Corporate Responsibility and Marketing Strategies: Suppliers of Apple - Case Study Example

Apple: Corporate Responsibility and Marketing Strategies Introduction Apple, Inc is a US based multinational corporation operating under the computer hardware and the consumer electronics industries, and it is well known for its innovation capabilities. While analyzing the corporate history of Apple, it seems that the organization has been successful since Steve Jobs was appointed as the interim CEO of Apple in 1997. Jobs’ terrific product innovations and unique business ideas have assisted the company to achieve a huge group of insanely loyal Apple fans around the globe. These Apple fans defend the company in social media, and eagerly wait for Apple’s new product launches. Many of them are willing to pay even a price premium for the product. Such a strong consumer base assisted the company to be well ahead of its global market competitors like Dell and IBM. This paper will discuss Apple’s current position in ethical and social responsibilities in the light of recent serious labor violations made by the firm’s suppliers. Ethical and social responsibilities While analyzing Apple’s current position on the ethical and social responsibilities, it seems that the company is not successful in meeting these responsibilities. Although Apple is taking great efforts to be a socially responsible business, the company fails to deliver the CSR (corporate social responsibility) benefits it had offered to the society. Apples says on its website that “we insist that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes”. However recent reports suggest that the company badly failed to keep this promise. In July 2013, an investigative report published by the China Labor Watch revealed the details of labor violations made by three factories of Pegatron Group, a major supplier to Apple. In 2013, Apple significantly increased the number of orders to these factories, who in turn relied on labor violations to improve their competitive advantages. The reported identified 86 labor right violations including 36 legal violations and 50 ethical violations. “The violations fall into 15 categories: dispatch labor abuse, hiring discrimination, women’s right violations, underage labor, contract violations, insufficient worker training, excessive working hours, insufficient wages, poor working conditions, poor living conditions, difficulty in taking leave, labor health and safety concerns, ineffective grievance channels, abuse by management, and environmental pollution” (China Labor Watch). Hence, these suppliers really violated Chinese as well as International laws and standards concerning labor rights and Apple’s social responsibility code of conduct. Although Apple is aware of these labor violations, the company keeps giving orders to the Pegatron Group. The Apple’s 2013 Supplier Responsibility Progress Report provides the details of 393 inspections made by Apple, including 55 environmental audits (Earth Techling). The Report stated that the firm’s 147 facilities failed to properly store or handle chemicals, 85 sites failed to properly indicate hazardous waste storage locations, and 100 facilities did not recycle or scientifically dispose hazardous waste in adherence to local laws. This internal audit report clearly indicates that Apple’s environmental operations are not in line with its claim that “we do not tolerate environmental violations of any kind” (Earth Techling). Impact of CSR violations by suppliers The publication of ethics and social responsibility violations made by Apple’s suppliers has had negative impacts on the Apple’s reputation. The publication of those labor violations by the China Labor Watch led to a sequence of investigations and inspections into reality of the report and it was found that the Pegatron Group was actually guilty of the accusations. This investigative report gained huge media coverage, and most of the media highlighted Apple’s failure to cop up with its code of social responsibility. Apple’s major competitors such as Samsung used this opportunity to slam the organization and to gain a competitive edge over Apple. Human rights advocates and other social institutions criticized Apple for its failure to identify and respond to the labor violations made by its supplier. Evidently, this situation raised many questions about the ethical conduct of Apple because the company had a stated ethical responsibility to ensure that its suppliers always meet labor right standards. In short, the labor violations made by the Apple’s supplier caused the company to damage it corporate reputation and market stature. As Owens reports, Apple’s stock prices did not drop when human rights groups attacked labor conditions at the Chinese factory because then the investors had focused on the confirmation of Apple’s cheaper iPhone. Earlier, Apple used to respond immediately to the labor violations report stating that the company had already addressed one of the violations and would investigate the new claims. Such practices assisted the company to increase its stock prices despite the serious labor violations report at the Chinese factory. Recommendations It would not be an easy task for Apple to ensure that its suppliers adhere to wage and benefits standards going forward. In order to mange this task successfully, it is necessary for Apple to work more closely with its suppliers. It is advisable for Apple to form quality inspection teams including the members from the supplier firm to frequently inspect the working conditions at the suppliers’ workplaces. Surprise inspections would assist the organization to recognize poor working conditions (if any) and to ensure that suppliers’ labor management are in well compliance with the wage and other benefits standards going forward. It is also better for the company to arrange personal meetings with suppliers’ workers to understand whether they are exposed to forcible overtime work, unsafe working, or any other type of worksite exploitation. Similarly, it is recommendable for the organization to form an agreement with suppliers making them responsible for reimbursing their workers as well as Apple if they are found guilty of labor mistreatment. Apple may also consider strong actions like decreasing orders or even dropping the supplier if there is a proven case of labor violation by a supplier. Furthermore, Apple should try its best to make payments on time so as to enable suppliers to provide better wages and other benefits to their workers. Impact of selling price increases Apple’s customers would not 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. It is clear that competition intensity is very high in the modern market, and therefore marketers are taking vehement efforts to offer superior quality products to customers at cheaper rates. Therefore, modern consumers have a wider choice of selection and they can easily switch marketers if they (consumers) are dissatisfied with a particular marketer. Similarly, modern consumers always look for better prices and they are less likely to pay higher unless they directly get more improved services/product features to justify the price. Evidently providing better wages and benefits for suppliers’ workers relying on higher selling prices would not please Apple consumers as they do not obtain anything additionally to justify the increase in prices. Although modern consumers are concerned with the wellbeing of the low-paid factory workers, they may not be willing to improve those workers’ living standards at their own costs. Hence, if Apple increases its selling prices to meet the needs of suppliers’ workers, even insanely loyal Apple consumers would turn against the company policy and switch their demand to alternative brands. Apple’s overall marketing strategy In the view of Forbes writer Christine Moorman, Apple’s current overall marketing strategy is based on the 3-point marketing philosophy developed 35 years ago by the firm’s investor/advisor Mike Markkula. The company’s marketing strategy is mainly comprised of three elements such as empathy, focus, and impute. It is advisable for Apple to strengthen its social media presence to improve its competitive advantage in the global marketplace. Currently social networking sites like Facebook and Twitter provide companies a well exposure to wider segments of population without involving huge marketing costs. Although Apple’s Facebook page has 9.6 million fans, the company never updates its page. Similarly the organization does not have an official presence on Twitter. It is important to note that Apple’s major competitors have a strong social media presence, and they make well use of social websites to promote their brands. To illustrate, Samsung has launched a series of social media campaigns and currently the company generates a notable percent of its sales from social websites. Another recommendation for Apple is to improve its CSR contributions because modern people are highly concerned about environmental sustainability and overall community welfare. Considering the importance of CSR in the current business context, today companies even publish a sustainability report along with annual financial reports to make their CSR efforts known to public. Improved CSR practices have assisted many corporations to confront with its competitors effectively and to survive stiff market competition successfully. To illustrate, Microsoft, the Washington based software giant and the top leading industry player, was ranked first by Forbes in term of CSR operations. Smith says that this strong CSR status has played a significant role in placing the company at the top of the industry (“The Companies With the Best CSR Reputations”). Conclusion From the above discussion, it is clear that Apple is not really effective in meeting its ethical and social responsibilities as it fails to address frequent labor violations made by suppliers. Such labor violations negatively affected the firm’s corporate reputation even though the company managed to maintain its share prices. A strong social media presence and improved CSR performance can benefit the organization to improve its competencies in the global market. Works Cited China Labor Watch. “Apple’s supplier Pegatron Group violates workers’ rights”. Press Release. Web. 25 April 2014. http://www.chinalaborwatch.org/news/new-459.html Earth Techling. “Apple’s CSR Report revels serious environmental problems”. Web. 25 April 2014. http://earthtechling.com/2013/01/apples-csr-report-reveals-serious-environmental-problems/ Moorman, Christine. “Why Apple Is a Great Marketer”. Forbes, 2012. Web. 25 April 2014. http://www.forbes.com/sites/christinemoorman/2012/07/10/why-apple-is-a-great-marketer/ Owens, Jeremy C. “Biz Break: Apple stock rises after cheaper iPhone confirmed; Tesla, Facebook hit new highs”. Mercury News, 2013. Web. 25 April 2014. http://www.mercurynews.com/60-second-business-break/ci_23755069/biz-break-apple-stock-rises-after-cheaper-iphone Smith, Jacquelyn. “The Companies With the Best CSR Reputations”. Forbes, 2012. Web. 25 April 2014. http://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/ Read More