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Apple And Its Suppliers Corporate Social Responsibility

Solution Id Length Case Author Case Publisher
2017 2019 Words (8 Pages) Sun Hye Lee, Michael Mol, Kamel Mellahi Ivey Publishing : W16147
This solution includes: A Word File A Word File

On December 18, 2014, BBC released a documentary that put Apple under-fire again for allowing Pegatron, one of its main suppliers in China, to get away with labor, ethical, and legal rights violation, and the company was heavily questioned for not keeping its promises regarding its CSR responsibilities. These accusations came just a couple of years after the case of Foxconn in which the Taiwanese company, one of Apple's former main suppliers that assembled its highest-grossing product: the iPhone, was accused of unethical labor practices and unspeakable working conditions that led to employees committing suicide. Jeff Williams, the senior VP of operations at Apple and the company had to face multiple CSR challenges due to these cases and as the result of offshore outsourcing almost all of their production and assembly lines.

Following questions are answered in this case study solution:

  1. Executive Summary

  2. Major Problem(s) Identification

  3. Underlying Problem(s) Identification

  4. Case Study Analysis

  5. Potential Solutions

  6. Managerial Recommendation

  7. Conclusion

Case Study Questions Answers

2. Major Problem(s) Identification

Apple’s conflicting demands towards its global suppliers: Apple's products had the reputation of being technologically convoluted, and with the complete shift from in-house production and supply chain operations to a complete dependency on offshore producers, Apple faced both technical and legal restraints. Apple aimed to minimize operating costs and maximize their gross income by cutting the budget for their products every year. Apple’s suppliers, such as Foxconn, dealt with these demands and had difficulty in employing their budget on worker facilitation strategies while bearing budget cuts. 

The backlash brought about by outsourcing: Due to Apple’s demand for innovation, the operations had to be shifted abroad. The lack of technological capabilities and skills back home led Apple to outsource, and that received a huge backlash from the US government. Apple was accused of cutting down job opportunities back home and hence reducing a major chunk of income from flowing through the US economy. Furthermore, Apple lost control over its manufacturing standards and practices, and the lack of consistent monitoring only resulted in further corporate scandals.

Labor rights and diverse CSR objectives: Apple faced criticism on broken promises and commitments in handling the labor rights issues and had to simultaneously handle the differing objectives held by its suppliers on CSR and labor ethics. The harsh working conditions, meager pay, and employment of unethical practices by its Taiwanese suppliers were hot topics in the tech industry, as Apple's huge market share made the corporation more prominent.

3. Underlying Problem(s) Identification

Cultural, social, and geographical gaps in ethics: The conflicting cultural and social values of the various economic environments that were integrated into Apple’s operations made it difficult for the company to manage the day to day ethics and working conditions from its main location. There was an issue of transparency in its operations that it failed to overcome and company no longer held the ability to comprehend the endemics prevalent in such economies. 

Efforts made by the executives: Apple and Jeff Williams made a public statement, declaring Apple as the only company to maximize efforts in providing safe and ethical working conditions, and yet those words remained questionable as documentaries exposing Pegatron, Apple’s main supplier for iPhones, for breaching the bare minimum code of legality and safety in the working area. Apple published a code of conduct and yet regulations were continuously being violated. Jeff Williams and the company refrained from frequently addressing these issues on media, and the few statements released from Apple only highlighted Jeff’s disappointment.  

Apple’s market share and brand image: Apple had built its massive market share and acquired brand loyalty through its differentiated and innovative products. A huge portion of Apple's success was credited to its smartphones, and their sales did not get affected regardless of their CSR failures. A big market share meant more social responsibility. The suppliers that Apple opted for worked with other brands too. Apple remained in the public’s eye, however, due to its massive customer base. 

4. Case Study Analysis

There seemed to be a huge question mark regarding Apple’s efforts to be more socially responsible. One of the biggest issues that played a part in such affairs was Apple's gross margin for profits out of its products. Even though Foxconn made efforts to improve its working conditions, Apple switched to Pegatron for its iPhone production and supply chain operations, the suspected reasoning behind it being a tighter margin for Pegatron, and more profitability for Apple. Doing so only leads to the inevitable, as providing training, safer working conditions, better accommodations, and higher pay all suggest a stretch in the budget of suppliers. In the Foxconn affair, multiple employees attempted suicide as they were pressurized and overworked to the point of torture. When BBC released the 2014 documentary, it was revealed that all the employees at Pegatron were overworked, had no social life, did not avail any day off, and had their privacy invaded by the company. And so, the backlash received was inevitable. 

Another major factor was Apple's decision to outsource completely, acknowledging the fact that managing a company from miles away would bound to have major setbacks. Again, this decision was taken to maximize profit, but the brand faced a negative response from the US government. Apple did provide a backup solution and suggested higher-paid and much larger value jobs back home, such as that for research. None of that, however, contributed to Apple's management deficiencies, and the loss of control only seemed to grow year after year. Furthermore, the turnover rate increased as Apple increased the production of its smartphones. It seemed to the external mind as if the company only wanted to please its consumers and did not pay much heed to the disastrous conditions its employees faced. As much as Apple benefits from not reacting to the backlash received by critics, it knows that the general public and its consumers would at some point speak up against the hideous secrets it hid behind its big shiny doors. Going forward, Apple must make a decision about whether it wants to improve its brand image in the public eye or continue making profits at the cost of people's lives.

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