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Week 7 Apple Case Study Final
Week 7 Apple Case Study Final
Week 7 – Case Study: Apple and Its Suppliers’ Corporate Social Responsibility
Champlain College
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 2
Introduction:
Corporate social responsibility (CSR) is a relatively new idea within the realm of
business and economics. Throughout history, there has been a steady progression of human
ingenuity that has continuously spurred technological advancement that has improved the lives
of humans. The speed of economic and business advancement was slow but steady in ancient
times; fast-forwarding to the age of the industrial revolution (starting in the 1750’s), the world
began to evolve at an accelerate rate. Up until that time, manufacturing was mostly the same
throughout the world, but the rate of technological advancement and geopolitical pressures from
the 1750’s until present times has spurred a drastic dichotomy in the manufacturing sector. A
stunning example of the diversity of manufacturing environments around the world can be found
Up until relatively recent history (1900’s – present), CSR was not a topic that was readily
addressed or even important to an organization. In the increasingly connect world of present day
however, it is becoming more important for a corporation to uphold the morals and ethics found
By analyzing the supply chain of Apple and the human rights violations that members of
its supply chain have committed, one can gain an appreciation for how important it is for a
company to address social responsibility. This paper intends to focus on the human rights
violations of two of Apple’s key suppliers, Foxconn and Pegatron and to answer questions
relating to why the violations occurred, who is responsible, if Apple can affect change, whose
ethics should be followed and if manufacturing should be returned to the United States.
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 3
If there were only one reason why Foxconn and Pegatron had issues with human rights
violations, the problem would be an easy fix; the problem would be known and a straightforward
solution could be implemented, but the situation is more nuanced than that. The Foxconn and
Pegatron human right failures were the result of multiple issues, some of the most important
The first and arguably most blatant issue was how Foxconn and Pegatron seemed to
effectively turn a blind eye to the events that were occurring at their facilities; whether this was
willful or otherwise is a matter of debate. It is possible that the upper management at Foxconn
and Pegatron didn’t know that they were violating labor laws at their production facilities in
China and Taiwan, however it is hard to imagine that such crimes could go unseen. The
environment at these facilities appears to be supported by the company at large as their modus
operandi, however their methods don’t compliment the ethical and moral standing of the masses
at the end of Apple’s supply chain. It is this clash in how social responsibility is perceived that
brought attention to the events at these facilities. The cause of the oversight by management at
Foxconn and Pegatron is most likely partially driven by profit (Luk, 2018).
As noted in Glenn Luk in an article published on Forbes.com, the cost of an iPhone to the
consumer would increase exponentially if it were manufactured in the United States. Luk
postulates that the MRSP (manufactures suggested retail price) of an iPhone would increase from
nearly $750.00 per unit to over $30,000.00 per unit. This isn’t entirely an increase due to labor
costs, but more a result of the US manufacturing industry not being capable of keeping up with
demand. Foxconn and Pegatron profit greatly by their relationship with Apple and are happy
with their positions within the supply chain. The more product that these facilities can produce,
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 4
the higher the revenue; thus, a continuous push for productivity is created which left unchecked
Additionally, carelessness could have played a part in the evolution of these issues.
Foxconn and Pegatron both provided housing to employees as a means of recruiting vast
amounts of laborers. The number of people housed was staggering with some sources citing
Foxconn and Pegatron of housing up to 300,000 people at any given time (McCarty, 2011).
What Foxconn and Pegatron were and still are attempting to do is not easy, they are basically
running and housing small cities. This doesn’t, however, negate the fact that they need to keep
basic living conditions acceptable to ensure everyone is safe and treated humanely.
In March of 2018, the average starting salary for a manufacturing worker at Foxconn was
$300.00 per month with the possibility to earn up to $676.00 per month (ABC News, 2012).
