Problem Statement
Over the years, Apple has diversified to include a comprehensive product portfolio, designing and selling smartphone devices, laptop and desktop computers, computer software, and consumer smart gadgets. With such an exponential growth rate, it has diversified operations into other international markets, such as China, which has had massive growth in its smartphone and device market (Podolny & Hansen, 2020). Nonetheless, despite Apple continually enjoying a larger market share in the Chinese market, it has been exposed to competition from other brands such as Samsung and Huawei.
Apple has continued to deliver value in the Chinese market since its introduction in 2010, with sales peaking in 2015 at an estimated $58.9 billion, mainly due to the popularity of its products among the middle class (Tien et al., 2019). Despite its successes, Apple does not manufacture its products in China independently but instead partners with Foxconn, also known as Hon Hai Technology Group, a Taiwanese contract electronic manufacturer and the world’s largest (Chan et al., 2022).
Such outsourcing has made the company liable to scrutiny from the United States company’s operations abroad due to a lack of control over its manufacturing standards (Xing, 2020). This is mainly attributed to China’s governance culture and structure, forcing Apple to adopt a dictatorial leadership style in its manufacturing plants to maximize its workforce. Findings from three Foxconn manufacturing plants, involving approximately 35,000 workers, reveal the company’s violations of multiple labor laws, including unpaid overtime and exceptionally long working hours (Xing, 2020). Such working conditions have imposed mental issues on some employees, leading to extreme cases such as suicidal deaths.
Literature Review
Primarily, Apple faces ethical issues in its production facilities and supply chain. Chan et al.’s (2022) research on Foxconn’s working conditions revealed many problems Apple faces in China. The researchers focused on the working needs of the workers in what they termed “Dying for an iPhone” (Chan et al., 2022, p. 3).
The research also explored China’s labor relations measures, including the roles of public sectors, workers, non-governmental, and governmental organizations. This led to their reflection on the need for civil society, the electronics industry, and national governments to collaborate to improve labor rights in the Chinese labor market and improve working conditions linked to suicides in various manufacturing plants, such as Foxconn. In this light, this research is particularly essential in highlighting the areas and efforts needed to support the well-being of Apple’s employees and those in other manufacturing plants.
Another study also showed the growing unresolved tension in the manufacturing plants. The study noted that the company has a private security force, similar to a country’s military, and strict measures are implemented (Chan, 2020). According to the researcher, living spaces and workplaces are compressed to facilitate round-the-clock and high-speed production.
Workers’ societal and cultural values are often given little thought and concern (Chan, 2020). The dormitories are assigned to one person per room, and there is no family relationship, whether married or single. There are instances where workers experience loneliness and isolation; most cases are created by the living system and the managerial staff suppressing any strong bonds that might spring among members.
Further research was also conducted, analyzing Apple’s supply chain and the role played by Foxconn in meeting these demands in China and worldwide. The study revealed that Foxconn, as the largest supplier, poses the most significant threat to the company’s reputation due to the crisis it faced regarding poor working conditions and employee mental health issues (Chen et al., 2023). Foxconn’s working culture and motto, which is “Profit maximization is the ultimate corporate principle, under which workers’ dignity and well-being are of no concern,” posed a significant legal issue with the government and the non-governmental organizations, mainly human rights activist organizations (Chen et al., 2023, p. 6). One legal point of concern was the Supplier Code of Conduct violation, which demands that every employee’s human rights must be respected and upheld at every level (Qi et al., 2020). Due to not considering these legal requirements, the company has found itself in the media spotlight.
The history of Apple shows that it took two years to sell one million iPod units. According to Chen et al. (2023), it took only 74 days to replicate the same milestone when the iPhone was introduced to the global market in 2007. On the other hand, Apple only took three days to pass the two million mark on the launch of the iPhone 4 in 2010 (Chen et al., 2023).
To meet such demands and pressure in the supply chain, the workforce managed by Foxconn worked day and night, as they were the only manufacturers and assemblers. The launch of the iPhone 4s marked the fastest phone rollout in January 2012 (Chen et al., 2023). The product was available in over 90 countries.
