Apple Corporate Responsibility and Marketing Strategies, Research Paper Example

There used to be a perception in the distant past that a company can do well for as long as it takes good care of its owners/shareholders and customers. But times have changed significantly and so have social attitudes. Now the consumers care about the social and ethical conduct of the companies they do business with and reward those who display model behavior. Thus, ethical corporate conduct is not only the right thing but also economical beneficial and Apple understands this well.

Apple takes its corporate social and ethical responsibilities and this can be judged by the fact that the company has been conducting annual audits since 2006. The company’s auditing activities covered 16 countries and 1.5 million workers last year.  Final assembly facilities are audited on annual basis whereas other facilities are audited on the basis of certain risk factors such as past audit record and geographical location (Apple Inc.).

One of the ways company has been demonstrating its commitment to highest ethical standards is by ensuring that its suppliers treat workers with respect and provide them fair wages as well as safe working environment. Apple tracked weekly work schedule for over million workers in its supply chain last year. The company also conducted 33 specialized audits at facilities with high risk of unfair treatment of migrant workers last year (Apple Inc.).

The company’s commitment to ethics is also reflected in its attitude towards the environment. Apple works closely with its suppliers to help them adopt sustainable production and manufacturing practices. The company also launched Clean Water Program pilot to help suppliers with reuse and recycling efforts (Apple Inc.).

One of the factors behind the company’s increased focus on ethics and corporate social responsibility is also the scandals related to its suppliers that threatened to inflict serious damage to Apple’s reputation few years ago. Apple commissioned an independent study which found that workers at one of its major suppliers, Foxconn were overworked and exposed to unsafe work environment (Racoma, 2012). Reports of violations like those at Foxconn threatened Apple’s reputation as an ethical company to such as extent that Apple agreed to join Fair Labor Association (FLA) in 2012 (Hillen, 2013).

Saving corporate reputation also became important to the company because of increasingly closer scrutiny by the media and advocacy groups. This is why Steve Jobs’ successor Tim Cook personally got involved in the issue and even visited Foxconn facility personally. Apple also forced another unnamed supplier to return the passports of foreign workers (Wingfield, 2012).

Apple can pursue several options to ensure that its suppliers adhere to wage and benefits standards going forward. One of the options the company can pursue is to let suppliers know that the company’s business relationship is contingent upon unlimited authority for independent auditors such as FLA to conduct unannounced audits anytime during the year. First of all, this will lend credibility to Apple that the company is genuinely interested in addressing ethical shortcomings in its supply chain and not merely paying a lip service. Not knowing when the audit may occur will also put suppliers on their toes and pressure them to comply with agreed-upon rules on a regular basis. In order to demonstrate company’s commitment to the findings of independent auditors, Apple should not hesitate to break off business relationships with suppliers who repeatedly fail to live up to their commitments. Such disruptions in the supply chain network may cost in the short term but they will also help protect the company’s brand image which is more important in the long term.

Another option that the company can pursue to ensure its suppliers adhere to wage and benefits standards going ahead is to put its own HR inspectors in suppliers’ production facilities around the world. These HR inspectors will be paid by Apple and answerable only to Apple’s management. While this alternative may not be practical or even an option for most companies, Apple is different. Not only the company has enormous resources but it also has a lot at stake. Apple’s market power and sales volume mean it has strong negotiation power against suppliers. No supplier would like to lose Apple which is demonstrated by the fact that suppliers, even major ones like Foxconn, have historically agreed to almost all conditions put forward by Apple. This option may be more expensive than the first option but this option will also ensure Apple monitors the labor conduct of its suppliers round-the-clock seven days a week and 365 days a year. This option is also the only one probably that will help Apple quickly achieve nearly 100 percent compliance rate if it has not already.

Apple single-handedly revolutionized the market for at least three products which are digital music player, smart phone, and tablet device. Apple’s technology was so ahead of the competition that the consumers were more than willing to pay the premium prices for the revolutionary products. Apple’s dominance over the competition was so clear that Apple had 75 percent share of the tablet devices market in late 2010 (BusinessInsider, 2011). In other words, Apple had achieved differentiation from the competition on the basis of product innovation and quality. This translated into record profit margins which were unprecedented in the industry. If it was still Steve Jobs era and Apple was maintaining its tradition of introducing revolutionary products that are far ahead of the competition in terms of innovation and quality, Apple’s customers would have been willing to pay more for its products if Apple had to increase prices to provide better wages and benefits for suppliers’ workers. There would have been two major reasons behind it. First would be the unrivaled loyalty of Apple’s customers to the company and second would be the fact that Apple’s customers would have little choice due to lack of competitive offerings by the competition.

But it may not be true today because Apple has lost the competitive edge in terms of innovation and so has pricing power and customer loyalty to an extent. Thus, it is not surprising that Apple has finally been witnessing declining profit margins due to lower pricing power. In October last year, Apple reported consecutive third quarter of declining profits. The average price of an iPhone had declined by 6.6 percent during the third quarter of 2013 as compared to a year ago. This declining profitability occurred despite rising sales (Sherr, 2013)which shows that Apple is finally transitioning from an innovative company to a mass-market producer.