These wages, though not exceptionally high, are very desirable among the burgeoning Chinese
working class as they are readily available and above minimum wage. Workers travel from over
50 miles away for the opportunity to work at Foxconn; there is no shortage of potential
employees (ABC News, 2012). This in and of itself is an issue that helps propagate the
conditions at Foxconn. The jobs are so desirable in fact, that even when employees were killing
themselves in the dormitories at Foxconn, ABC News reported that mobs of people still wanted
to get a job at the facility (ABC News, 2012). With plenty of people to fill their needs, Foxconn
and Pegatron did not need to worry about the satisfaction of their workers. If someone left, they
had plenty of willing people to fill the void. This led them to be careless in their practices.
Ultimately, Apple valued profits over people. In 2014, Apple had a net income of over
$39 billion (Lee, Mol, & Mellahi, 2016, p.2) and a gross margin of 38.6%. Acknowledging this,
Apple insisted that Pegatron could only obtain a margin of .8% (Lee, Mol, & Mellahi, 2016, p.5).
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 5
Yes, Pegatron does have the responsibility to make sure that they can operate within the law and
make a profit, but that is razor thin margin. Such a restriction on earnings is a strongarm tactic
used by Apple to control costs of manufacturing and doesn’t leave much room for Pegatron to
operate, make a profit, and not have provide high quality devices. This tactic results in a
The final, and probably most telling issue was the result of corporate greed and ego.
Steve Jobs rebuilt Apple in his image and wanted to show the world he was right and that Apple
was the biggest and best company around (McCarty, 2011). While this resulted in the
development of world changing products, it also meant they needed to reduce costs as much as
they could. Prior to Steve Jobs return to Apple (Steve Jobs retired from Apple at the age of 30 in
1985, but returned to the company in 1996), Apple still made products in the US. That
manufacturing process didn’t take long to change after his return (McCarty, 2011). Steve created
an initiative to move production overseas, which reduced costs and created higher profits and
higher praise. Consequently, this fed into the ego of Apple that they were right and could do no
wrong. With this mindset, they were nowhere near as diligent as they should have been with
(2) Who was responsible for the alleged human rights violations?
In this case, all parties involved were responsible for the human rights violations, no side
was immune. This even includes the consumer to some extent. First off, Foxconn and Pegatron
were responsible because they were the closest to the situation and should have done more. They
knew what they were doing to their employees was illegal, immoral and unethical.
Unfortunately, it took the deaths of multiple employees to bring the conditions to light (McCarty,
The Chinese government was also responsible - they created the laws that neither
Foxconn nor Pegatron were following and did nothing to enforce them. It is up to the
governments to make sure their rules are being enforced and that their populous is protected.
The Chinese government should have done more to uphold basic human rights.
Another responsible party was obviously Apple. It is within Apple’s best interest to
ensure that the employees at companies within their supply chain are not being abused. Kara
Maciel of Conn Maciel Carey LLP said “[l]abor is the backbone of any supply chain operator”
(Lopez, 2017). Without the labor force, Apple could not make the products they are designing
and marketing. It is a vital piece of their supply chain; even if they do not care about the
wellbeing of the individuals, they at the very least do not want labor stoppages to affect
production. By ensuring the protection and rights of every individual that constitutes their
degree. It is very difficult for the individual consumer to know exactly what is happening in the
supply chain of their favorite brands, but the priorities of the of the consumer directly impact the
priorities of the company. If the consumer makes social responsibility a priority then the
company will most likely also make it a priority. The best way to get the company’s attention is
those survey said that they were “blindly loyal” to Apple and 78% said that they couldn’t
imagine using a different smartphone (Lee, Mol, & Mellahi, 2016, p.2). These statistics are a
grim detail that highlight the consumer market mentality. It appears that a large amount of Apple
At the end of the day, everyone in the supply chain is responsible, some more than
others. It needs to be a priority of each part of the supply chain link to ensure that human right
violations do not occur on their watch. The questions must be asked however, how does one
affect change in a company that has a different culture, different law, and a different purpose for
(3) What can and should Apple do differently to correct the CSR issues addressed in the
case? Should Apple bring production back to the U.S.?
