INB 372
“ Apple Case ”
SUBMITTED TO :
Mahmud Habib Zaman (MHZ) sir
Submitted By :
Group – Red
Muhammad Shafkat Hasan Masud 1811827030
Akif Shareef Liam 1811819030
Saadman Sakib Obak 1812234630
Answer 1
Outsourcing the assembly of the iPhone to foreign countries such as China
provides Apple several advantages.
Better quality of labor:It is mentioned in the case that according to
Apple’s executive aside from working at a much lower wage workers in
foreign countries such as China, are far more skilled, dedicated, hard
working and skilled than US workers and hence by producing in China the
company take advantage of the country’s workforce.
Better plants and factories:The case also states that according Apple
executives, US plants cannot match the speed and flexibility of the Chinese
factories and hence this provides Apple with an advantage in its
production.
Government Subsidy:Apple by outsourcing to China can take advantage
of the subsidy provided to Chinese firms by the Chinese government, as it
would be passed on to them in the form of lower costs. The case states
how Chinese glass cutting factories receive subsidies from the
government.
Accessibility of Supplies: A top-level executive of Apple mentioned in
the article how the entire supply chain is in China. Chinese factories to
whom Apple outsources its production are a lot closer to the factories
producing the raw material and hence have a competitive advantage.
According to Blodget (2012), most of the components of the iPhone are
produced in China.
Efficiency in finding Engineers:Compared to the US, China can provide
engineers at a much faster rate. According to an Apple analyst it would
take 9 months to find 8,700 industrial engineers in US, while in China it
was done in just 15 days.
Blodget (2012), mentions in his article that, “China now has a far bigger
supply of appropriately-qualified engineers than the U.S. does.”
Closer to markets:Dunn (2017) mentions that a large portion of Apple’s
revenue comes from the Chinese, European and other Asian markets.
According to Bay Source Global, Asian countries are experiencing rapid
growth and the increase in the GDP is being accompanied by a rising
demand for smartphones such as the iPhone and hence manufacturing in
China make its easier for the company to sell its product to consumers
outside America as the European and Asian markets are physically a lot
closer to China than they are to the US.
Answer 2:
Might lose control over innovative ideas: Even though the work will be done
economically, but it comes at a cost of losing some control over that
particular function as the supplier will have the freedom to do things the way
they see fit. Also, whenever there is someone new in the business, it
increases the confidentiality risk. New innovative ideas need to be shared
with that supplier so there is a risk that the supplier might sell the
confidential information to another company.
Brand Image- work environment related issues: Besides being a superb
brand marketer, Steve Jobs was the core of Apple’s brand story. The big
question now lies whether Tim Cook can match Steve Jobs in terms of
innovation, brand strategy? Apple has also been in the press with regards to
questionable working practices. Foxconn Technology, Apple’s manufacturing
partner in China faced criticism over labor practices that it forced vocational
students to work at plants making IPhones and their components.Chinese
state-run news media reported that several vocational schools in the city of
Huai’an, in eastern China, required hundreds of students to work on
assembly lines at a Foxconn plant to help ease worker shortages (Barboza D
&Duhigg C). However, a spokesman for Apple said Apple’s code of conduct
tells suppliers to follow local labor laws with all the workers.
US – CHINA trade war: China indicated that it would impose a new round of
retaliatory tariffs, after the U.S. said that it would impose tariffs of 10% on
Chinese imports worth $300 billion. President Donald Trump responded to
the new round of tariffs, asking U.S. companies to immediately start looking
for an alternative to China. Apple’s stock price immediately went down
following the news as Apple only counts on China as their manufacturing
base.
Answer 3:
USA:
o Apple outsourcing its manufacturing is reducing the job
opportunities in the United States as jobs are flowing out to China.
o Currency is flowing out of the US as Apple pays the companies that
manufacture its products. If production took play in US the money
would stay within the country and circulate in its economy.
o Apple, one of the largest companies in the world, relying so heavily
on China is providing the country with leverage in its trade war
with the US.
Chinese mobile manufacturers: The case and answer one provided
evidence that China has a comparative advantage in the manufacturing of
smartphones. Apple producing in China therefore is causing Chinese
companies such as Huawei, One Plus, Xiaomi to lose their competitive
advantage in the smart phone market.
Chinese Citizens: To some extent even China is the potential loser based
on the whole scenario. Hook and Hille (2012) stated in the Financial
Times that Apple outsourcing its work in China is a causing
environmental degradation in the country and is hence adversely
affecting its people.
Apple:Layne (2019), from CBS News stated that Apple lost $42 billion in
market value after Donald Trump tweeting his threat of imposing tariff on
China on the 1st of August 2019. If Apple didn’t rely on China and
produced in its home country this threat might have been avoided.
References:
1. Girotra, K., &Netessine, S. (2020). Why Apple Has to Manufacture in
China. Retrieved 2 October 2012, from
https://hbr.org/2012/10/why-apple-has-to-manufacture-i
2. The Pros and Cons of Outsourcing Manufacturing to China. Retrieved
12 February 2020, from https://baysourceglobal.com/the-pros-and-
cons-of-outsourcing-manufacturing-to-china/
3. Blodget, H. (2012). This Article Explains Why Apple Makes iPhones In
China And Why The US Is Screwed. Retrieved 12 February 2020, from
https://www.businessinsider.com/you-simply-must-read-this-article-
that-explains-why-apple-makes-iphones-in-china-and-why-the-us-is-
screwed-2012-1
4. Dunn, J. (2017). Here’s how Apple’s iPhone sales break down by
region. Retrieved 12 February 2020, from
https://www.businessinsider.com/apple-iphone-sales-region-china-
chart-2017-3
5. Coleman, D. (2012). Weakness In The Apple Brand? | Branding
Strategy Insider. Retrieved 12 February 2020, from
https://www.brandingstrategyinsider.com/crunch-time-for-the-
apple-brand/#.XkQ1tBMzY_U
6. Hook, L., &Hille, K. (2011). Apple attacked over pollution in China.
Retrieved 12 February 2020, from
https://www.ft.com/content/e7cad0f4-d381-11e0-9d6a-
00144feab49a
7. Barboza, D., &Duhigg, C. (2012). China Contractor Again Faces Labor
Issue on iPhones. Retrieved 12 February 2020, from
https://www.nytimes.com/2012/09/11/technology/foxconn-said-to-
use-forced-student-labor-to-make-iphones.html?
pagewanted=all&fbclid=IwAR3CbU1fnUjJRhhosUIUeJnqNMwQivgPRL
CVYfs8XX0GLtYbkle3sFH69nU
8. Trefis Team, & Great Speculations. (2019). What's The Worst That
Could Happen For Apple As Trade War Re-Escalates. Retrieved 12
February 2020, from
https://www.forbes.com/sites/greatspeculations/2019/08/27/what
s-the-worst-that-could-happen-for-apple-as-trade-war-re-
escalates/#5a1f821c6596
