).
In this case, Apple knew that batteries in its devices are to some extent incompatible with excessively powerful processors and that after a certain time the device could start performing poorly. It has concealed such information presumably in order not to lose its customers and stay competitive on the market as the producers of the most powerful devices. Since it could be potentially detrimental to the user’s experience with the device one might classify it as damage resulting from fraudulent concealment. In a similar well-known old case, Vokes vs. Arthur Murray, Inc. (1968) Murray sold dancing lessons that were unusable. The court ruled that such commercial activity and advertising of the product were fraudulent. (1, Conclusion) According to past and present legal practices, such business decisions are considered improper practices. In addition, CNN reports multiple lawsuits filed against Apple that accuse the company of ‘breach of implied contract’ and ‘unfair business practices,’ which once more proves the fact that such behavior is considered unlawful. (Toh, Geier, & Kottasová, 2018, par. 7).
(2, Premise) Another argument against such actions of Apple company is that it resulted in Apple losing or having lost considerable sums of money. Such issues as the concealment of facts often divert customers from buying the company’s products. Additionally, it loses money over lost legal cases. Even if it wins some of them, it creates unwanted costs that are associated with case management. For instance, a similar situation occurred with Volkswagen corporation that concealed the fact of their cars emitting more carbon dioxide than it was officially announced. According to Jung (2017), Volkswagen suffered $3.9 billion of losses quarterly over this scandal. According to universally acknowledged business philosophy gaining profit for its owners and stakeholders always was, is, and always will be a top priority to which all other tasks in the company are aligned. In respect to the current situation, this decision was bad because the company will much likely lose assets due to the damage the scandal caused to the reputation. This situation will likely result in client ‘exodus’ and violation of brand loyalty which is millions of foregone profit. Financial losses will also follow if the fact of fraud will be proved in court. According to French laws, companies that are found exposed to such activities can be fined up to 5% of their annual profits (Maitre‐Ekern & Dalhammar, 2016). (2, Conclusion) Judging from the fact that Apple has acknowledged its guilt and is already working on measures to amend the situation, the company understands that this decision was incorrect. Financial and reputational losses that are soon to follow will prove this once more.
(3, Premise) A decision to withhold information about this design flaw was also wrong because it hurt the company’s reputation and may set its marketing strategy at an imbalance. Apple often presents itself as a producer of one of the most powerful technological solutions for smartphones (Inclusion & Diversity, n.d.). Now that it has become a universal fact that such power is only temporary, and the company acknowledged it publicly, brand loyalty might suffer as a result of such a lie. The battery problem that Apple decided not to disclose has now become a liability. If this scandal never happened, the company may have worked out a technical solution peacefully and presented it during its annual presentation. (3, Conclusion) Scandal will likely cause Apple to rethink its marketing strategy and refrain from mentioning the power advantage their devices have because it may remind the people of the incident.
On the other hand, Apple’s decision may have been a good one because it was motivated by care for its customers. In a previous year, Apple reported that it had found a system flaw that caused a phone to restart (Kelly, 2018). The issue was fixed by a prompt iOS update, and for a year before a scandal, users seemed satisfied judging by the growing profits announced by the company in its press release in November 2017 (Apple reports fourth-quarter results, 2017).
However, this does not prove that it was the customer care that the company was after. According to Agrawal, Kavadias, and Toktay (2015), many companies secretly employ a strategy called ‘planned obsolescence, which includes making seemingly durable goods such as kitchenware, household electronics, cars, and so on from materials that will most certainly break after a period of time forcing users to buy them more frequently. Apple’s secrecy about its battery flaw and processor deceleration might as well be a part of this strategy. When a user’s iPhone starts performing poorly, they buy a new, faster model that emerges each year.
All things considered, Apple’s decision to secretly curb the performance of iPhones through software was incorrect because it will likely incur financial and reputational losses. Multiple lawsuits filed against the company and the ongoing scandal in the media are the precursor to that. Despite the assumption that Apple was acting in the best interests of its customers, the most likely reason is the participation in planned obsolescence. To build my arguments I used both deductive and inductive approaches. The deduction was demonstrated in using the assumption that almost all companies want to make a profit. Therefore, Apple being a company has the same goals. Induction is seen in arguing about the possibility of financial losses of Apple derived from an example of a similar situation that befell Volkswagen.
References
Agrawal, V. V., Kavadias, S., & Toktay, L. B. (2015). The limits of planned obsolescence for conspicuous durable goods. Manufacturing & Service Operations Management, 18(2), 216-226.
Apple reports fourth quarter results. (2017). Web.
Fraudulent concealment. (n.d.). Web.
Inclusion & diversity. (n.d.). Web.
Jung, J. C. (2017). Case Study: Volkswagen’s Diesel Emissions Scandal. Thunderbird International Business Review, 59(1), 127-137.
Kelly, H. (2018). Apple apologizes for slowing iPhone, drops battery prices. CNNMoney. Web.
Maitre‐Ekern, E., & Dalhammar, C. (2016). Regulating planned obsolescence: A review of legal approaches to increase product durability and reparability in Europe. Review of European, Comparative & International Environmental Law, 25(3), 378-394.
Poole, J. (2017). IPhone performance and battery age. Web.
Toh, M, Geier, B., Kottasová, I. (2018). Global backlash spreads over Apple slowing down iPhones. CNNMoney. Web.
Vokes v. Arthur Murray, Inc., (1968) 212 So. 2d 906.