Assignment:
Do Customers Care More about the Newest iPhone or about Working Conditions in China?
An iPad user reading a recent issue of The New York Times on his or her tablet might have suffered a strange sense of guilt. The newspaper published reports of labor abuses that seemingly run rampant in the Chinese factories responsible for producing Apple's most popular products. These in-depth reports catalogued a long list of failures: the presence of child workers, more than 12-hour shifts, regular work weeks of longer than 60 hours, workers housed in tiny dormitories with approximately 20 people limited to three rooms, allegations of suicides, and lax safety standards that have led to fatal explosions.
The reports focus mostly on a Foxconn factory in Chengdu, in southwestern China, that manufactures iPhones and iPads. An explosion caused by insufficient ventilation of aluminum dust (created when the cases for the gadgets are polished) in May 2011 killed four workers. A similar explosion followed six months later at another factory. The ensuing investigations by The New York Times revealed multiple other violations of the code of conduct that Apple has established for its suppliers.
With this code of conduct, as well as the frequent audits it performs, Apple asserts that it is doing the best that it can to ensure its suppliers live up to reasonable standards and fair labor practices. An anonymous former Apple executive asserts, "There is a genuine, companywide commitment to the code of conduct." Yet abuses continue, as Apple's own corporate responsibility reports reveal. Audits show that several supply companies continue to engage in labor practices that violate the code, with few punishments or changes to the supply chain.
Part of the reason stems from Apple's need for secrecy-once it finds a supply partner that can manufacturer its high-tech gadgets, it wants to maintain that relationship to avoid any leakage of innovation information. So even if a supplier violates the code again and again, Apple is unlikely to switch.
Furthermore, Apple's focus on innovation means that it must work constantly to come up with new ideas and products, which it needs to produce quickly and in sufficient quantities to keep customers happy. This demanding supply chain leaves little room for flexibility. When Apple says it needs 1 million products, say, then its supplier is going to do whatever it takes to get those products ready in time. The code of conduct might ask that factory workers be limited to 60-hour work weeks, but in truth, Apple is asking the factories to keep running all day, every day, to make the order.
To keep its costs low, Apple also offers very slim profit margins to suppliers. In turn, these factories aim to reduce their own costs. Another Apple supplier thus began using a toxic chemical, instead of rubbing alcohol, to polish the screens of iPhones, because the chemical dries faster. But it exposes workers to the threat of paralysis and nerve damage.
The primary reason for these labor abuses may come only at the end of the supply chain-the consumer. A survey of Apple consumers showed that only 2 percent of them recognized labor issues as a concern. In a remarkably succinct summary of the challenge, another anonymous Apple executive asserted, "You can either manufacture in comfortable, worker-friendly factories, or you can reinvent the product every year, and make it better and faster and cheaper, which requires factories that seem harsh by American standards. And right now, customers care more about a new iPhone than working conditions in China."
PROMPT: What do you think that this publicity will do to Apple's sales and image?