Apple Stakeholder Analysis

Introduction

In regards to the situation around the choice of manufacturing strategy, I do believe that Apple has several relevant stakeholders. In this article I am going to outline that stakeholders as well as their stakes and attributes. I am going to focus on the responsibilities Apple has to them, and end up with my recommendation on strategies and actions Apple should take for each.

I limited my selection to the various news articles and videos published mostly in 2012-2017 related to Foxconn and its manufacturing facilities as well as to the information provided with my own research.

In fact

Apple has many stakeholders such as local governments, local communities, surrounding businesses, and many other social and activist groups.

For this particular analysis, I chose the stakeholders listed below. (Table 1-X)

The research highlights many stakeholders for Apple. In the chart below, I listed them along with the various attributes, responsibilities, and types, along with the strategy Apple should use in dealing with them.

I will take the time to explain each in detail, along with my thoughts on why I selected each.

The first thing to consider with these stakeholders is ranking them according to their relative importance. This will allow Apple to make timely decisions about who to deal with first. Based on the type, I am suggesting the following order of importance.

Employees

I felt that they hold an interest and a right, as stakes (Table 1-1). Apple should perceive them as legitimate (Table 1-2), they do have power, since they design and create the products sold by Apple. If they are unhappy with conditions, they are definitely in a position to impact Apple. That is also why I determined them to be urgent as well (Table 1-2). Apple should feel an economic responsibility to them. They rely on Apple for their livelihoods. Additionally, Apple owes them certain legal and ethical responsibilities as employees. (Table 1-3) The health and well-being, and happiness of their employees should be important to Apple. The employees are what make the company special. Based on these criteria, I view employees a Ultimate (Table 2) stakeholder, since they have legitimacy, power, and urgency. They are very likely to cooperate with Apple, since they are agents of Apple, and what is good for Apple will often be in their best interests as well. I feel they are also a high threat to Apple, since they are driving the innovation and designing the products which make Apple such a special company. Any strategy dealing with employees should therefore be collaborative in nature. In regards to the Foxconn situation, the Apple employees themselves are not being mistreated. Apple should continue to work with their employees and make sure they are receiving safe and effective working conditions, and are not being mistreated, though that doesn’t seem to be the case. Employees are the driving force behind Apple, and they need to work in partnership with them. Perhaps create some joint committees on employee issues to make sure conditions remain positive for their workers.

*** All of the “Ultimate” stakeholders should be addressed first. These stakeholders would be Employees, Customers, Stockholders, and the U.S. Government. The “Supreme” stakeholders are Overseas Contract Labor, and Suppliers.The next group would be the “Flexible” stakeholders like Competitors, and the Chinese Government. The “Quiet” stakeholders are the monitoring groups, such as the Fair Labor Association.The final group would be the “Non-Stakeholder” - in this case the generic “U.S. Worker”. These are not Apple workers in the U.S.; they are workers in the U.S. who would benefit from Apple jobs being brought into the United States.

Customer

The customer has interest and rights stakes (Table 1-1). Apple has approximately 166 million customers and supporters all over the world. Apple should view them as a legitimate, powerful, and urgent stakeholder (Table 1-2), which would make them a Ultimate one (Table 2). Apple should owe their customers an economic, legal, and ethical responsibility based on their position as customers purchasing products. They would tend to cooperate with Apple, and should be seen as a high threat (Table 2). As such any strategy should be collaboration with their customers. Perhaps they could survey their customers about the Foxconn situation. If the customers stop buying Apple products due to the brutal situation in the manufacturing plants, Apple will be forced to act quickly.

Getting customer feedback, and working with customer groups early on will help Apple form a reaction to the situation without the loss of sales, jobs, and economic strife. It will be the overall best way for them to address the problems in the eyes of their customers.

Stockholders

Apple’s stockholders absolutely have an interest, right, and ownership stake (Table 1-1) in Apple. Apple should view them as a legitimate, powerful, and urgent stakeholder. (Table 1-2) As such, they are a Ultimate stakeholder. As owners of the company, Apple absolutely owes them an economic, legal, and ethical responsibility (Table 1-3). They are also a Ultimate stakeholder. (Table 2) They would tend to cooperate with Apple, since they have a strong economic bond with them. They are also a high threat, since, as owners, they have the ability to force changes, or can sell their stock, driving share prices down. As with the others, a strategy of collaboration is best with this stakeholder. Prominent and powerful shareholders should be worked closely with on formulating a response to the Foxconn situation. As owners, shareholders wield tremendous power.

