How the iPhone Is Made: Apple's Global Production System (Case Study)

QUESTION 1: How has globalization created opportunities for companies like Apple to optimize their supply chains?

Answer:

Since much of Apple's manufacturing is done abroad and obtained from all over the world, globalization has allowed them to improve their supply chains by creating opportunities. Globalization has given Apple access to the highest quality items as well as any and all materials they desire, allowing them to create distinctive and profitable products. Apple is able to take advantage of differences in cost and quality of factor of production due to globalization, and by diversifying their suppliers, they will have a larger pool of suppliers to choose from around the world rather than relying on a small number of suppliers who are only available to them. As a result, the risk is lowered:

• This provides Apple more bargaining power than relying on a single supplier because Apple is more likely to have control over the price of their supply, allowing them to secure the best deal at the end of the deal. In fact, because of the differences in the speciality of different countries, Apple is able to obtain high-quality and low-cost raw materials and electrical components for its products from a variety of countries.

• Apple is also able to source material and electronic components from various locations and take advantage of location advantages around the world as a result of globalization, which will reduce logistical challenges such as delivery of material and electronic components close to their manufacturing plant, lowering delivery costs. The location of component factories and suppliers near the Foxconn production factory in China may be seen. This is true in both directions, as Apple's goods can be transported anywhere in the world at a low cost and in a short amount of time, giving Apple a competitive advantage in the market.

QUESTION 2: What factors make China such an attractive production location for Apple? How does production in China help Apple compete?

Answer:  

Given the abundance of labor supply of various abilities and skill levels that are available in China and are expanding over time, labor costs in China are substantially lower for both low skilled and high skilled labor. Because labor costs and availability are lower in China than in the United States, operation costs will also be significantly lowered. In fact, training costs are lower since there is always a supply of laborers with diverse abilities available and easily replaceable.

China is a manufacturing hub with significant manufacturing capital, allowing them to quickly scale up or down production in response to Apple's requests, as seen in the case study. As a result, Apple can quickly adjust to changes in market conditions such as demand and supply for its products, allowing for mass production on demand. Upgrades or extra hardware systems that are not accessible at the time of design can be simply put into the iPhone at any suitable available stage of manufacturing, even on a larger scale, giving Apple every opportunity to improve the quality of their products.

QUESTION 3: Why has Apple faced criticism for its decision to produce its iPhone in China? Is the criticism warranted? Explain.

Answer:

Apple has been chastised for their decision to manufacture the iPhone in China because:

• Apple's subcontractors have been singled out for their deplorable working conditions. Low compensation for line employees, long hours, required overtime for little or no additional pay, and poor safety records are among the criticisms. Furthermore, President Trump has blasted Apple's outsourcing practices, claiming that the business is guilty of sending American jobs offshore.

• Indeed, there is justification for the critique. Despite the fact that Apple disagrees with this judgment, the company has responded by boosting its investment in U.S. facilities. For example, in 2018, the corporation declared that it would invest $30 billion over five years to create 20,000 new Apple jobs in the United States. However, the majority of these employees are projected to be in software development and data center operations, rather than manufacturing and assembly.

Case Study : Apple's Global Production System

WHAT TO DO:

• INTRODUCTION (Introduces the case, including the background and any previous studies of the issue.)

Globalization and technological advancements have benefited Apple immensely. For example, Apple began as essentially an American company, but thanks to globalization, it has grown into a multinational corporation. According to the annual report, the Americas account for only around onethird of the company's sales, a figure that includes Canada and all of Latin America in addition to the United States. As a result, the corporation might be described as selling globally. Sales in Asia-Pacific were particularly strong, and the corporation has a number of flagship stores there. Advanced semiconductors are made in Germany and Taiwan, memory is made in Korea and Japan, display panels and circuitry are made in Korea and Taiwan, rare metals are made in Africa and Asia, and the iPhone's gyroscope is made in Switzerland. Apple's main subcontractor, Foxconn, a Taiwanese multinational corporation, assembles half of all iPhones sold worldwide today, with China playing a significant role. Foxconn operates iPhone production plants in a number of additional countries, including Brazil and India. Pegatron, a Taiwanese business, also assembles iPhones for Apple in a Chinese factory. Apple projected that around 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line employees engaged in creating the initial iPhone since it was much easier to hire engineers there. China controls the entire supply chain. Several Apple subcontractors have been singled out for their substandard working conditions. Low compensation for line employees, long hours, required overtime for little or no additional pay, and poor safety records are among the criticisms. Former Apple executives said the firm is riven with unsolved tensions.

• AIMS (Describes the purpose of the study and the specific questions you are trying to
answer.)

