Apples Social Responsibility - Case Study Example

Apple’s Social Responsibility Apple is among the biggest technology companies in the world. The company was ranked first in the world by value. In 2014, Apple recorded the highest revenue of US$182.8 billion. The increase in revenues was a result of corporate level strategies that the company has adopted. One of the most visible strategies is that Apple outsources all its production activities to companies outside the United States. Chinese companies form the largest percentage of Apple suppliers. However, outsourcing production comes at a cost to Apple. Recently, Apple’s major suppliers, such as Foxconn have been accused of improper labor practices such as offering unsafe working conditions, low wages and child labor. As noted, Apple’s commitment to social responsibility is questionable. Over the past few years, there have been numerous suicide cases in protest of poor working conditions. Additionally, there have been cases where employees have been poisoned in the working environment (Guglielmo par. 13). The situation in its supplier’s plants has dented the company’s image in the global arena. The case of Apple is a proof that supernormal profits are attained at a high social cost. Although the suppliers are independent companies, Apple has the power to influence their actions and has been blamed for not reigning. Core Course Concepts Foxconn is the largest supplier of Apple products. The company has also been in the forefront of disputes arising from labor misdeeds. In this regard, Apple is dragged into the scene. However, it is worth noting the problems originates from Apple and hence Apple can directly or indirectly reign in the situation. The “McDonaldization” effect is live in most multinational Corporations today. The company aims to maximize its profits at the lowest possible cost. Being a company with one of the best management structure in the world, Apple seeks to lower the costs of production. Outsourcing production to Asia where raw materials and skilled labor is cheap ensures that Apple gets high-quality products at the low price. However, it is worth noting that suppliers produce at low cost so as to sell to Apple at low cost. The strategies that suppliers use is a reflection of how Apple uses its dominance to maintain low prices. The discussion above leads to the question of how Foxconn maintains the low prices. Guglielmo asserts that suppliers offer low wages to their employees to meet this end. The low wages do not reflect the labor sacrifice of each individual. Thus, employees are often exploited. Although major suits and complaints have been launched against Apple, it maintains the separation of obligations between the company and the contractors. Apple culture control mechanism stipulates that its suppliers maintain the highest quality of products. This is because Apple sells its products at premium prices, and banks on quality to stimulate demand for its products. The culture control requires a skilled workforce that maximize the efficiency and timely delivery of supplies. To get such competencies at low costs, Apple has decentralized the organizational structure; Management based in the United States whereas the production is based in other countries that have cheap factors of production. In their article, Lucas, Kang and Li assert that Apple supplier crisis has reached a point where the company has decided to assess the working conditions at Foxconn China (97). The company found that the workers condition in China were sub-optimal and that Foxconn failed in providing fair remuneration in aspects such as overtime. Although the conditions have changed recently, the changes are not sufficient since workers are still underpaid and are subjected to excess overtime hours that do not have a clear compensation policy and accommodation situation. A 2007 research showed that employees of Apple suppliers earned $50 a month (Frost and Burnett 104). The discovery uncovered massive violation perpetrated by the suppliers. A 2012 audit discovered that the Chinese workers had acute problems at that workplace with health hazards and safety risks (Lucas, Kang and Li 104). Consequently, there existed no channels of communication where employees could express their grievances. The lack of a communication channel can be partly attributed to the fact the suppliers prohibited workers from joining trade unions or speaking to the press (Zhang par. 7). The violations have dented people perception towards Apple. In 2013, the reality of employment of children was uncovered at Pegatron. A boy aged 15 years had died apparently due to poisoning from the production process. The Chinese law requires that children under the age of 16 cannot be employed. Pegatron was in violation of the labor conduct. The death of the boy exposed not only the child employment problem in Apple suppliers but also the risky working conditions in the facilities. As noted above, Apple is touted to be among companies with the best working condition and remuneration policies. However, the discoveries of the Fair Labor Association shows that Apple does not extend this policy to its overseas suppliers. The action of Apple can be