Ethical and Societal Dilemma Case AMB336 International Marketing (Author: Dr Shane

Mathews)
(Reference: in Grewal, Dhruv, Levy, Michael , Mathews, Shane W., Harrigan, Paul , & Bucic,
Tania (2014) Marketing. McGraw Hill Education, Australia.)
Do Customers Care More about the newest iPhone or about Working Conditions in China? i
An iPad user reading a recent issue of The New York Times on their tablet might have
suffered a strange sense of guilt. The newspaper published reports of labour abuses that
seemingly run rampant in the Chinese factories responsible for producing Apples most
popular products. These in-depth reports catalogued a long list of failures: the presence of
child workers, more than 12-hour shifts, regular work weeks of longer than 60 hours,
workers housed in tiny dormitories with approximately 20 people limited to three rooms,
allegations of suicides, and lax safety standards that have led to fatal explosions.
The reports focus mostly on a Taiwanese owned Foxconn factory in Chengdu, in southwestern China, that manufactures iPhones and iPads. An explosion caused by insufficient
ventilation of aluminium dust (created when the cases for the gadgets get polished) in
May 2011 killed four workers. A similar explosion followed six months later at another
factory. The ensuing investigations by The New York Times revealed multiple other
violations of the code of conduct that Apple has established for its suppliers.
With this code of conduct, as well as the frequent audits it performs, Apple asserts that
it is doing the best that it can to ensure its suppliers live up to reasonable standards and
fair labour practices. An anonymous former Apple executive asserts, There is a genuine,
companywide commitment to the code of conduct. Yet abuses continue, as Apples own
corporate responsibility reports reveal. Audits show that several supply companies
continue to engage in labour practices that violate the code, with few punishments or
changes to the supply chain.
Part of the reason stems from Apples need for secrecyonce it finds a supply partner
that can manufacturer its high-tech gadgets, it wants to maintain that relationship to
avoid any leakage of innovation information. So even if a supplier violates the code again
and again, Apple is unlikely to switch.
Furthermore, Apples focus on innovation means that it must work constantly to come
up with new ideas and products, which it needs to produce quickly and in sufficient
quantities to keep customers happy. This demanding supply chain leaves little room for
flexibility. When Apple says it needs 1 million products, say, then its supplier is going to do
whatever it takes to get those products ready in time. The code of conduct might ask that
factory workers be limited to 60-hour work weeks, but in truth, Apple is asking the
factories to keep running all day, every day, to make the order.
To keep its costs low, Apple also offers very slim profit margins to suppliers. In turn,
these factories aim to reduce their own costs. Another Apple supplier thus began using a
toxic chemical, instead of rubbing alcohol, to polish the screens of iPhones, because the
chemical dries faster. But it exposes workers to the threat of paralysis and nerve damage.
The primary reason for these labour abuses may come only at the end of the supply
chainthe consumer. A survey of Apple consumers showed that only 2 percent of them
recognised labour issues as a concern. In a remarkably succinct summary of the
challenge, another anonymous Apple executive asserted, You can either manufacture in
comfortable, worker-friendly factories, or you can reinvent the product every year, and
make it better and faster and cheaper, which requires factories that seem harsh by United
Sates standards. And right now, customers care more about a new iPhone than working
conditions in China.
Although Apple attempts to monitor its channel partners behaviour with regard to labour

issues, sometimes abuses fall through the cracks.

More recently unsafe work conditions have again been called into question with an outsourcing
manufacturing factory in Bangladesh collapsing killing more than a thousand workers (Times, 2013). The
Bangladeshi garment industry has been plagued with incidents of unethical and unsafe working conditions with
many major retailers being accused of not managing the unethical work environments of their outsourcing
companies, for example, in the last few years, fires in Bangladesh and Pakistan have taken the lives of nearly 500
apparel workers before this incident, at plants producing for Gap, H&M, JC Penney, Target, Abercrombie &
Fitch, the German retailer KiK and many others (The Guardian, 2012). Britain's low-cost chain Primark and
Canada's Loblaw who had outsourcing contracts from the factory have offered compensation to victims and their
families, but 28 unnamed companies have also been implicated in the disaster, for example high street brands
Primark, Benetton, Matalan and Mango (News.com.au, 2013). Target, Kmart and Cotton On, who all source
materials from Bangladesh but did not have anything to do with the factory that collapsed have agreed to meet
with Oxfam and come up with a solution to the issue of unauthorised third party outsourcing (News.com.au,
2013).
Student Action:
You are an international marketing manager for ASCC. You have been given the task to
evaluate the outsourcing implications for the firm who currently manufacture in Australia.
You have been asked to evaluate overall manufacturing of your textile products in
Bangladesh.
Assess the case and develop some recommendations for the approach you would take and
give reasons why. You should have some immediate recommendations as well as some
long term recommendations linked clearly to the firm, the product and the brand. Focus on
Cooperate Social Responsibility (CSR).

iCharles Duhigg and David Barbosa, In China, Human Costs Are Built into an iPad, The
New York Times, January 25, 2012,
http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-humancosts-for-workers-in-china.html?
pagewanted51&_r53&ref5business&src5me&adxnnlx5133104603059qBpuAMRNH8OEl6dxh/7g; Melissa J. Anderson, The Supply Chain Enters the
Spotlight, Evolved Employer, February 14, 2012,
http://www.evolvedemployer.com/2012/02/14/the-supply-chainenters-the-spotlight/.
Rana Foroohar , (2013), Time: Business & Money, Bangladesh Factory Collapse Will Force
Companies to Rethink Outsourced Manufacturing. April 30, 2013,
http://business.time.com/2013/04/30/bangladesh-factory-collapse-will-force-companies-to-rethinkoutsourced-manufacturing/#ixzz2d2ZKniHL
Scott Nova, (2012), The Guardian, Apparel industry outsourcing costs garment workers' lives in
Bangladesh, Until western consumers make safety standards an issue for the big clothing brands,
factory fires will continue to take lives, Friday 14 December 2012,
http://www.theguardian.com/commentisfree/2012/dec/13/apparel-industry-outsourcing-garmentworkers-bangladesh
News.com.au, (2013), Death toll from Rana Plaza building collapse in Bangladesh hits 1000, May
10, 2013, http://www.news.com.au/world-news/asia/bangladesh-collapse-toll-passes-1000/storyfnh81fz8-1226639325170#ixzz2d2dNnOz5