Last week in class, we briefly discussed globalization. We learned about the reasons to globalize. Globalization can do many things like reduce costs, improve supply chain, and assist in providing better goods and services. We discussed the reasons for globalizations but we didn’t discuss issues that can affect strategies to globalize. One company that has continued to target globalization as a strategy is Apple. Apple in the past few years has had considerable success spreading throughout the world with its innovative products.
According to an article from the Wall Street Journal, Apple has had problems conducting business in China with sales operations and a part of their supply chain. Last week Chinese authorities forced Apple to shut down their Beijing store with fear of riots during the iPhone 4S release. Chinese authorities aren’t particularly fond of these types of occurrences. Usually, Apple has large product debuts and violent occurrences could cause strained relationships as a result.
Additionally, upon scrutiny from activists in the US and abroad, Apple released a report regarding the work conditions at some of Apple’s suppliers. The author noted that the results from Apple’s audit report could affect the relationship between Apple and China. The report consisted of the results from the audits of 229 factories that showed 112 factories weren’t properly storing, moving or handling hazardous chemicals. Apple said it was taking new steps to improve conditions at factories. Additionally, close to a third of its suppliers didn’t follow Apple’s standards on wages and benefits. The audits also found five facilities that employed underage workers.
Companies globalize to reduce costs. A majority of Apple’s suppliers are in Asia where the cost of labor is significantly lower. Lower wages can lower direct and indirect costs, thus providing Apple with more profit.
Furthermore, companies globalize to improve the supply chain. Apple has numerous suppliers in Asia, such as Sony, Intel and Tianjin Lishen Battery Ltd. The suppliers from this region are important to Apple because with an improved supply chain they are able to reduce costs and provide better goods and services. However, to prevent public scrutiny they must make ethical decisions in order to maintain a positive reputation. Over the past few years there have been several incidents involving Apple’s suppliers in Asia. In 2010, there was a wave of employee suicides at the facilities and several deadly disasters. Even though Apple has taken steps to prevent disasters from occurring certain standards may not be practiced as the supplier report identified.
China is estimated to be a $14 Billion dollar market for Apple and competitors so proper globalization strategies are important.
What do you think can occur involving increasing working conditions for Apple’s suppliers? Do you think costs will increase because of more wages and benefits? Do you think they will see significant changes in supply chain? Will suppliers stop working with apple? What do you think will happen to Apple if China cracks down on Apple for how they do business in China?
http://online.wsj.com/article/SB10001424052970204409004577158764211274708.html?mod=WSJ_mgmt_LeftTopNews
This is important because alot of companies globalize and have their products made in another country. It is natural for many companies because they are profit driven and globalizing helps increase their profit margin. It is not surprising for apple because they are a large corporation and they try to keep their suppliers secret.
I think your article did a good job of encompassing the challenges and benefits of globalization. I think if China’s standard of living continues to rise; Apple and others will find the next country for cheap labor. It will be interesting to see what happens with the standard of living in China because of the many rural areas. What do you think with China and Apple?
If Apple wanted to do business offshore, I feel as though their responsibility to adhere to the policies and requests of the hosting country because they no longer have the home advantage. Especially when employees are committing suicides, you have to wonder what’s going on behind closed doors. I agree that globalization is a great thing but cheap labor does not mean that they are not people.