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Sustainability Final Project Author: Shannon (shannon #at# readrecord #dot# org) Sustainability and Quality Assessment: The Case of Apple Although sustainability is an overall developing strategy in global scope, we believethat public entities, no matter profit oriented (e.g. business companies) or not (e.g. non-profitassociations), should shoulder their responsibilities on sustainable growth of human being. Thus,a comprehensive assessment of their choices and practices is a way of necessity to understandthe real situation and to explore solutions of a sustainable development. In this case, I chooseApple, the worlds’ leading consumer electronic and software company, to implement thesustainability and quality analysis. In addition, I follow the value creation scheme to analyzeeach element of sustainable operations under the guidance of triple bottom line and qualitycontrol (Martins, Mata, Costa, & Sikdar, 2006).Company Background Apple Inc. is an American-headquartered multinational corporation that designs,manufactures and markets a range of popular products including hardware (e.g. personalcomputers, mobile and media devices), software (e.g. operation systems and softwareapplications), peripherals (e.g. iPad and iPhone case), and third party digital contents (AppleInc., 2011b). The Company outsources a substantial part of manufacturing and logistics to thirdparties and sells its products internationally using self-owned retailer stores, online stores, andthird party resellers (Apple Inc., 2011b). The company has been honored the most admiredcompany several times by Fortune Magazine (Bernasek, 2010; Colvin, 2009; Fisher, 2008);however, it also received harsh criticisms for its lagged environmental and labor practices.Economy Overall market and sales. Consumer products draw Apple’s main focus: its innovativelines of iPod media players (9.02 million sales*1), iPhone (18.65 million sales*1), and its newlylaunched iPad (4.69 million sales*1) hold the majority of consumer market (Apple Inc., 2011b);Macs (3.76 million sales*1) are historically pricier than Windows powered PCs, with exceptionsif the two are similarly configured. The company’s roaring financial success is a reward fromevery Apple user but also a great return to its numerous shareholders. Operation. Worth noting is Apple’s user-oriented albeit anti-traditional businessphilosophy: unlike the business school’s typical approach of product diversification to defusemarket risk (by offering a range of products that vary performance grades, features, and prices),Apple puts every resource and attention behind a few flagship products and makes themexceedingly well (Morris & Levinstein, 2008). This paradigm makes Apple’s products inherentlysustainable: less variety in design means less sophisticated and easily standardized molds in themanufacturing process, which is able to ultimately cut the spending on raw material as well aslabor cost; also, by not differentiating low-end and high-end products, Apple is able to carter formarkets that are geographically and culturally different. Another sustainable strategy is to put its innovativeness and creativity in the usability(focus on software based ease of use rather than the traditional hardware specification) toavoid the low margin battle with its rivals (Yoshida & Ojo, 2009). By building an eco-systemaround Apple’s software platform, developers, publishers, and multimedia distributors havebeen contributing to the usability goal under Apple’s roof; the ability of gain mutual benefitis more likely to have a lasting effect on the Company’s profitability (Yoshida & Ojo, 2009). However, dispute on the openness of the Company’s platform remains unsettled, with most
criticisms arguing that proprietary device and software can not only ensure Apple’s controlon consistent user experience but also can guarantee the Company a huge profit (Cusumano,2010). The inconformity to existing rules may harm the motivation of numerous developers andmanufacturers if a formidable rival appears. Distribution and Service. A variety of direct and indirect distribution channels are usedby Apple to reach the end consumer, including but not limit to brick and mortar stores, onlinestores, third-party cellular network carriers, wholesalers, and retailers (Apple Inc., 2010b). Thecompany believes a direct and effective communication with its customers can differentiateitself from its competitors (Apple Inc., 2010b). Thanks to this notion, Apple is able to focus onproviding a high quality of sales and after-sales support across the world. The rise of automatedservices, which deliver the digital content and updated software application through Internet, isianother tactic to enhance service quality (Cusumano, 2010). It is not hard to speculate the effect of providing high quality service: (1) knowledgeableand passionate salesperson can ensure an integrated buying experience; (2) by operating self-owned flagship stores, Apple is able to eliminating the cost of market research on what consumerare pursuing, since the information can be directly