The study's aim is to evaluate Apple's vision of providing the best user experience to its consumers around the world through new hardware, software, and services. A mission statement, on the other hand, focuses more on the company's goals and how to achieve them. The long-term vision is about how that same company views itself. To have a comprehensive grasp of how they think about the future, it is vital for every business to understand how the mission and vision are developed. One of the most essential aspects of Apple's operation, according to the company, is the capacity of Chinese contractors to respond promptly to requests to grow production.

• METHODS (Explains how the study was carried out, e.g. what research methods did you use to collect data: interviews, observations, questionnaires, etc.? What were the circumstances of your data collection?)

Apple keeps its market survey a closely guarded secret to keep competitors at far. If competitors acquire access to the information, they may be able to exploit it to detect market gaps and gain a competitive advantage over Apple. SWOT analysis, user surveys, prototype testing, and anonymous data collection are some of Apple's additional research methods, all of which are done internally. Though Apple has its own research methodologies, they are not without limitations. Because it is a well-known brand, conducting research on a global basis, for example, can be tough. There's also the added pressure to satisfy high expectations because of Apple's image as a new, innovative brand that continually develops cutting-edge products and leads the industry. Apple's enormous success can partly be due to customer loyalty to the brand. Apple has succeeded to become one of the top firms in the technology market by developing a strong relationship with its customers. Apple's limited market research and massive cult following, combined with its overall great product design and commitment to innovation, make it a virtually unstoppable force in the world of technology.

• RESULTS (Describes what you found through your investigations, e.g. the main themes that came out in researches, interviews, responses to questionnaires, significant observations.)

Apple is known for having one of the world's best-managed supply chains. The tech behemoth can demand high-quality products and impose stricter terms on its suppliers because of its size and global reach. Apple spends a lot of time and money monitoring its suppliers. Relationships that have helped the tech behemoth operate one of the most efficient supply-chain management systems currently available. China is an important global region for Apple in general. Due to the decrease in worldwide communication costs, organizations have more options to develop their enterprises. Up-todate data can be obtained, making it easy to keep track of global market trends. The number of people who use the Internet is constantly increasing. This aids in the creation of a global audience, and ads are no longer bound by geographic region.

Foreign enterprises, worldwide brands, strange products, and new values are all made possible by globalization. Consumers are increasingly purchasing identical things imported from other nations rather than purchasing local products. Traditional norms, attitudes, and behaviours may become more homogeneous through time in this way. National identity could be obliterated by 'global culture. Every day, Chinese companies produce hundreds of thousands of iPhones. Each one is a symbol of American consumerism, and each one is made up of components from many countries. Its ideas are based on the inventiveness and competitive spirit that have made and continue to make the country great, in good times and bad.

• DISCUSSIONS (Explains the significance of the study and what can be learnt from it. Note
that a case study is a study of a particular situation so you can't generalize the results to all other situations. That means your discussion should focus on what can be learnt about that particular situation and the individuals involved.)

China was an important aspect of the company's manufacturing, outsourcing, and general prosperity, but it also had drawbacks and hazards. Poor working circumstances, such as low pay, long workdays and hours, not properly compensating employees for extra time worked (overtime), and lax safety standards, are all risks. The advantages of outsourcing iPhone manufacture to foreign countries are frequently associated with lower labour costs. As a result, labour expenses in China are significantly lower than in the United States.

Apple claims that it is not just because of labor costs, but also because of its Chinese subcontractors' ability to respond rapidly to Apple's demands to scale production up and down. Furthermore, it is considerably easier to immediately hire engineers there. Engineers were required to supervise and guide assembly-line employees involved in the manufacture of the iPhone; it took 15 days to find that many engineers, whereas in the United States, it would most likely take nine months to find the same number of engineers. Despite China's outsourcing prowess, Apple's subcontractors have been chastised for their poor working conditions.

Apple's move to outsource benefits the employers and employees of the hired factories in China, as more jobs are now accessible. People in the United States are the potential losers here, as they will lose jobs as a result of Apple's outsourcing to China. In China, factories are located in close proximity to one another.

When the Foxconn assembly plant requires supplies, workers simply need to walk next door. It makes it simple for the manager to make manufacturing decisions. In addition, Apple claims that its business supports another 250,000 jobs in engineering, manufacturing, and transportation in the United States. The subcontractors are one of the potential issues with outsourcing assembly jobs to Foxconn in China. Low pay for line workers, long hours, and mandatory overtime are among the criticisms. Apple should talk to its subcontractors about how to improve the working conditions at their facilities. One of the most serious ethical issues with outsourcing assembly to Foxconn is that employees have been singled out because of their poor working conditions. This is, of course, an ethical issue, because Apple is aware of the working circumstances but has done nothing to address them. Apple may wish to speak with the company's executives in order to improve employee working conditions. They could argue that if they do not improve working conditions, they will have to manufacture iPhone components elsewhere.