As Apple continues to grow and develop in the technology sector, their Corporate Social
Responsibility efforts and claims remain scrutinized. There’s no question that Apple is a
technological wonder. In addition to its quick turnaround, design, innovative features, and media
content, the products the firm produces makes Apple almost impossible to resist. What isn’t hard
to resist is asking: How can the most successful company in the world be misplaced in achieving
Apple relies on a heavily global supply chain that ties together a research and
development base in the United States. Due to the firms just-in-time supply chain, we notice that
much of the burden of producing its technology falls heavily on the shoulders of suppliers,
causing component delays, impacts on inventory projections, and supplier code of conduct
mistreatment.
Apple claims they are “committed to ensuring the highest standards of social
responsibility wherever our products are made. We insist that our suppliers provide safe working
conditions, treat workers with dignity and respect, and use environmentally responsible
shows an increased focus in halting unethical practices amongst their suppliers. CEO Tim Cook,
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 8
although a visionary, has focused much of him efforts on discouraging the use of underage labor,
dangerous working conditions, falsification of audit materials, and bribery within over 20
facilities.
Apple defends these practices by saying it can only facilitate so much control over
monitoring and regulating its component sources. Just this year, Apple has reported an “increase
in the number of serious violations of working conditions amongst facilities where its products
are manufactured, but mentions that the overall conditions have improved. (Reisinger, 2018)”
In relation to the supply chain, the challenges that Apple faces are immense. The lack of
oversight and good governance has made it difficult to control thousands of suppliers, producing
a high risk for Apple in terms of non-compliance and abusive labor practices. In order to improve
these standards, Apple must integrate Corporate Social Responsibility into its strategy. There is a
human cost to outsourcing to countries with less traditional labor laws, all of which “leave an
ugly stain on the corporate social responsibility credentials of the companies that use their
In order to provide the best experience for their consumers and suppliers, Apple must
take a multi-pronged approach to identifying and ratifying the issues that plague its supply chain.
What follows is a list of four points that highlights issues with Apples’ supply chain.
continuously failed to engage stakeholders. At first, we noticed this when the firm failed
Apple’s North Carolina data center. This continued when Apple failed to initially
response to several Chinese environmental groups that were investigating the pollution
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 9
issues that were created by Apple’s supply chain in China. If Apple wants to continue to
establish itself as an organization with purpose and social justice, it must successfully
incorporate its stakeholders into its strategy and allow for communication and
2. Low Levels of Transparency: Although the firm provides more information than many
of its competitors, this lack of transparency is still very far from satisfactory. For the
majority of the corporation’s life it failed to provide its consumers and stakeholders with
a sustainability report and even chose not to disclose the name of its suppliers or allow
3. Auditing: Out of the 757 suppliers included in last year’s Supplier Responsibility
Progress Report, 197 were being audited for the first time. Apple found nearly twice as
many core violations in 2017 as they did in the previous year. Three of these violations
were debt-bonded labor violations which proved that disparity in the workforce still
exists. Continuing to audit the ethical sourcing of its products and supplies along the
supply chain, allows Apple to take a proactive approach to mitigating these violations.
These violations should be thoroughly reviewed to identify root causes and help
systematically correct them. The suppliers should be required to “undergo regular audits
to ensure the reviewed policy is implemented to prevent future violations. In addition, the
supplier must revise all records to reflect an accurate accounting of hours worked by their
4. Ensuring Integrity in the Supply Chain: There is still much evidence that suggests that
the intensity of Apple’s production regimes are being forced to meet demanding product
management systems to improve the standards of their suppliers’ factories. Why can’t the
organization resolve these issues once and for all? Apple is forcefully “held hostage by
the capital markets to control costs and feels compelled to disgorge tens of billions of
dollars in dividends and share buy-backs or face the wrath of the hedge funds. (Clarke,
2018)” This focus reflects on Apple’s share price and not the welfare of its contracted
employees.