obtained from the interaction betweenconsumer and salesperson; and (3) most importantly, customer loyalty can be raised up byturning the whole experience into pop culture, which can further help building a sustainablepublic relationship.Society Human resource management. Apple is perhaps the best-known company formaintaining the balance between creative and commercial personnel, epitomized by thecooperation between the meticulous CEO Steve Jobs, who acted as the creative brain specializedin shaping product design and use experience, and COO Tim Cook, who handled the day-to-day operations (Rigby, Gruver, & Allen, 2009). Working culture in Apple has a consistentimage as its products: the spiritual pursue of doing extraordinary work is Apple’s universalrecruiting requirement. Apart from the intelligent engineers, Apple has 10,000 (out of 25,000 intotal) full time employees working in its retail stores (Morris & Levinstein, 2008). Moreover,Apple is dedicated to be an Equal Employment Opportunity and Affirmative Action Employer;it even provide opportunities to job applicants with physical or mental disabilities through aspecial “reasonable accommodation” plan (Apple Inc., 2011d). Supplier responsibility. Apple is a company that likes to operate everything underone roof expert for the hardware manufacturing. Substantially all of Apple’s products andparts are outsourced globally to manufacturing partners, primarily located in East Asia (AppleInc., 2010b). Suppliers have to accept the Apple Supplier Code of Conduct (the Code) as acondition of business contract, which targets at improving working conditions as well as treatingworkers with dignity and respect (Apple Inc., 2010a). Furthermore, Apple conduct onsite audits,approve corrective action plans, and verify implementation together with third-parties such asgovernment agencies and NGOs (nongovernmental organizations), to ensure the suppliers takethe Code seriously with double check (Apple Inc., 2011c). Apple is also the active memberof EICC (Electronics Industry Citizenship Coalition), a group of electronic firms voluntarilyworking together to adopt CSR (Corporate social responsibility) practices; annual reportsdocumenting detailed audited information on supplier social responsibility have been publishedby Apple from 2007 (Apple Inc., 2011e). However, Apple’s effort on equal-standard social responsibility, regardless of wherethe products are made, has seldom stopped sweatshop charges from mass media. Suppliers of
Apple have been repeated criticized for abusing workers under inhuman and military conditions(Moore, 2011; Tsai, Kane, & Ye, 2009), of which the super-factories are mainly clustered ineast China. Although the widely reported child-labor or suicide incidents were not happenedunder the direct supervision of Apple -- who usually acclaimed immediately to have an thoroughinvestigation after the media exposure -- consumers should not excuse Apple’s seeminglyinnocent: as the world’s leading technological company, Apple has an undeniable bargainpower on suppliers ( Kane, Sherr, & Tsai, 2010) – the root reason for suppliers mal-balanced therelationship between profit and social responsibility.Environment Evaluation on environment friendliness of Apple’s services is not easy, since theCompany does not actually manufacture the products. The true manufacturers are mostly locatedin developing countries, where environmental regulations are lax and frequently get violated(Bertolucci, 2009). Meanwhile, the market force from government and cooperate buyers areforcing Apple to meet the environment standards: electronic vendors have to follow RoHS(European Directive on the Restriction of the Use of Certain Hazardous Substances in Electricaland Electronic Equipment) if they want to sell product in European countries or EPEAT(Electronic Product Environmental Assessment Tool) if the customer is US a federal agency(Bertolucci, 2009). Transparency. Apple documents detailed reports of its environmental progress andenergy efficiency designs on official website. A comprehensive analysis of green-gas-emissionsis also available, covering the complete products’ lifecycles from manufacturing to retailfacilities. Specifically, consumers can download environmental report tailored for each product;they can even participate in free recycle program according to product category by simplyclicking the mouse (Apple Inc., 2011a). In contrast, scant information can be found on e-wasterecycling operation after collecting these wastes from consumers. Little is known on energyconsumption of data computing, which responsible for its massive media data exchange oniTunes platform. Lack of transparency on less tangible area can be a potential flaw on the greenimage of Apple, especially when green organizations began to realize this problem and gaveharsh comment on behalf of consumers (Cook & Horn, 2010). Hazardous Substance Management and Restrictions. Although all Apple products(except for power cords) are now free of PVC and brominated flame retardants (BFRs) (AppleInc., 2011a), the Company is criticized for not giving timelines for