In some ways, Apple's assumption of outsourcing is a good thing. For example, outsourcing in China keeps labour costs low, allowing them to use the savings in improving their products and doing research to invent and manufacture new items in the United States. They must, however, continue to monitor labour conditions in its Chinese assembly factories to avoid issues such as extended work hours, mandatory overtime for little extra pay, and bad safety records.

• RECOMMENDATION AND RESEARCHES (Provides proposals for future action to solve the problem or improve the situation, e.g. by applying a particular kind of treatment or intervention)

Other than cost, I believe Apple's management team should make a greater effort to convey the advantages of producing overseas. International possibilities for its employees, speed to market for its customers to have the latest and greatest technology, and supply chain efficiencies with subcomponent suppliers are just a few of the advantages. Apple should also publicize the number of foreign workers they have sponsored to work in the United States in order to contribute to the country's diversity and talent pool. I also believe that Apple, along with other manufacturing businesses such as Microsoft, Alphabet, and Amazon, should band together to oppose the current President's aims of bringing all manufacturing back to the US and "making America great again."

Bringing that much manufacturing back to the US would be a significant change that would require companies to invest a significant amount of money and resources in the move, and the country might not be able to keep up with the high demand for skills and labour required to manufacture all hardware products. Apple has a need for suppliers, and suppliers have a need for Apple. It's a smooth connection that's frequently mutually beneficial, yet it may be tense at times. Apple and its overall market success have a significant impact on suppliers. Market analysts frequently use financial reports from supplier companies to forecast sales for Apple products, and investors frequently look to Apple's underlying suppliers for insights into the company's performance as well as more granular investment opportunities on their own.

Reference:
1. https://digital.hbs.edu/platform-rctom/submission/globalization-with-apple/

2. https://www.slideshare.net/mahiadel94/apple-inc-strategic-case-analysis

3. https://financesonline.com/hello-world-the-economics-of-iphone/

4. https://u.osu.edu/iphone/3-the-manufacture-of-the-iphone/

5. https://www.investopedia.com/articles/investing/090315/10-major-companies-tied-apple-supply-chain.asp


Step-by-step explanation

Globalization and technological advancements have benefited Apple immensely. For example, Apple began as essentially an American company, but thanks to globalization, it has grown into a multinational corporation. According to the annual report, the Americas account for only around one-third of the company's sales, a figure that includes Canada and all of Latin America in addition to the United States. As a result, the corporation might be described as selling globally. Sales in Asia-Pacific were particularly strong, and the corporation has a number of flagship stores there. Advanced semiconductors are made in Germany and Taiwan, memory is made in Korea and Japan, display panels and circuitry are made in Korea and Taiwan, rare metals are made in Africa and Asia, and the iPhone's gyroscope is made in Switzerland. Apple's main subcontractor, Foxconn, a Taiwanese multinational corporation, assembles half of all iPhones sold worldwide today, with China playing a significant role. Foxconn operates iPhone production plants in a number of additional countries, including Brazil and India. Pegatron, a Taiwanese business, also assembles iPhones for Apple in a Chinese factory. Apple projected that around 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line employees engaged in creating the initial iPhone since it was much easier to hire engineers there. China controls the entire supply chain. Several Apple subcontractors have been singled out for their substandard working conditions. Low compensation for line employees, long hours, required overtime for little or no additional pay, and poor safety records are among the criticisms. Former Apple executives said the firm is riven with unsolved tensions.

The study's aim is to evaluate Apple's vision of providing the best user experience to its consumers around the world through new hardware, software, and services. A mission statement, on the other hand, focuses more on the company's goals and how to achieve them. The long-term vision is about how that same company views itself. To have a comprehensive grasp of how they think about the future, it is vital for every business to understand how the mission and vision are developed. One of the most essential aspects of Apple's operation, according to the company, is the capacity of Chinese contractors to respond promptly to requests to grow production.
Apple keeps its market survey a closely guarded secret to keep competitors at far. If competitors acquire access to the information, they may be able to exploit it to detect market gaps and gain a competitive advantage over Apple. SWOT analysis, user surveys, prototype testing, and anonymous data collection are some of Apple's additional research methods, all of which are done internally. Though Apple has its own research methodologies, they are not without limitations. Because it is a well-known brand, conducting research on a global basis, for example, can be tough. There's also the added pressure to satisfy high expectations because of Apple's image as a new, innovative brand that continually develops cutting-edge products and leads the industry. Apple's enormous success can partly be due to customer loyalty to the brand. Apple has succeeded to become one of the top firms in the technology market by developing a strong relationship with its customers. Apple's limited market research and massive cult following, combined with its overall great product design and commitment to innovation, make it a virtually unstoppable force in the world of technology.