Apple would best handle this situation by engaging with shareholders, and coming to a solution endorsed by them. Any good method of dealing with labor issues with manufacturers will impact Apple’s economic bottom line. They will either need to raise prices to compensate for higher prices paid to manufacturers, or they will need to earn less per unit. Determining the level of commitment of the shareholders towards doing the right thing with Foxconn is a very important piece of information Apple will need to correct the situation. Since shareholders can force change, it’s best to work with them early on to avoid that action.

Top five shareholders of Apple Inc.

Arthur Levinson is the largest individual shareholder in Apple, with his 1.16 million shares of common stock as of May 9, 2018. Tim Cook is one of the largest insider shareholders in Apple, according to U.S. Securities and Exchange Commission (SEC) filings. He owns 901,474 shares according to the latest filing in December 2017. Craig Federighi, a senior vice president of software engineering, owns 460,367 shares according to his April 2018 SEC filing. Jeff Williams is Apple's chief operating officer under CEO Tim Cook, a position he has held since December 2015. He owns 123,737 shares of Apple according to his July 9, 2018 SEC filing. Bruce Sewell, Senior Vice President of Legal and Global Security and General Counsel, owns 113,865 shares of Apple according to the latest filing in December 2017.

Top three institutional stockholders of Apple Inc.

Vanguard Group Inc., Berkshire Hathaway Inc., and State Street Global Advisors, which combined own 15.93% of the outstanding shares.

The U.S. Government

The United States Government is a stakeholder with interest and right stakes (Table 1-1). Apple should view them as legitimate, powerful and urgent (Table 1-2). Apple owes them economic, legal, and ethical responsibilities (Table 1-3). They pay taxes, and wages, but are subject to the legal and regulatory system enforced by the U.S. government. They also have a responsibility to act ethically with them, not just to the absolute letter of the law. The government they are also a high threat due to their power (Table 2). At some point public pressure will mount for the U.S to do something about unhealthy and unsafe conditions in factories overseas. At that point, the U.S government will likely not be as cooperative with

Apple, and will act to force change upon them. That change will likely not have Apple’s best interest at hand. Collaborating with the government early on will allow Apple to address change in a way beneficial to themselves as well as to the workers overseas. If Apple were to work with U.S. regulatory and trade organizations, they could act as an industry leader in working to enact change in their Chinese factories. They could be seen as a forerunner in third world worker’s rights. Apple yields tremendous power with Foxconn. Combined with regulations and assistance from the U.S. they could really be a force for positive change. The public relations boost to them would help to offset, at least somewhat, any hot to their economic bottom line.

Government Agencies and their special Interests (FBI, NSA, IRS etc)

Device Requests Most commonly they come from law enforcement agencies working on behalf of customers who have requested assistance locating lost or stolen devices. Additionally, Apple regularly receives multi-device requests related to fraud investigations.

Financial Identifier Requests are requests based on financial identifiers such as credit card data. Examples include cases in which a credit card has been used fraudulently to purchase Apple products or services. These requests generally seek details of suspected fraudulent transactions.

Account Requests most commonly involve information related to a customer’s Apple account. Requests from law enforcement seek content such as email, photos, and other content stored on users’ iCloud accounts.

Emergency Requests relate to circumstances involving imminent danger of death or serious physical injury to any person.

Account Restriction/Deletion Requests from law enforcement ask Apple to restrict or delete a customer’s account.

Account Preservation Requests are made pursuant to the U.S. Electronic Communications Privacy Act (ECPA), which permits law enforcement and government agencies to request that Apple preserve the contents of a customer’s Apple account. U.S. National Security Orders demand that Apple provide information in response to U.S. National Security legal authorities.

Overseas Contract Workers

The most important one in this case is the actual overseas contract workers. They have an interest and a right stake (Table 1-1). Apple should view them as legitimate stakeholders. As far as power, I submit they have a little (Table 1-2). Should they ever get organized on a large scale, or if the Chinese government really steps in to end the abuse, they will have much greater power, but under current conditions, they wield very little if any. Apple should feel an economic, legal, ethical responsibility to these workers. These are the workers actually assembling the products which make Apple great. In many ways, they should have the same rights and responsibilities as Apple’s own employees.

