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Austin Paulenske
English 1020
Professor Layton
12 April, 2014
Apples Reasons for Success and Manufacturing Practices
Apple is one of Americas most prosperous business corporations for multiple reasons.
Its strong, business savvy, co-founder, Steve Jobs, found numerous ways for Apple to distinguish
itself from its competition. Apple produces unique products that set the standards for the cellular
and computing industry. Its focus on simplicity and elegance is what makes Apple the leading
manufacturer in the world of electronics. The impressive amount of revenue in which the
company generates would not have been possible if it were not for the help from the U.S.
government. Therefore, Apple has an obligation to bring manufacturing back to America.
It is not often that a college dropout becomes a multimillionaire before the age of 30.
Steve Jobs, the co-founder of Apple computers is one particular individual that accomplished this
feat. According to Infoplease.com, Jobs attended Reed College in Portland Oregon for one
semester before he dropped out in 1972. Not but four years later, In 1976, he began to sell
personal computers assembled in his garage. That was beginning of Apple computers, which
revolutionized the computing industry (Infoplease). Aside from Apple Computers, Jobs was
also the CEO of the animation Company Pixar. To expand his wealth even further, in 2006, Jobs
sold Pixar to Walt Disney Company for 7.4 billion in stock. Once Pixar was out of the picture,
Jobs sole focus was on Apple Computers. He put his heart into the business for five more short
years until he passed away in 2011 due to respiratory arrest resulting from pancreatic cancer
(Infoplease). His charismatic personality and unique business tactics drew customers in. It is
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often said that Jobs himself is one of the main reasons why Apple is such a successful company
today.
A strong, business savvy, co-founder is not the only thing that brings success to a
growing operation. From a business perspective, Apple understands when and why people want
to pay more ease of getting connected, the pleasure of using, and the security of the devices
(Martellaro). Apple develops products that are simple to use, and elegant in design. Simplicity is
a key element in Apples diverse range of products. In accordance with Dan Schawbel, a
contributor for Forbes, Preference for simplicity is part of being human finding a simpler way
to achieve the same or better result. Apple single handedly made simplicity a key factor in
design for electronic products in this field. Accordingly, Schawbel also mentions that The
company has actually helped elevate the public appreciation of- and demand for- design and
simplicity... Simplicity has the power to bring employees closer together and get closer to
customers.
From a different perspective, John Martellaro, contributor for The Mac Observer, says,
Competitors have been able to make products that look almost as good and operate almost as
well second best. The difference between Apples products and their competitors is the
unique aspect to them. Company executives and employees are the trendsetters in advancement
of product design and functionality. Thinking different was an accurate expression of the
companys soul They create products that they themselves would love to use (Schawbel).
Designing products that are unique from others in the same field is a risky business decision that
has caused other corporations to crash and burn, but for Apple, its one of many keys to their
success.
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Another reason for their prosperity is its marketing tactics. The companys target
clientele are not bargain shoppers, Apple is not a discount brand. Simply put, their products are
designed for consumers who have money, more specifically people who are eager to spend
money to avoid the loss of precious time (The Mac Observer). In other words, its products are
intended for important people, whose time is more valuable than their capital and people who
are willing to spend a little more for perceived value (Schawbel). Apples marketing techniques
are impressive, but the numbers are even more eye opening.
Exactly how profitable is the company? William Lazonic, author of many short works on
the Roosevelt Institute, said that Right now the most financially successful innovative enterprise
in the U.S, if not the world, is Apple Inc. He also mentioned that the companys sales in the
fiscal year of 2011 were equivalent to about $107 billion on an annual basis. Apple not only has
access to more money than any other business corporation in the United States, but It has been
noted that they had access to more cash than the U.S treasury (Lazonic). But like most
successful establishments, behind all of its prosperity and financial income, there is a dark side to
this business. The company maintains its steady revenue by keeping the largest share of the
profit for itself and yielding the lowest possible share to the workers (Sethi).
The most profitable business in the U.S is not benefitting our domestic economy to its
fullest potential. Virtually all of the production of Apples products is done by contract
manufactures in Asia (Lazonick). The exact numbers are approximately 43,000 or so
employees in the U.S. but more than 700,000 employees working overseas (Takahashi). This is
mainly because the extra costs that it would require to bring manufacturing to the United States.
Tim Worstall, contributor for Forbes.com speculates that is would cost them about $600
million a year, plus whatever tax rate is implemented on the goods to bring manufacturing back
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to America. This is obviously nowhere near its gross annual income. Also, similar to other
multinational corporations, Apple holds roughly 63% of its money outside of the U.S. to evade
our countrys tax rate (Lazonick). Ed Kleinbard, former chief of staff of Congresss Joint
Committee on Taxation and now USC law professor says that the number of U.S. corporate
money that is overseas is around $2 trillion. He then goes on to say Tax that at top corporate
rate and suddenly America has an extra $700 billion (Garrison). This is money that can vastly
improve the federal budget and reduce national deficit.
Apple not only has an ethical duty to practice domestic manufacturing but also an
obligation to America. If it were not for the U.S. government, Apple would not be where it is
today. Clyde Pestowitz, editor for CNN says Virtually every piece of technology in any Apple
product had its origin or was partially developed on the basis of a U.S. government- funded
program. Even the president of the United States, Barack Obama, recognized that U.S.
government investments and subsides played a major role in making it possible for a company
like Apple to exist in the first place (Lazonick). In the early days of Apples development,
America helped it to get on its feet, Apple has an obligation to return the favor.