As the market leader and most successful consumer electronics firm in the world, Apple
has a very high responsibility to ensure the responsibility and integrity of its value chain. The
future of innovation is placed in jeopardy when the idea of value creation becomes defined as
value extraction. Rather than focusing solely on returning cash to its shareholders, Apple must
also focus upon its efforts to eradicate the issues disrupting its supply chain. The continued use
of an “at arms-length” mentality shifts the burden of production and cost to its suppliers, while
also making them carry the burden through unsafe working conditions and low wages.
As mentioned in the case, Apple cannot survive in an economy that relies on U.S.
suppliers. Apple executives estimated that about “8,700 industrial engineers were needed to
oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing the
iPhones” (Mark, 2017). These engineers work closely with suppliers to update manufacturing
processes and technology which grant them a competitive advantage over their competitors. The
demand that is created for these products requires a staff that is readily available throughout all
hours of the day. To meet sudden spikes in orders from Apple, one former executive describes
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 11
how a foreman roused over 8,000 workers inside the supplier’s dormitories to meet a spike in
demand. Each employee was given “a biscuit and a cup of tea, guided to workstations and within
half an hour started a 12-hour shift fitting glass screens into beveled frames” (Mark, 2017).
Within 96 hours, the plant had produced over 10,000 iPhone a day. “The speed and flexibility is
breathtaking. There’s no American plant that can match that”, the executive said (Mark, 2017).
In the end, it the authors of this paper believe that Apple should not bring manufacturing
completely back to the United States. This decision needs to be purely a business decision and
not an emotional one. From a business perspective, it would not make any financial sense to
As mentioned previously in this paper and with other associated costs aside, the cost of
an iPhone would increase exponentially due to the lack of manufacturing capacity in the US to
meet demand. The production of the necessary parts and the tooling that is required to assemble
the products is highly specialized and requires an equally highly trained vocational laborer to
perform these tasks. Unfortunately, the United States has not focused on vocational training for
the most recent generations entering the workforce, thus resulting in a drastic shortage of skilled
capabilities, marketing and design efforts. It’s the result of its “domination of the advanced
consumer electronics supply chain” (Clarke, 2018). Apple has successfully integrated a closed
ecosystem that controls each and every part of the supply chain from design all the way to retail.
This disaggregation of the global value chain enables Apple’s most profitable strategies, which
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 12
include marketing and sales, finance, design, etc. to be retained in the United States. The “less
profitable labor-intensive activities are given to contractors in developing countries, where wages
Apple sources the majority of its components from its manufacturers in Asia. The poor
working conditions displayed along the supply chain have given a profoundly new meaning to
the term “electronics sweatshops”. However, this deviation between varying global economies
and local circumstances poses several challenges for Apple in terms of business accountability,
The problem facing Apple and many other technology companies is easy to explain, yet
difficult and extremely complicated to solve. Apple, in many cases, is sincere about its desire to
ensure the workers making the devices we use live the best lives they can. The issue stems from
the fact that organizations within Apples supply chain are operating in places with fewer worker
protection laws and more cases of abuse. As mentioned before, the number of core violations in
the workplace have nearly doubled, causing some significant concern for the health of Apple’s
As part of the global auditing process and the initiative to create a more socially
sustainable supply chain, it’s important for Apple to determine and implement a provisional
protocol for all employees along the supply chain. Just last year, Apple launched a program at
locations in China and India that were designed to significantly improve the health awareness for
its workers throughout the supply chain (Murdock, 2018). “We believe that everyone making
Apple products deserves to be treated with dignity and respect and we’re proud that almost 15
million people understand their workplace rights as a result of the work we’ve done over the
From an ethics perspective, Apple has many opportunities to improve the lives of the
people who make its products. Operating within a different country provides the company with
many tactical opportunities for increased profit, sustainability and lower production costs.
Although laws and litigations vary between these developing countries, managing an ethical
supply chain starts with Apple. Yes, a firm can operate in a country with different laws and
standards, but social responsibility and the dignity of those workers should never be
compromised. This year’s Supplier Responsibility report helps paint a picture of an organization
that wants to create a reputation for how it treats those working through its supply chain. They
outline a demand for ensuring a safe and healthy workplace where the rights of the employee are
respected, and individuals are treated with dignity. In 2008, Apple launched a Supplier Employee
Training Program that helps cover the standard human rights such as proper working and living
conditions, permissible working hours, and other fundamental healthy and safety information.