A similar trend was seen when the iPhone 5 was launched eight months later. Within eight months, the production line manufactured millions of units to meet Apple’s demand and supply chain needs. During the launch, over five million units were sold in two days, and Apple CEO Tim Cook announced that they were working day and night to ensure every single customer received the iPhone 5. By that time, the dream phone had become the aspiration for most middle- and upper-class citizens (Chen et al., 2023). The mounting pressure continued as Apple rolled out other brands, and it remains a standing issue as global demand continues to proliferate.
Case Elements
According to the literature review, one underlying root cause of the problems Apple faces in its supply chain in China is the pressure to meet consumer demand. This is why the firm had to contract Foxconn, which, at the start of their partnership, employed more than 400,000 young workers, with its largest manufacturing plant in Shenzhen Longhua accounting for the largest share (Chan, 2020). While some workers were mature adults, the majority of the workforce consisted of student workers. Worse still, the firm’s working schedule had a 24-hour system, comprising day and night shifts, with frequent overtime being imposed.
In this respect, an examination of Apple’s supply chain indicates a reliance on its primary supplier, Foxconn, to produce on time. Coupled with the first enhancement of its characteristics and the concentration and centralization of capital, the company has been able to outcompete rural laborers as its core workforce (Chen et al., 2023; Sindermann et al., 2021; Tengler, 2023). However, because the company relies on design, marketing, style, and technical innovation, Foxconn is an essential actor in determining the effectiveness of Apple’s supplier networks.
PESTEL Analysis
Political Factors
In Apple’s operations in China, political factors are at the center of the regulations and requirements that must be met to operate successfully. In China, the political scene is a multifaceted environment. The Chinese government provides political stability, ensuring a conducive environment for the company to operate (Li, 2021).
Political tension exists between the United States and the Republic of China, particularly with the US ban on Huawei devices. This also presented several challenges for Apple, a multinational company based in the US. If the US increases tariffs on Chinese products, China can respond by imposing heavy taxes on US products, including those from Apple.
Economic Factors
China, the world’s largest population, also enjoys a strong economy with a sizable number of middle-class citizens. Its government has focused on core infrastructure development in technology, favoring technological companies like Apple (Zhao & Zhang, 2022). China’s high GDP also tends to support Apple’s establishment and progress, as its citizens can afford its products. This has created the supply-demand pressure that Foxconn faces. Having a larger population also means that the labor force can be easily accessed, a situation that has led to its manufacturing plant underpaying its employees. China’s economy also suffered during the pandemic, which affected the production line in Foxconn facilities.
Social Factors
One is that Apple’s Foxconn facility has been struggling over the years to meet the social expectations of its employees. China has strong values, societal norms, and trends. This should be considered from both the consumer’s perspective and the employee’s perspective.
There is a need to understand consumer spending trends, demographics, and power structures of shared beliefs (Zhao & Zhang, 2022). Similarly, culture plays a crucial role in marketing, meeting the expectations of both consumers and employees. Additionally, spending behaviors and patterns are in the social class structure.
Technological Factors
China has a reputation for being a technologically advanced country. Apple can use this to its advantage, maximizing profit and staying at the edge of the competition. China has experienced rapid technological advancement and innovation, backed by a population that offers a ready market and a large pool of employees. The company can also utilize innovative social media marketing strategies to reach a wider audience and support their campaigns (Li, 2023). More focus should be put on research and development to develop products with shorter product lifecycles.
Legal Factors
Legal issues are one area in which Apple has primarily clashed with the Chinese government. There are sets of rules and regulations that must be adhered to, including compliance with labor laws regarding minimum wages, workers’ social welfare, employee protection, and consumer protection (Li, 2021). Similarly, Apple must ensure that it protects its intellectual property laws by monitoring the use of its valuable ideas and patents. This will be essential for managing leaking and counterfeit products mimicking Apple products.
Environmental Factors
The environmental conditions established by Apple meet the government’s standards. In operations, the company must consider applying and adopting materials that can be easily recycled (Zhao & Zhang, 2022). Apple has a sufficient waste management policy in place. As climatic and weather conditions have gained international attention, the company must be at the forefront in adopting renewable technologies that align with SDG requirements. The company has implemented programs to reduce its carbon footprint.
SWOT Analysis
Strengths
Several strengths can be identified in Apple’s operations in China. Apple is a global icon and has a valuable brand. Best Global Brands ranks Apple as the best manufacturer of smartphones, with millions of loyal customers. Similarly, Apple is involved in rapid innovation, using high-end technology and producing high-quality products.