attributed to the “McDonalization” process outlined above. In addition, Apple exploits the weak regulation mechanisms in Asian nations to maintain low wages in its suppliers. The FLA reports come at a time when the company recorded super-normal profits. Analysis of the Interview To get more insight into the social problem that arise from outsourcing, I interviewed Catherine Branson. She is a mid-level manager in the operations department at Apple headquarters. She has worked in Apple since she graduated from University in 2003. This means she has served in the company for 12 years. The reason for choosing to interview her is that I believe she is well informed about the operation of the company especially in production. Branson has roles in ensuring that designing and production relate well. In this regard, she has information regarding the outsourcing program. As noted, outsourcing is a project meant to reduce the costs of production. I prepared questions regarding the negative impacts of outsourcing in China and the role of Apple in influencing the suppliers. Apple’s decision to outsource production was a result of increased costs of production in the United States. Outsourcing proved to be a better idea since the company did not have to undergo costs of building and maintaining manufacturing plants overseas. Apple contracted companies such as Foxconn and Pegatron to manufacture brands such as iPhone and iPads. The contractors are independent companies and hence Apple does not have direct control over the companies. Branson explains that the “McDonalization” process is a reality in today’s business environment. Most developed countries are increasingly becoming expensive to start and run a business. The costs, including power, wages and taxes are a barrier towards business development. Thus, the manufacturers seeks to maintain their production at the lowest costs in developing nations. The motive of every business is to maximize profits. Profits are maximized by having maximum revenues at the minimum cost. Apple seeks to outsource production to China due to low costs. Giving higher wages, and better working condition would raise costs for the company. The cost increases are shared between the company and its customers. Thus, Apple customers would have to pay more for the products. This is a consequence that Apple tries to suppress ta all cost since the industry is very competitive. According to Branson, the fact that Apple does not control the companies means it has less influence on the operations. After contractual terms are agreed, the major concerns for Apple are quality, efficiency, and predictability. Although Apple has tried to influence several factors in supplier facilities, the influence has been ineffective due to labor regulation in the supplier countries. For example, China has less strict safety standards as opposed to the American standards. Thus, it becomes hard to balance the policies of the two countries. Employee remuneration is guided by company policies and the national regulations on minimum wage. In the US, for example, the minimum wage is $7.15. As such, a company in the US cannot pay less that amount. However, in many parts of China, the minimum wages is less than $1.5 per hour. Thus, the company cannot force suppliers to use its wage policy. However, the company is advocating for better remuneration packages. The company is especially concerned with the issue of overtime. The company is following up on claims of excessive overtime without clear compensation policy. Conclusion Apple suppliers are blamed for poor social responsibility scores. However, the buck rests with apple and critics say Apple has influence that it rarely uses. The respondent’s answers were in line with the literature such that she admitted that the company is more concerned with the business aspect of the relationship. As such, the social responsibility aspect is overlooked. Branson concurred with the concept that suppliers such as Foxconn have a poor social responsibility record due to violation of overtime policies, remuneration policies and also underage employment. From the interview, it is clear that the literature accurately portrays the social responsibility status of Apple and its suppliers. I learned that multinational companies are more interested in the business aspect and steer away from the social misdeeds of their contractors.AS such, the Multinationals enjoy the supernormal profits at a high social cost. Works cited Frost, Stephen, and Margaret Burnett. "Case Study: The Apple Ipod in China." Corporate Social Responsibility & Environmental Management 14.2 (2007): 103-113. Business Source Complete. Web. 30 May 2015. Guglielmo, Connie. "Apples Supplier Labor Practices In China Scrutinized After Foxconn, Pegatron Reviews." Forbes. N.p., 12 Dec. 2013. Web. 30 May 2015. Lucas, Kristen, Dongjing Kang, and Zhou Li. "Workplace Dignity in a Total Institution: Examining the Experiences of Foxconns Migrant Workforce." Journal of Business Ethics 114.1 (2013): 91-106. Business Source Complete. Web. 30 May 2015. Zhang, Chi-Chi. "Apple Manufacturing Plant Workers Complain of Long Hours, Militant Culture" CNN. N.p., 6 Feb. 2012. Web. 30 May 2015. Read More