The total number of employees informed and educated of their rights through this program sits
In 2015, Apple mandated that zero fees can be charged to supplier employees for the
purpose of recruitment, even if the fees fall within the legal limits of the supply’s country. If any
bonded labor is found, the supplier is required to repay the recruitment fees in full to all
employees impacted by the debt. The total now falls just short of $30 million repaid to over
35,000 employees since the program was founded. By empowering its suppliers, Apple can
create a system of knowledge and community for its workers. By continuing to stay committed
to raising the bar each and every year across the supply chain, Apple can create an ecosystem
that educates, empowers and provides workers with the fundamental resources and necessities
needed.
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 14
These measures, although slow to enact, are a step in the right direction for Apple. The
complexity of operating in a diverse supply chain are evident. As the firm continues to audit and
research its supply chain, it’s important to continuously develop programs and resources to
educate workers on their fundamental rights, opportunities, and to help them advance in their
respective careers. The effects will not only be felt by those working along the supply chain, but
their communities, families, and the organizations that employ them as well.
(5) If Apple has encountered these CSR problems given their resources and brand and
struggled with them from a CSR standpoint, does it indicate that they are only the
tip of the "iceberg" in terms of U.S. firms outsourcing internationally? Why or why
not?
As mentioned throughout this paper, Apple has encountered many CSR events since
introducing its wildly popular consumer electronics. In the early 2000’s, Apple launched a device
that would change the world, the Apple iPhone. Since it’s unveiling, the iPhone has been mainly
produced in China and Taiwan. Apple made the decision to manufacture their flagship product in
China for a number of reasons, but among the most important was the cost of labor, the speed of
production, the availability of a skilled worked force, the proximity of China to other Asian
countries that manufacture components for its products, and the lower cost of managing a
complex supply chain in China. Even while facing a PR nightmare resulting from inhumane
treatment of workers at companies within Apple’s supply chain, Apple hasn’t changed their
production strategy. A New York Times article from 2012 quotes Steve Jobs as telling then
president Barak Obama his opinion about bringing Apple product manufacturing back to the US,
The United States has a strong history of promoting advanced education amongst its
youth, however this emphasis is partly to blame for a negative impact on our skilled labor force.
By encouraging and stressing that a high-level education is necessary for a comfortable life,
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 15
American’s have created a skills gap within the trades and vocational training. This
We no longer have a manufacturing workforce that is competitive with that of China or many
other developing economies (Duggid et. al., 2012). The US plainly doesn’t the available
workforce to be competitive.
As an example of the US’s lack of necessary skilled labor, an Apple executive related a
story to a New York Times reporter about manufacturing in China. Apple had decided at the last
minute to make a drastic change to the screen of the iPhone before it was released and notified its
suppliers that it needed a sudden influx of workers to meet its deadline. “A foreman immediately
roused 8,000 workers inside the company’s dormitories, according to the executive. Each
employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour
started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was
producing over 10,000 iPhones a day. There’s no American plant that can match that.” (Duggid
This is but one component that gives foreign countries the upper hand in manufacturing
in comparison to the United States; however, the rate of adoption of outsourcing jobs, in
particular manufacturing positions, isn’t about to change drastically. The rate may slow gradually
as developing countries mature, but it is the view of the authors of this paper that there will
always be a hierarchy in business which will result in continuous outsourcing. Apple is without
question an incredibly large and successful company, hence it’s PR troubles and outsourcing
strategies are inevitably going to be the topic of public scrutiny. Apple’s outsourcing is in a sense
the “tip of the iceberg” when referring to outsourcing manufacturing. It’s upfront, so large that
Week 7 – Cast Study: Apple and Its Suppliers: Corporate Social Responsibility 16
one can’t help but notice, but the other companies hidden under Apples bulk that constitute the
References:
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