, Cebu

CASE ANALYSIS PAPER

Date: October 9, 2021

Name : PABLEO, GERLINE MAE O.

Program : Master of Business Administration
Subject : HUMAN RESOURCE MANAGEMENT AND DEVELOPMENT
Professor : ROEL A. MONSANTO, Ph.D.

Case Study 1.2 Fire-Fighting HRM in China’s New Global Economy

Title of the Case

PROCEEDINGS/DETAILS OF THE CASE:

Foxconn was founded in 1974 in Taiwan and has grown as a world-leading supply chain
transnational corporation. The company makes components and manufactures electronic products:
iPhones, iPads, computers, cameras, games and gaming consoles and TVs (and more). It has about 50
percent of total market share for outsourced electronics and a client list including some of the most
well-known household brands: Apple, IMB, Sony, Motorola, Nokia and many others. A company of this
size and scale could mean that it has already provided human resource systems for its large-scale
production.
Foxconn is basically a contract manufacturer or so-called EMS (Electronic Manufacturing
Services) provider. EMS means that the company not only does the assembly of electronic products but
delivers complete product designs and handles the logistics and after-sales services. Due to the
segmentation of the supply chain in the electronics industries and the logic that favours IP content and
marketing savvy over mundane tasks such as electronics assembly, the EMS business is low-margin and
low-wage with constant pressure on workers so keeping wages in check is the order of the day for
Foxconn.

FACTS OF THE CASE:

Over 500,000 people live and work in a Foxconn site in Shenzhen city, south China, many of
whom are rural migrant workers who flock to expansive industrial cities for employment. And many of
these employees live on-site in factory dormitories, with six to eight people sharing bunk beds. This site
contain its own on-site hospital, banks, a post office, its own fire service, and workers can access
educational and schooling opportunities, there is a library, and sports ranging from soccer, swimming,
tennis and basketball courts. There is a cinema/theatre, supermarkets and restaurants, and even a
wedding dress shop on-site for workers seeking love and marriage. Many employees work 12-hours
shifts with overtime going unpaid. Supervision is also intensive and very intimidating. There are unsafe
working conditions and health hazards to thousands of employees.
PROBLEMS:

I felt very discouraged if I was employed in a harsh environment of Foxconn. There is unequal
treatment and absence of proper HR management in such large corporation. There is enormous work
pressure and human needs are not satisfied. The HRM practice employed in the company is that of
Radical (critical) management approach. There is exploitation of people at work owing to the supplier-
dominated relationships. There exist a managerial power and authority relations such as line managers
who serves as the authority agents of owners and the key driver for the HRM approach is a control of
the labour process and peer surveillance. The relationships in the organization create discrimination and
unfairness. There are flexibility, outsourcing and work fragmentation issues in the Foxconn case.
Fragmentation is the nature of the employee–employer relationship and who is managing whom.
Flexibility has resulted in extensive use of subcontractors, consultants, work outsourcing, temporary
employees and interims. Foxconn is characterized by a flexible workforce, wherein, workers are
optimized when production needs them and is pressured by supplier relationships. This changes the way
people work, because HR responsibilities are blurred across organisational boundaries, public–private
partnerships and inter-firm contractual relations such as with the Foxconn suppliers e.g. Apple, which
have a major impact on the management of people at work. There is immense pressure as Foxconn face
the margin pressures and cost constraints. According to estimates by Morgan Stanley, in 2012 Foxconn
accounted for 65 per cent of Apple’s product costs (COGS cost of goods sold in Apple’s annual report).
On the other hand, Apple orders have contributed up to 50 per cent of Foxconn’s revenue in recent
years. In 2013 Foxconn got about about 65 billion US dollars or 51 per cent of its total revenue, from its
biggest customer Apple, up from 48 percent the previous year (The Economist, 6 July 2013). In 2007,
Apple had contributed only 17 per cent to Foxconn’s sales. That means that Apple depends on Foxconn
and Foxconn on Apple. Due to the contribution of Apple to the financials of Foxconn, supplier dictates
and exerts influence on Foxconn productions and on its human resource strategy.

RECOMMENDATIONS:

Foxconn can enforce better pay and better working conditions. Democratic unionisation with
contract manufacturers is possible for change since it is highly improbable that they will negotiate better
terms with their customers (Apple) unless faced by labour and international pressure.
Trade unions should take part in its enforcement and there should be CSR initiatives to
scrutinize the company and its clients such as Apple. These Foxconn customers – the lead companies in
electronics – make huge profits by enforcing cost-cutting from their suppliers.
There should be an opportunity for sector-wide initiatives to improve working conditions at the
contract manufacturers. An initiative for a cross-border union workshop on pay and working conditions
at the contract manufacturers might be a useful step in strengthening international coordination or
democratic unionisation.

The Foxconn business model has focused on driving sales. The smartphone market is growing,
but the pace is declining and the prices of phones that have the greatest market potential are ever-
falling. At the same time, Apple is diversifying its supplier base. Foxconn’s monopoly on Apple orders is
over. Automation will become key to keeping labour costs under control in the long term and diffusing
the bad reputation Foxconn has earned because of its treatment of its workers. The company aims to
get robotic arms to perform mundane tasks currently done by workers. This means there are fewer
Foxconn workers, but with more complex tasks and probably higher wages.