What are the benefits to Apple of outsourcing the assembly of the iPhone to foreign countries, and particularly China? What are the potential costs and risks to Apple?

INSTRUCTION Please respond to all four questions associated with this mini-case. These mini-cases are related to topics discussed in the chapters and they also serve as integrated learning vehicles covering materials across several chapters.   Instructions

• Please read pages 39–40 of your book and respond to the four questions after reading the case.

 

• Number the answers and submit them in the Blackboard assignment tab.

   

• Please make sure each answer is at least 200 words long.

  39 International Business: Competing in the Global Marketplace, 11th Edition Making the Apple iPhone In its early days, Apple usually didn’t look beyond its own backyard to manufacture its devices. A few years after Apple started to make the Macintosh computer back in 1983, the late Steve Jobs bragged that it was “a machine that was made in America.” As late as the early 2000s, Apple still manufactured many of its computers at the company’s iMac plant in Elk Grove, California. Jobs often said that he was as proud of Apple’s manu- facturing plants as he was of the devices themselves. By 2004, however, Apple had largely turned to foreign manufacturing. The shift to offshore manufacturing reached its peak with the iconic iPhone, which Apple first introduced in 2007. All iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chip sets from Europe, and rare metals from Africa and Asia. Apple’s major subcontractor, the Taiwanese multinational firm Foxconn, performs final assembly in China. Apple still employs some 43,000 people in the United States, and it has kept important activities at home, includ- ing product design, software engineering, and marketing. Cases 609 Furthermore, Apple claims that its business supports another 254,000 jobs in the United States in engineering, manufacturing, and transportation. For example, the glass for the iPhone is manufactured at Corning’s U.S. plants in Kentucky and New York. But an additional 700,000 people are involved in the engineering, building, and final assem- bly of its products outside the United States, and most of them work at subcontractors like Foxconn. When explaining its decision to assemble the iPhone in China, Apple cites a number of factors. While it is true that labor costs are much lower in China, Apple execu- tives point out that labor costs account for only a very small proportion of the total value of its products and are not the main driver of location decisions. Far more im- portant, according to Apple, is the ability of its Chinese subcontractors to respond very quickly to requests from Apple to scale production up and down. In a famous il- lustration of this capability, back in 2007 Jobs demanded that a glass screen replace the plastic screen on his proto- type iPhone. He didn’t like the look and feel of plastic screens, which at the time were standard in the industry, nor did he like the way they scratched easily. This last- minute change in the design of the iPhone put Apple’s   Global Perspectives in Business 610 Part 7 cases market introduction date at risk. Apple had selected Corning to manufacture large panes of strengthened glass, but finding a manufacturer that could cut those panes into millions of iPhone screens wasn’t easy. Then a bid arrived from a Chinese factory. When the Apple team visited the factory, they found that the plant’s own- ers were already constructing a new wing to cut the glass and installing equipment. “This is in case you give us the contract,” the manager said. The plant also had a ware- house full of glass samples for Apple, and a team of en- gineers available to work with Apple. It had built onsite dormitories so that the factory could run three shifts seven days a week in order to meet Apple’s demanding production schedule. The Chinese company got the bid. Another critical advantage of China for Apple was that it was much easier to hire engineers there. Apple calculated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers involved in manufacturing the iPhone. The com- pany had estimated that it would take as long as nine months to find that many engineers in the United States. In China it took 15 days. Also important is the clustering together of factories in China. Many of the factories providing components for the iPhone are located close to Foxconn’s assembly plant. As one executive noted, “The entire supply chain is in China. You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need a screw made a little bit differently? That will take three hours.” All this being said, there are drawbacks to outsourcing to China. Several of Apple’s subcontractors have been targeted for their poor working conditions. Criticisms in- clude low pay of line workers, long hours, mandatory overtime for little or no additional pay, and poor safety records. Some former Apple executives say that there is an unresolved tension within the company; executives want to improve working conditions within the factories of subcontractors such as Foxconn, but that dedication falters when it conflicts with crucial supplier relation- ships or the fast delivery of new products. Sources Gu Huini, “Human Costs Are Built into iPad in China,” The New York Times, January 26, 2012; C. Duhigg and K. Bradsher, “How U.S. Lost Out on iPhone Work,” The New York Times, January 22, 2012; “Apple Takes Credit for Over Half a Million U.S. Jobs,” Apple Intelligence, March 2, 2012, http://9to5mac. com/2012/03/02/apple-takes-credit-for-514000-u-s- jobs/#more-142766. Case Discussion Questions

1. What are the benefits to Apple of outsourcing the assembly of the iPhone to foreign countries, and particularly China? What are the potential costs and risks to Apple?
2. In addition to Apple, who else benefits from Apple’s decision to outsource assembly to China? Who are the potential losers here?
3. What are the potential ethical problems associated with outsourcing assembly jobs to Foxconn in China? How might Apple deal with these?
4. On balance, do you think that the kind of out- sourcing undertaken by Apple is a good thing or a bad thing for the American economy? Explain your reasoning.

ANSWER. PAPER DETAILS
Academic Level	Masters
Subject Area	Nursing
Paper TypeÂ	Admission - Application Essay
Number of Pages	2 Page(s)/550 words
Sources	1
Format	APA
Spacing	Double Spaced

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