Apple is known for having one of the world's best-managed supply chains. The tech behemoth can demand high-quality products and impose stricter terms on its suppliers because of its size and global reach. Apple spends a lot of time and money monitoring its suppliers. Relationships that have helped the tech behemoth operate one of the most efficient supply chain management systems currently available. China is an important global region for Apple in general. Due to the decrease in worldwide communication costs, organizations have more options to develop their enterprises. Up-to-date data can be obtained, making it easy to keep track of global market trends. The number of people who use the Internet is constantly increasing. This aids in the creation of a global audience, and ads are no longer bound by geographic region.

Foreign enterprises, worldwide brands, strange products, and new values are all made possible by globalization. Consumers are increasingly purchasing identical things imported from other nations rather than purchasing local products. Traditional norms, attitudes, and behaviours may become more homogeneous through time in this way. National identity could be obliterated by 'global culture. Every day, Chinese companies produce hundreds of thousands of iPhones. Each one is a symbol of American consumerism, and each one is made up of components from many countries. Its ideas are based on the inventiveness and competitive spirit that have made and continue to make the country great, in good times and bad.

China was an important aspect of the company's manufacturing, outsourcing, and general prosperity, but it also had drawbacks and hazards. Poor working circumstances, such as low pay, long workdays and hours, not properly compensating employees for extra time worked (overtime), and lax safety standards, are all risks. The advantages of outsourcing iPhone manufacture to foreign countries are frequently associated with lower labour costs. As a result, labour expenses in China are significantly lower than in the United States.

Apple claims that it is not just because of labor costs, but also because of its Chinese subcontractors' ability to respond rapidly to Apple's demands to scale production up and down. Furthermore, it is considerably easier to immediately hire engineers there, Engineers were required to supervise and guide assembly-line employees involved in the manufacture of the iPhone; it took 15 days to find that many engineers, whereas in the United States, it would most likely take nine months to find the same number of engineers. Despite China's outsourcing prowess, Apple's subcontractors have been chastised for their poor working conditions.

Apple's move to outsource benefits the employers and employees of the hired factories in China, as more jobs are now accessible. People in the United States are the potential losers here, as they will lose jobs as a result of Apple's outsourcing to China. In China, factories are located in close proximity to one another. The subcontractors are one of the potential issues with outsourcing assembly jobs to Foxconn in China. Low pay for line workers, long hours, and mandatory overtime are among the criticisms. Apple should talk to its subcontractors about how to improve the working conditions at their facilities. One of the most serious ethical issues with outsourcing assembly to Foxconn is that employees have been singled out because of their poor working conditions. This is, of course, an ethical issue, because Apple is aware of the working circumstances but has done nothing to address them. Apple may wish to speak with the company's executives in order to improve employee working conditions. They could argue that if they do not improve working conditions, they will have to manufacture iPhone components elsewhere. In some ways, Apple's assumption of outsourcing is a good thing. For example, outsourcing in China keeps labour costs low, allowing them to use the savings in improving their products and doing research to invent and manufacture new items in the United States. They must, however, continue to monitor labour conditions in its Chinese assembly factories to avoid issues such as extended work hours, mandatory overtime for little extra pay, and bad safety records.

Other than cost, I believe Apple's management team should make a greater effort to convey the advantages of producing overseas. International possibilities for its employees, speed to market for its customers to have the latest and greatest technology, and supply chain efficiencies with sub-component suppliers are just a few of the advantages. Apple should also publicize the number of foreign workers they have sponsored to work in the United States in order to contribute to the country's diversity and talent pool. I also believe that Apple, along with other manufacturing businesses such as Microsoft, Alphabet, and Amazon, should band together to oppose the current President's aims of bringing all manufacturing back to the US and "making America great again."
Bringing that much manufacturing back to the US would be a significant change that would require companies to invest a significant amount of money and resources in the move, and the country might not be able to keep up with the high demand for skills and labour required to manufacture all hardware products. Apple has a need for suppliers, and suppliers have a need for Apple. It's a smooth connection that's frequently mutually beneficial, yet it may be tense at times. Apple and its overall market success have a significant impact on suppliers. Market analysts frequently use financial reports from supplier companies to forecast sales for Apple products, and investors frequently look to Apple's underlying suppliers for insights into the company’s performance as well as more granular investment opportunities on their own.

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