further phasing-out otherhazardous substances such as DEHP and phthalates, which leads to an unfavorable overallGreener Electronics Ranking position (Apple dropped its place from 5th to 9th in the latest report)behind its major rivals in the market of consumer computer and mobile equipment such as Dell,HP, Nokia, and Sony Ericsson (Greenpeace, 2010). The plans of eliminating elemental bromineand chlorine in all product lines are in progress, however, with no official disclose of detailedinformation reported (Greenpeace, 2010). Energy Use. Apple’s product is born to be more efficient: designers and engineers arededicated to develop smaller, thinner, and lighter products without compromising usabilityor computing power (Apple Inc., 2011a). Using less material and building power efficientprocessors are the main contributors of eliminating greenhouse gas emission: every singleproduct is benefited from Apple’s strategy of putting software and hardware designing underone roof and thus exceeds the strict Energy Star guidelines (regulated by the United StatesEnvironmental Protection Agency) for efficiency (Apple Inc., 2011a). Nevertheless, clean energy(or the renewable energy) has not been incorporate into Apple’s operation, which is extremely
important because energy use in data center buildings are experiencing an explosive increase butremains out of the public eye (Cook & Horn, 2010). In this filed, Apple lagged behind its rivalGoogle who has audaciously invested several wind farms from 2010 (Becker, 2011; Morrison &Sweet, 2010). Recycling. Apple currently provides two recycling programs (one for computer, the otherone for small electronics) to customers all over the world; participation is encouraged by sendingout incentives (e.g. gift card or discount when purchasing a new product) (Apple Inc., 2011a).Again, little is known about the operation procedure of recycling; less information is availableabout the efficiency of third-parties who are handling these e-wastes out of American market.Moreover, what Apple adopts is the cradle-to-grave way of consumption, with no innovativeconsiderations on creating a reusable product line or creating a green manufacturing chain2.Consumers are increasingly encouraged to buy a new device no longer than 18 months (that’s thetypical period of launch a brand new generation) instead of updating the old one. The plannedobsolescence, or the designed disposability, may be the key problem of Apple’s green strategy.Quality Internal Quality Metrics. Quality control is a vital issue for every company, sincethe overall quality of offerings plays an important role in brand reliability and can improvecustomer satisfaction in the long run (DelVecchio, 2000; Taylor & Baker, 1994). Apple setsup an extremely high quality standard inherited from its luxury product positioning, which hasbeen systematically imbedded into Apple’s culture: there is a senior vice president of operationspecialized in making sure ‘the products meet the highest standard of quality’(Adrian, 2010). Therefore, suppliers of Apple are carefully chosen and intensively tested, to ensure that allsuppliers are on the same quality level as Apple itself (Apple Inc., 2010b). Recently the antennadesign and problematic Bluetooth performance coming with the new iPhone 4 have put Applein spotlight. However, Apple’s attitude is less than responsible: the CEO simply decided to givethe iPhone owner a free case but rather sticking to the original design without serious real-worldtesting prior to the product launch (Yukai Iwatani Kane, Sheth, & Morison, 2010). Service quality is less tangible but as equal important as the product quality (Taylor &Baker, 1994). The post-sales support quality is ensured by the ecosystem built on iTunes Store,which provides personalized yet system-level-integrated applications to every customer; asa result, users who are attracted by the aesthetic design of Apple’s products are able to enjoysuperior easy-of-use features and experience high-quality service (Yoshida & Ojo, 2009). External Quality Metrics. Objective standard of quality can be established andperformance of salesperson can be measured (although more complicated than productevaluation) quantitatively. But the customer expectation, the other facet of quality measurement,is intangible and hard to explore (Reeves & Bednar, 1994). Apple has a higher risk of marketfailure in this sense (than other PC makers) because it keeps fewer product lines than itscompetitors, which is less flexible in satisfying consumers from different social background. Therisk gets doubled because of the aggressive market strategy: Apple, acts like a nonconformist,scoffs at the notion of a target market and do no market research before initiating a new product(Morris & Levinstein, 2008). Thus, the incongruence of Apple’s innovation and consumer’s needmay be a potential cause of market failure. Furthermore, market success of the existing productlines may pull up the expectation of consumers, who may require a breathtaking innovation fromApple instead of a minor upgrading.
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