Apple case study

Ahnaf Tazwar_1911202630

1. What are the benefits to apple of outsourcing the assembly of the iPhone to
foreign countries, and particularly china? Explain with example.

The benefits for Apple are:

 Lower labor cost.

Example: Assembly line workers in china are paid 3.15 dollar per hour which is almost
half of the minimum wage in the U.S. In USA workers need to be paid at least 11-12
dollars per hour.
 Chinese subcontractors respond very quickly to requests from Apple to scale production
up and down. They are more flexible.
Example: Steve Jobs wanted glass screen to replace plastic screen in iPhone within a very
short time and a Chinese factory made that possible.
 Easier to hire engineers in China.
Example: Chinese company only took 15 days to gather 8700 engineers which would
have taken months in USA.
 Clustering together of factories in China.
Example: Apple found glass samples ready in a nearby industry.

2. What are the potential cost and risk to Apple? What are their costs of
continuing business?

Potential cost and risk to apple:

 Low pay line workers may strike.

 Long working hours may lower efficiency.
 Poor working condition may hamper product quality and brand image.
 Biggest risk is in terms of patent right. Their idea might be copied.
 Cost of continuing business:
 Increased tariff
Apple has successfully avoided levies so far on its major products in the trade war
between U.S. and china. But as president Trump briefed recently, the iPhone and
other star products could be hit with almost 25% tariffs on December 15 which would
result in a huge lose for Apple if they want to continue business in China . Bank of
America estimated that Apple would respond to the tariffs by raising iPhone prices by
about 10% which would reduce demand by 20% or about 10 million units.

 Loss of Reputation due to nationalism

Trade war between the U.S. and china is invoking a sense of nationalism in both
countries. And Apple as an American company, is facing the most difficulties.
Though China is one of the biggest market for Apple in terms of revenue (Almost
13.58 billion in 2019 or 25% of the total revenue) still Chinese community is
abandoning Apple products. As apple is continuing their operations in china, same
effect may occur in their American users as well.

3. In this whole scenario who are the potential losers? Explain with
justification.

Here the potential losers are the people of the United States.
Apple is gaining a lot by giving work contracts to the Chinese factories due to lower
production cost. And the Chinese factories are also happy with it as they are getting works.
But the people of the U.S. are losing jobs to the Chinese people. Despite Apple’s claim that it
supports more than 250,000 jobs in the United States, it also support almost 700,000
additional jobs outside of the U.S. - jobs that possibly could be filled by workers in the
United States.
This is why people of the U.S. are the potential losers here.
References

O'Hara, A. (2020, Fabruary 12). Retrieved from Apple Insider:

https://appleinsider.com/articles/20/01/28/apple-excels-in-china-during-q1-2020-thanks-
to-double-digit-iphone-growth#:~:text=In%20greater%20China%2C%20Apple's
%20reported,14.8%25%20of%20Apple's%20total%20revenue.
Rapoza, K. (2012, Jan 31). Retrieved from Forbs:
https://www.forbes.com/sites/kenrapoza/2012/01/31/how-much-of-the-iphone-is-made-
in-china/#76a66b075dc9
Shah, N. (2019, January 19). Retrieved from Counter Point:
https://www.counterpointresearch.com/apples-china-problem-12-reasons/
Zhu, S., & Levine, A. J. (2019, Aug 28). U.S. China Trade war. Retrieved from Reuters
Graphics : https://graphics.reuters.com/USA-TRADE-APPLE/0100B25R11Y/index.html