Apple’s customers also have little reason to pay higher prices now since the competition, particularly, Samsung has emerged as a close competitor to Apple in terms of product offerings. Samsung has not only been spending billions of dollars in marketing to improve its perceptions for marketing but the company has also increased the pace of introducing new products, sometimes even before Apple as the case of smart watch demonstrates (Kim, 2013).

Apple developed a reputation for innovation and quality during Steve Jobs’ second tenure but the company’s current marketing strategy is focused on striking a delicate balance between quality and volume. We noted above that the company’s profit margins may be on the decline but the company’s sales volume has been increasing. Declining profitability is often a sign that the competition is closing and competitive advantage is disappearing. Apple can adopt several strategies to improve its competitive advantage in the global market place.

Apple has a valuable brand with high global recognition rates but even this is not enough to compensate for the often huge cultural and consumer lifestyle differences as the company’s experience in Japan shows. Despite being greatly in demand, Apple failed to make inroads in Japan because Japanese consumers want different features in smart phones and they use smart phones for different purposes than American consumers. For example, many Japanese watch TV on their smart phones, thus, TV Tuner is a common technology in many smart phones in Japan. Similarly, Japanese play lot of games on smart phones. Japanese also don’t like cell phone contract plans (Chen, 2009). Thus, Apple should think global but act local and this is also clear through India’s example. Apple’s entry in India was late because the company initially hesitated due to different distribution structure in India than the one Apple prefers (NDTV, 2012). But it was a huge mistake because India is one of the fastest growing markets for smart phones and Apple should have adapted to Indian market sooner instead of following the same competitive strategy that has been successful elsewhere.

Another strategy Apple could adopt to enhance its competitiveness may be to go back to its roots, i.e. renewed focus on innovation to set itself apart from the competition and increase pricing power in the face of the rising competition. One alternative may be to set up new or expand the scale of existing research operations (if any) in India and China where labor costs are low and there is a steady supply of engineering and computer science graduates. One of the reasons Apple’s profit margins may be declining is the declining lower of new products from Apple which do not present the same leapfrog in terms of innovation that Apple’s newer models used to represent in the past. In fact, the popularity of older iPhone models which are cheaper was one of the reasons behind lower profitability in the third quarter of 2013 (Pepitone, 2013). Thus, Apple needs to invest more in research and innovation to regain the pricing power it enjoyed not long ago and when the consumer enthusiasm for newer products or models from Apple was the envy of the industry.

Apple is sitting on a massive cash reserve, thus, the lack of resources is not an issue. Apple still has a brand power that none of the other competitors has and the company should innovate in order to remind the consumers what its brand stands for. In addition, Apple should adapt to local markets where necessary because volume has also become important to Apple and it cannot afford to ignore some of the markets with the greatest potential even if the consumer demographics and industry structure may be vastly different from Apple’s preferred models. 

References

Apple Inc. (n.d.). Accountability. Retrieved April 20, 2014, from http://www.apple.com/supplier-responsibility/accountability/

Apple Inc. (n.d.). Environment. Retrieved April 20, 2014, from http://www.apple.com/supplier-responsibility/environment/

Apple Inc. (n.d.). Labor and Human Rights. Retrieved April 20, 2014, from http://www.apple.com/supplier-responsibility/labor-and-human-rights/

BusinessInsider. (2011, March 6). Steve Jobs Wasn’t Lying: Apple’s iPad Market Share Was Really More Than 90% Last Year. Retrieved April 20, 2014, from http://www.businessinsider.com/ipad-share-2011-3

Chen, B. X. (2009, February 26). Why the Japanese Hate the iPhone (Updated). Retrieved April 20, 2014, from http://www.wired.com/2009/02/why-the-iphone/

Hillen, B. (2013, May 18). Foxconn continues to violate Chinese labor laws says report. Retrieved April 20, 2014, from www.slashgear.com/foxconn-continues-to-violate-chinese-labor-laws-says-report-18282626/

Kim, M. (2013, November 27). Samsung’s marketing splurge doesn’t always bring bang-for-buck. Retrieved April 20, 2014, from http://www.reuters.com/article/2013/11/27/us-samsung-marketing-idUSBRE9AQ18720131127

NDTV. (2012, July 25). Apple CEO Tim Cook: “I love India, but…”. Retrieved April 20, 2014, from http://gadgets.ndtv.com/mobiles/news/apple-ceo-tim-cook-i-love-india-but-247307

Pepitone, J. (2013, October 28). Apple’s profit concerns linger. Retrieved April 20, 2014, from http://money.cnn.com/2013/10/28/technology/apple-earnings/

Racoma, J. A. (2012, March 3). Apple Foxconn Investigation Finds ‘Significant Issues’ in Labor Standards. Retrieved April 20, 2014, from TechWireAsia: http://www.techwireasia.com/2582/apple-foxconn-investigation-finds-significant-issues-in-labor-standards/

Sherr, I. (2013, October 28). Apple Shows Its Mettle Ahead of Holiday Season. Retrieved April 20, 2014, from http://online.wsj.com/news/articles/SB10001424052702304655104579163963606788056

Wingfield, N. (2012, April 1). Apple’s Chief Puts Stamp on Labor Issues. Retrieved April 20, 2014, from http://www.nytimes.com/2012/04/02/technology/apple-presses-its-suppliers-to-improve-conditions.html?pagewanted=all&_r=0