In terms of manufacturing, it costs Apple roughly seven dollars in labor to construct an
iPhone; the bulk of the iPhones value comes from the key electronic components. These
components require intensive capital and technology investments, but they do not require a great
amount of labor. In other words, they can be produced in America (Pestowitz). In disregard to
these findings, Apple continues to assemble these parts in Asia. Pestowitz insists that Apple
should move production of the advanced components to America and the human labor to
Mexico. In turn, this would create more jobs in North America, reduce the U.S. - Mexican trade
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deficit (which is about $55 billion annually), and would have geographical benefits for Apple
because of the close location.
On another note, not only would domestic manufacturing benefit the U.S. but it would
also benefit Apples employees. The company has had numerous reports of it violating labor
laws in factories overseas. Most of its worker related problems focused on Apples
manufacturing partner, a company called Foxconn. Foxconn is the largest, most technically
sophisticated manufacturing operation for consumer electronic products also the single largest
exporter from China (Sethi). Apples partner has a notorious reputation for violating labor laws
to an unacceptable extent. Foxconns unlawful practices are that of: underage workers, below
standard wages, involuntary labor (60- 70 hours per week), and health hazards resulting from
toxic chemicals and inadequate air filtration systems (Sethi). There have even been numerous
reports of factory workers committing suicide due to the high stress work environment. Prakash
Sethi, editor for Carnegie Council, say that Chinese factories conceal their problems from
auditors by keeping workers away from plants during audit visits, promising workers bonuses if
the auditors were satisfied, and implied threats of punishment if serious problems were
identified.
This type of abuse is not uncommon in Chinese factories. China Labor Watch conducted
an investigation in six of Samsungs major factories. According to China Labor Watch's report,
overtime for some employees reached or exceeded 100 hours per month, with some employees
having only one day off a month (Lee). The workers in factory felt compelled to work overtime
due to such low pay rates, approximately $206 a week in U.S. currency. Investigators entered
factories undercover to get a firsthand observation of the working conditions. The investigation
uncovered excessive overtime, exhausting working conditions that require most employees to
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work standing, cases of forced overtime without pay and other labor abuses (USA Today). If
the production of these goods was shifted to America, executives from companies like Samsung
and Apple wouldnt have to worry about the unfair treatment of their employees.
Apple recognizes its unlawful manufacturing techniques, in an effort to clear its name,
In 2011 Apple announced they joined the FLA (Fair Labor Association) (Sethi). This
announcement was good for the companys image at first but it was soon exposed that the FLA
has extremely low credibility regarding worker related issues in Asia. More recently, after all of
the attention from the media, Foxconn has pledged to raise wages and make improvements. If
the company follows through, this is going to raise the cost of doing business in China
(Takahashi). Aside from that, shipping costs from China to America are extremely high. Taking
these things into account, Why not create the same jobs here, under better conditions, says
Dean Takashi, editor for Venturebeat.
From a corporate perspective, Apple has a right to fear bringing manufacturing back to
the homeland. According to Clyde Prestowitz, writer for CNN, It will entail raising labor costs
so high as to make the company less competitive and profitable. From a different perspective,
Takashi states that Apple will continue to keep their business in Asia because: American workers
here are overpaid relative to Asian workers, infrastructure for manufacturing plants has melted
away, and the flexibility of Chinese factories. All these factors are practically irrelevant when the
amount of money that Apple has is taken into consideration. Other companies have successfully
manufactured electronics in the U.S. Intel has major factories in Oregon, California, New
Mexico, and Arizona and invests $5 billion a year in American factories (Takahashi).
Apple does not feel impelled to go beyond the minimum because they see no apparent
and measurable positives that could be expected from choosing any other course of action
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(Sethi). The simplest way to put it is that they are dead wrong. In addition to the benefits
mentioned earlier, Apple is not taking into account that domestic manufacturing could limit
secrets that are leaked through the Chinese supply chain and they would no longer have to
support jobs in the country where its goods are pirated in huge numbers (Takahashi).
In recapitulation, Apple is such a successful corporation today because of Steve Jobs and
his ability to distinguish the company from its competition. Its keen eye for design and class
combined with the functionality of its products sets Apple apart from other electronic companies.
The money accumulated by the company would not be so substantial if it were not for help from
the federal government in Apples blooming stages. Therefore, Apple has an obligation to bring
manufacturing back to America. In doing so, the money accumulated through taxes and other
means will vastly improve the federal budget, reduce national deficit, create more jobs in North
America and reduce the U.S. - Mexican trade deficit. Not only will our nation benefit from the
subsidies, but it will benefit Apple and its employees as well. Domestic manufacturing will
reduce shipping costs and have geographical benefits because of the closer location. In addition
to these benefits, American factories can provide considerably better working conditions for its
employees and Apple would no longer have to support jobs in a corrupt workforce. In essence,
Apple could not have come to be the dominant electronic provider that it is without U.S.
government investments and subsides, and they should bring manufacturing back to America for
the wellbeing of the company and this nation.