The company has demonstrated the ability to expand its services to encompass various product portfolios under Tim Cook’s leadership. For example, in the 2020 financial year, Apple earned more from its services, which comprised 19% of the company’s total revenue (Li, 2023). This was second only to the revenues earned by the iPhone, which accounted for 50%.
Weaknesses
These comprise the internal factors that are obstacles to the company’s progress. In China, one of the weaknesses is presented in Apple’s manufacturing line, operated by Foxconn. Foxconn has a bad reputation and a negative brand image in China and the international market (Li, 2023). The company has had legal issues with the government of China, where it is accused of not abiding by labor laws requirements. Apple products are highly priced, while the people making them are underpaid.
Opportunities
These comprise the external factors that indicate areas where Apple can venture and capitalize on to stay relevant and maintain its competitive edge (Chen, 2023). Apple, with its facilities at Foxconn, can expand its distribution channel and reach more clients. Smart wearable devices are expected to experience a doubling of demand in the coming years. Apple can focus on these wearable devices and expand into related products.
Threats
Factors that limit Apple’s performance in China can be grouped into threats, as they reduce or limit the organization’s financial performance. One underlying threat that Apple faces in China is the intense competition in the smartphone market. Brands such as Samsung, Xiaomi, and Google are fierce competitors who are equally innovative and offer high-quality products (Chen, 2023).
Another notable threat is the rising cost of labor, which increases production costs. With Foxconn in the spotlight for underpaying its workers, Apple must ensure that its remuneration meets international standards (Chen, 2023). The emergence of the coronavirus also saw the depopulation and retrenchment of some of its workers. The company can no longer participate competitively with the reduced labor force and negative publicity.
Recommended Action Plan (Case Solution)
The best-recommended solution for addressing Apple’s ethical issues, including poor working conditions and employees’ grievances over underpayment and excessive overtime, is to implement worker-driven monitoring.
Worker-Driven Monitoring Action Plan
One recommended action plan is for Apple to adopt Worker-driven monitoring to address these challenges and meet supply-demand pressure. Worker-driven monitoring should be accompanied by a series of core elements to monitor labor conditions and the working environment effectively. These core elements and steps to implementation include objectives, inspection, governance, design of the monitoring subject, education and training, dispute resolution, complaints, and remediation (Angelini & Curphey, 2022; Outhwaite & Martin-Ortega, 2019; Dillard et al., 2023; Reinecke & Donaghey, 2021). The worker-driven monitoring has a higher chance of solving most of Foxconn’s disputes and providing a win-win situation for employees and managers.
Objectives
Traditional approaches have consistently failed to meet their objectives. The problems persist in the global supply chain, as evident in Apple’s working conditions in China. The objective of worker-driven monitoring ensures that employees are meaningfully incorporated in the entire process of monitoring, that the result leads to necessary modifications in conditions, that the monitoring process reflects the reality of the working environment, and that solutions do not further infringe the rights of these workers (Outhwaite & Martin-Ortega, 2019). By all means, the objective is not subjugated by any interest and is entirely focused on improving working conditions.
Governance
After setting the objectives, the next important element in this action plan is to modify the government structure to focus on the interests of employees. There appears to be a lack of employee relations within the company, as senior employees do not seem to side with the junior employees, who are the majority (Reinecke & Donaghey, 2021). Another layer of internal employee relations can help address grievances and seek solutions appropriately (Dillard et al., 2023). A separate body should be established to report these conflicts, ensuring that no disputes of interest arise.
Designing Monitoring Subjects
Improving supply chain conditions requires employees to be part of the initiatives’ design, as they are directly affected. The remediations should be from the worker’s perspective, not the managers’, as directed by worker-driven monitoring (Dillard et al., 2023). This stage is crucial as it will determine the progress of other steps, such as inspection, which is entirely driven by different stakeholders who, by all means, have a divergent perspective from that of the Foxconn employees. What the workers decide in this stage dictates the route the subsequent process, such as inspection, must take. At this stage, the top-down structure must be avoided, a method standard in Foxconn’s code of conduct.
Education and Training
Foxconn appears to employ educated employees, and the primary effort required is to support their training and education. Foxconn employs more interns than any other organization in China. Worker-driven monitoring depends on the empowerment of employees to be educated and well-trained to a capacity in which they can voluntarily transform their working conditions (Dillard et al., 2023). The information enables employees to raise complaints and assert their rights.