I categorized them as a Supreme stakeholder, due to their legitimacy, but low power. They will tend to cooperate with Apple. I ended up rating their threat as low, simply because they are unorganized and wield little power currently. If I was advising Apple, I would caution them that this could change very quickly should they ever organize on a large scale. A work strike or slowdown would cripple Apple’s supply of products. It would take significant time to move that elsewhere. Currently though, their threat is low. I would suggest a strategy of involvement with these workers. They need to involve the workers in developing a reasonable arrangement to maximize output, while providing reasonable pay and working conditions to these workers so vital to Apple’s success. It would not be enough to just visit on occasion, Apple needs to continue to set up full time oversight at these factories. That way, local management cannot cherry pick situations for them. They will see the real conditions. They must also be permanently empowered by senior management at Apple to drive and direct change at these locations.

Suppliers

Suppliers are another key stakeholder in the Foxconn crisis. Apple’s “suppliers employ more than 1.5 million people in 20 countries”(Apple, 2016, Supplier Responsibility Section). Suppliers hold interest and right stakes (Table 1-1). They should be viewed as legitimate and powerful stakeholders (Table 1-2). Apple should feel economic, legal, and ethical responsibilities to them (Table 1-3). They owe them the right to earn a profit on each item sufficient to enable them to pay a fair wage and have safe conditions for employees.

I classify them as Supreme stakeholders, since they are legitimate and powerful (Table 2). They will tend to have a high level of cooperation with Apple, and pose a high threat. Any slowdown or work stoppage, even a day’s worth will have economic repercussions for Apple. The best strategy to use with suppliers is one of collaboration. By working with them on conditions, and coming to a reasonable agreement on price per unit output, Apple can make sure that Foxconn is making enough to pay workers well, and give them a safe and secure place to work. By cutting the price Foxconn receives, Apple is almost forcing these conditions upon the workers. By collaborating with Foxconn management and Foxconn workers, Apple can broker a set of situations which are amenable and fair to each stakeholder. As I mentioned in my analysis of the contract labor stakeholder, sending permanent Apple employees, empowered to address situations, over to Foxconn and other manufacturing facilities, Apple can come to a fair and equitable price, wage, and working condition arrangement. Eventually public pressure either in the U.S. or China will drive these changes; Apple would be best served by continuing to get ahead of the curve and being seen as a leader in labor reform overseas.

Foxconn {supplier}

Since 2007, Apple has relied on the company known as Hon Hai Precision Industry, which trades as Foxconn Technology Group, to assemble its devices at plants in China and Taiwan. Today, it is the world's largest contract electronics manufacturer and the fourth-largest information technology company by revenue. The company is the largest private employer in Taiwan and one of the largest employers worldwide. Foxconn has 12 factories in nine Chinese cities—more than in any other country. Apple dominates Foxconn’s facilities and bottom line, receiving millions of devices (mostly iPhones) every quarter from the company.

The two companies are the biggest buyers of tech in the world, spending more than $250 billion last year on a cost-of-goods-sold basis.

Apple is Foxconn’s most significant client by some margin, dating back to 2000 when Foxconn won an order to produce Apple’s new iMacs. It’s also been an infamous partnership

The manufacturer caught the attention of the world’s media following a spate of worker suicides in 2010, mostly in the giant Longhua complex where iPhones are made, and where workers also live. Foxconn and President Donald Trump announced at the White House on July 26, 2017 that Foxconn will build a US$10 billion flat screen TV manufacturing plant in southeastern Wisconsin. The Foxconn deal, promising 13,000 high paying jobs, is the largest corporate attraction deal in U.S. history, in terms of pure number of jobs. Foxconn is expected to contribute $51.5 billion to Wisconsin's GDP over the next 15 years, which is $3.4 billion dollars annually.

Competitors

Competitors are another potential stakeholder. They have an interest stake in Apple, but no right or ownership stakes (Table 1-1). They should be seen as legitimate stakeholders, but without any real power or urgency behind them. Apple owes them a legal and ethical responsibility(Table 1-3). They need to make sure they act in fairness and in full compliance with all legal and regulatory frameworks.

I classified competitors as Flexible, because they have no power or urgency. They will have a low probability of cooperation, and pose a low threat to Apple. As such, the best strategy to deal with them is by monitoring their situation. Since most of Apple’s competition uses overseas contract labor, they are all on somewhat equal standing on this situation. If one or more competitors act to reform labor conditions overseas, or move manufacturing to the U.S. or another location where unsafe conditions aren’t tolerated, that may be used as leverage against Apple. If Apple is the leader in this reform, the others will tend to follow. It is vital that Apple monitor their competitors.

