Questions

1) Define and explain the terms "globalization” and “human capital”, identify different
skills that can be part of human capital.
2) What is meant by the globalization of human capital? Is this inevitable as firms
increase their global operations?
3) How does this case illustrate the threats and opportunities facing global companies in
developing their strategies?
4) Describe the company's history (with a timeline etc.), referring to Apple's
globalization strategy.
5) Comment on the Apple executive's assertion that the company's only obligation is
making the best product possible. „We don't have an obligation to solve America's
problems."
6) Who are the stakeholders in this situation and what, if any, obligations do they have?
7) How much extra are you prepared to pay for an iPhone if assembled in China but
under better labor conditions or pay? What kind of trade-off would you make? Show
the price evolution of iPhones over the last years. With your comment, refer to more
recent and current data for iPhones than given in the case. What do you think has
changed over the last few years that justifies the discernible price increase?
8) Show and describe Apple's competitive environment and find at least two other
companies in the same industry, to compare their competitive situation.
9) To what extent do you think the negative media coverage has affected Apple's recent
decision to ask the FLA to do an independent assessment and the subsequent decision
by Foxconn to raise some salaries?
10) Please describe the last 12 months of the company and critically reflect its
development.

Case Study:
There are risks and rewards for all in a global economy. The globalization of human capital
results in a range of winners and losers around the world: companies and their stockholders,
consumers, contractors, firms up and down the supply chain, employed people, and
unemployed people, as well as their economies. In February 2011, President Obama asked
Apple's Steve Jobs (now deceased) why Apple could not bring back all the jobs it used to
provide in the United States. The jobs related to most high-tech products made by companies
such as Dell, HP, and Apple have now migrated overseas, including those for Apple's 700
million iPhones (as of March 2015) as well as millions of iPads and now Apple Watches.
Time broke down a retail price of $500 for Apple's iPhone, for example, and estimated that
$61 worth of value comes from Japan, with its high-end technology manufacturing; $30 of
value is added from Germany; $23 from South Korea; $7 from Chinese assembly lines; $48
from unspecified sources; and $11 from the United States. Those inputs total $179 for parts
and assembly abroad, leaving Apple, the inventor in the United States, a profit of $321.3 For
the first quarter of 2012, Apple made $13 billion in profit.
Although Apple directly employs an estimated 43,000 in the United States and 20,000
overseas, an additional 700,000 people engineer, build, and assemble iPads, iPhones, and
Apple's other products in Asia and Europe. Sophisticated component parts outsourced in
various countries are assembled in China. Some of those are contracted to the Taiwanese-
headquartered company Foxconn's Longhua factory campus in Shenzhen, for example, where
more than 300,000 employees live in dorms, eat on site, and churn out iPhones, Sony
PlayStations, and Dell computers. Foxconn Technology, with 1.2 million employees in plants
throughout the country, is China's largest exporter and assembles an estimated 40 percent of
the world's consumer electronics, including for customers such as Amazon, Dell, Hewlett-
Packard, Nintendo, Nokia, and Samsung. No other factories in the world have the
manufacturing scale of Foxconn.
The answer to President Obama's question is not as simple as the ability to acquire cheaper
labour overseas; Apple's executives and those at other high-tech firms claim that "Made in the
U.S.A" is not a competitive strategy for them because America does not compare favourably
with the industrial skills, hard work, and flexibility that can be found in companies such as
Foxconn. Questions about what corporate America owes to Americans are met with the
example of thousands of Chinese workers being roused in the night to accommodate a
redesigned iPhone screen and, within a few days, being able to produce 10,000 iPhones a
day-a feat not possible in U.S. factories. Although the cost of labor is a small percentage of an
iPhone's cost, the major advantage and cost saving in China is in the management of supply
chains and rapid access to component parts and manufacturing supplies from various
factories in proximity. In addition, Apple maintains that the large number of engineers and
other skilled workers who could be accessed on short notice in China simply are not readily
available in the United States; nor are the factories with the scale, speed, and flexibility that
such a high-tech company needs. Apple executives give the example of visiting a factory to
consider whether it could do the necessary work to cut the glass for the iPhone's touchscreen.
Upon their arrival, a new wing of the plant was already being built "in case you give us the
contract." Fareed Zakaria, in Time, maintains that this competitive edge is gained largely
through Chinese government subsidies and streamlined regulations to boost domestic
manufacturing. In the end, however, Apple maintains that:
“We don't have an obligation to solve America's problems. Our only obligation is making the
best product possible”.
However, after a number of suicides at Foxconn in 2010, reportedly attributable to the poor
working conditions and excessive hours for very low pay, Apple was under some pressure
from negative publicity; subsequently, Foxconn raised wages, retained counsellors, and
literally strung nets from its highest buildings (to catch people). Apple does have a supplier
code of conduct. In January 2012, Apple joined the Fair Labor Association (FLA), the first
technology company to do so, and asked the group to do an independent assessment of
conditions at its major factories. This move followed the company's own report that
documented numerous labor violations, including employees working 60-hour workweeks
and not being paid proper overtime. A few days after the FLA started its investigation,
Foxconn said that it would in- crease salaries for some workers by 16 percent to 20 percent-to
about $400 a month before overtime and that it would reduce overtime. Although this is
encouraging news for workers' rights, it should be noted that Apple and other contractors are
known to allow only the slimmest of profits to its suppliers, which encourages the suppliers
to try anything to reduce their costs, such as using cheaper and more toxic chemicals or
making their employees work faster and longer.
"The only way you make money working for Apple is figuring out how to do things more
efficiently or cheaper," said an executive at one company that helped bring the iPad to
market. "And then they'll come back the next year and force a 10 percent price cut."
China is being forced to take notice of such problems, and labor is gaining some ground; the
issue then is that firms have already started to move jobs to other countries with lower wages.