Inspection
Worker-driven monitoring necessitates ongoing evaluation of how workers are performing their tasks. During inspection, violations and non-compliances with state standards or laws are identified and brought to the attention of the relevant authorities. Rather than focusing on specific outcomes, worker-driven monitoring emphasizes repeating such instances in a continuous cycle (Angelini & Curphey, 2022). The methods of inspections and verifications should also not disadvantage the Foxconn employees. The inspection process is, therefore, left to a third-party body employed by either the government or Apple itself to report on the working conditions of the environment.
Dispute Resolution, Remediation, and Complaints
In this proposed action plan, the monitoring process must extend beyond identifying specific violations of labor standards and employees’ human rights to encourage employees to respond and report their grievances actively. At the center of these disputes, worker-driven monitoring introduces remediation, which includes employee-oriented provisions (Angelini & Curphey, 2022). This means that corrective actions or closures are implemented, and Foxconn makes reasonable efforts to offer safe employment to retrenched employees. Employees, rather than choosing to commit suicide, are provided the opportunity to say no to unsafe environments without putting their current job position at risk. Worker-driven monitoring ensures that employees are entitled to collective bargaining and reasonable compensation.
Relevance and Importance
The diffusion of industry and Globalization of supply chains to China has given rise to a heated debate on how Apple can improve its labor standards while meeting supply and demand. In the face of hazardous working conditions, including the use of teenage labor in the form of internships, low wages, and excessive working hours, which violate societal and cultural norms and ethical standards, Apple’s Foxconn continues to face problems. Apple and Foxconn are foreign multinational companies in China that have developed their own code of conduct, which appears to favor their interests over those of their employees.
This case study is essential because it identifies the underlying issues within Apple’s supply chain in China. China produces most of Apple’s phones and plays a critical role. Recognizing these challenges is a wake-up call for Apple to address them while maintaining its brand image and competitive edge over competitors such as Huawei, Samsung, Xiaomi, and Google. By addressing the challenges its employees face, the underlying root cause of the problem – meeting supply and demand pressure – is also resolved in the process.
This case study shows the importance of balanced workforce planning and supply and demand in business. All business depends on human capital to be competitive and achieve their objectives. Aligned and talented employees are crucial in ensuring that the organization’s supply and demand are met. The conditions for these employees to succeed and work must be conducive enough. Similarly, as illustrated in the case study, there must be room for their development and training. Ignoring employees’ grievances is like killing the supply chain and, eventually, the business’s brand reputation.
The proposed worker-focused monitoring plan offers measures that any company facing challenges similar to Apple’s can adopt to address employee complaints effectively. Worker-driven centers its solution on junior employees rather than senior and top management. Allowing for collective bargaining, an element in worker-driven monitoring ensures that employees are remunerated fairly in accordance with industry standards, government salary floors, and relevant benchmarks.
Proper management is vital for the success of any business. The turmoil at Apple is closely linked to the management style of Foxconn. The business world can learn from Apple’s mistakes. The dictatorial management style demonstrates that it is challenging to manage employees if working conditions, rights, and societal factors are not taken into account. Every business needs a conducive environment for it to be productive. Similarly, the social welfare of every employee is crucial to fostering strong employee-employer relationships.
Case Conclusion
The case study outlines the difficulties experienced by Apple in its production line based in China. The production line is contracted to a third-party company, Foxconn, a Taiwanese multinational electronics manufacturer. Apple’s underlying problem is the management of its employees in the manufacturing plants.
Several ethical, social, societal, and legal issues have emerged in the case. The employees complain of underpayment, excessive overtime, and poor working conditions, which lead to a deterioration in the physical and mental well-being of the workers. Apple, a multinational company focused on expanding and venturing into other continents, has been well-received in China, and most of its sales originate from there.
With pressure to meet the supply-demand, strict measures have been put on the workers, while their welfare is ignored. Identifying these challenges is a wake-up call for Apple to act on them while maintaining its brand image and competitive advantage over its competitors, such as Huawei, Samsung, Xiaomi, and Google. This is essential because every business relies on human capital to remain competitive and reach its goals. Therefore, the proposed action plan outlines measures that any company facing circumstances similar to Apple’s can take to manage employee concerns effectively.
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