The Chinese Government

The Chinese Government is another very important stakeholder in the Apple/Foxconn situation. They have an interest and a right stake in it (Table 1-1). They should also be viewed by Apple as legitimate (Table 1-2). I considered how to rate their power and urgency. Currently, the Chinese are very dependent on companies like Apple bringing in the millions of manufacturing jobs they need to drive their economy. Further, the Chinese citizens and workers aren’t sufficiently organized or powerful enough to drive the government to change things. As such, there is no real threat of the Chinese government getting involved to push for change. I attributed no power or urgency to them (Table 1-2), however, should the workers and citizen unite and organize, that could change very quickly. It warrants Apple keeping an eye on that. Apple owes an economic, legal and ethical responsibility to the Chinese government (Table 1-3). They pay taxes and wages, and must comply with laws and regulations.

I typed the Chinese government as a Flexible stakeholder (Table 2), since they are legitimate, but currently aren’t seen as powerful or urgent because they need Apple more than Apple needs them. They will tend to highly cooperate with Apple, and pose a relatively low threat. The best strategy in dealing with them is one of involvement. If Apple is serious about correcting the labor conditions, they should involve the Chinese government. They yield tremendous power and influence with them. If they threaten to pull their work unless real reform is enacted, the Chinese government will act immediately. They government is very dependent on companies like Apple sending manufacturing jobs to them, loss of those jobs would be a disaster for them. They will make any reasonable concession to keep the jobs in China. By working closely with the Chinese government, as well as any other governments they do work with, Apple can be a world leader in third world labor reform. As one of the biggest players, Apple has tremendous influence.

Monitoring groups

Various monitoring groups, such as the Fair Labor Association, have stakes with Apple. They have an interest, but no right or ownership stake (Table 1-1). I believe Apple would see them as having some potential power, if they are large enough or influential enough. I don’t’ believe Apple sees them as legitimate or urgent, since they haven’t worked closely with them at all in the past. I believe Apple owes them an ethical responsibility, since they should want to do the right thing. In regards to Foxconn, they should view an ethical responsibility to help these groups drive reform.

I classified them as a Quiet stakeholder (Table 2), since they have potential power but little else. They would tend to not cooperate with Apple and pose little threat. As such, a good strategy with them would be to monitor them. Should these groups gain greater influence, or get in a position to drive the public or government to get involved, they will potentially yield significant power and influence.Currently that is not the case, but it could change quickly, and Apple should monitor these groups closely. When and if Apple starts driving true reform, involving or cooperating closely with these groups could add legitimacy to that change. Rather than Apple simply claiming reform, if these groups corroborated the change, the public and competitors would tend to view it as fact rather than an advertisement or assertion by Apple.

U.S. Worker {generic}

These are not Apple workers in the U.S.; they are workers in the U.S. who would benefit from Apple jobs being brought into the United States. I see them as having a definite interest, but no right or ownership stakes (Table 1-1). I don’t see Apple viewing them as legitimate, powerful or urgent (Table 1-2). Apple has stated that the American worker simply doesn’t have the skills to bring these jobs to the U.S. Perhaps Apple can work to help teach these skills to U.S. workers, or help to influence the U.S. Government, colleges or trade schools to teach and emphasize the needed skillsets. Since they are not legitimate, powerful, or urgent, they should be typed as a non-stakeholder (Table 2). They would tend to cooperate highly with Apple, but pose very little threat. A good strategy would be one of involvement. Perhaps Apple could work with relevant government and educational groups to stress the needed skills to bring more of their manufacturing jobs to the U.S. With the job market and economy down, being seen as a force to help drive U.S. manufacturing, Apple would win a public relations windfall. This could also drive change in their overseas manufacturing plants, if they see real completion from U.S. firms.

Media

Apple communicates its core business issues through ways unlike any other tech-company. Apple have communicated about the issue of employee working conditions externally through: Press releases, Progress report, Website, Letter from CEO, Media relations.

Apple has an unusual social media presence, with no official Facebook and Twitter account. It is interesting that they do not use social media as a way to communicate to its customers. Despite the lack of social media presence, Apple have been able to retain customers worldwide, which can be attributed by their other communication processes externally and internally over the last few years.

I see them as having a definite interest, but no right or ownership stakes (Table 1-1)

Overall

It is in the best interest of every stakeholder I analyzed for Apple to take a leadership role in reforming the labor conditions in the plants manufacturing their products. It may not be their best economic bottom line decision, but if they consider the triple bottom line, they will see that change is vital to their success.

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