Sustainability and Quality Assessment: The Case of Apple


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Sustainability and Quality Assessment: The Case of Apple

  1. 1. Due Apr. 27, 2011 Sustainability and Quality Assessment: The Case of Apple Although sustainability is an overall developing strategy in global scope, we believe thatpublic 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 (Apple Inc.,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. 1
  2. 2. 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) to avoidthe low margin battle with its rivals (Yoshida & Ojo, 2009). By building an eco-system aroundApple‟s software platform, developers, publishers, and multimedia distributors have beencontributing to the usability goal under Apple‟s roof; the ability of gain mutual benefit is morelikely 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 criticisms1 Sales are in Q2 2010. 2
  3. 3. arguing that proprietary device and software can not only ensure Apple‟s control on consistentuser experience but also can guarantee the Company a huge profit (Cusumano, 2010). Theinconformity 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 differentiate itselffrom 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 specialized 3
  4. 4. in shaping product design and use experience, and COO Tim Cook, who handled the day-to-dayoperations (Rigby, Gruver, & Allen, 2009). Working culture in Apple has a consistent image asits products: the spiritual pursue of doing extraordinary work is Apple‟s universal recruitingrequirement. Apart from the intelligent engineers, Apple has 10,000 (out of 25,000 in total) fulltime employees working in its retail stores (Morris & Levinstein, 2008). Moreover, Apple isdedicated to be an Equal Employment Opportunity and Affirmative Action Employer; it evenprovide opportunities to job applicants with physical or mental disabilities through a special“reasonable accommodation” plan (Apple Inc., 2011d). Supplier responsibility. Apple is a company that likes to operate everything under oneroof expert for the hardware manufacturing. Substantially all of Apple‟s products and parts areoutsourced globally to manufacturing partners, primarily located in East Asia (Apple Inc.,2010b). Suppliers have to accept the Apple Supplier Code of Conduct (the Code) as a conditionof business contract, which targets at improving working conditions as well as treating workerswith dignity and respect (Apple Inc., 2010a). Furthermore, Apple conduct onsite audits, approvecorrective 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 member ofEICC (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 where theproducts are made, has seldom stopped sweatshop charges from mass media. Suppliers of Apple 4
  5. 5. 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 in east China.Although the widely reported child-labor or suicide incidents were not happened under the directsupervision of Apple -- who usually acclaimed immediately to have an thorough investigationafter the media exposure -- consumers should not excuse Apple‟s seemingly innocent: as theworld‟s leading technological company, Apple has an undeniable bargain power on suppliers( Kane, Sherr, & Tsai, 2010) – the root reason for suppliers mal-balanced the relationshipbetween 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 simply 5
  6. 6. clicking 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 usability orcomputing 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 under oneroof 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 6
  7. 7. 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 chain1.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, since theoverall quality of offerings plays an important role in brand reliability and can improve customersatisfaction in the long run (DelVecchio, 2000; Taylor & Baker, 1994). Apple sets up anextremely high quality standard inherited from its luxury product positioning, which has beensystematically 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 all 1 Although Apple acclaims that any Mac or PC desktop or notebook computer may qualify for reuse, thecomputers are not made to be reused. 7
  8. 8. suppliers 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 Apple inspotlight. However, Apple‟s attitude is less than responsible: the CEO simply decided to give theiPhone 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; as aresult, 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. 8
  9. 9. ReferencesAdrian, N. (2010). Seeing the light? Quality Progress, 43(10), 16-18.Apple Inc. (2010a). Apple supplier code of conduct (version 3.3). Retrieved from Inc. (2010b, October 27). Form 10-K. Retrieved from Inc. (2011a). Apple and the environment. Retrieved from Inc. (2011b). Apple reports second quarter results. Retrieved from Inc. (2011c). Apple supplier responsibility: 2011 progress report.Apple Inc. (2011d). Jobs at Apple. Retrieved April 24, 2011. Retrieved from Inc. (2011e). Supplier responsibility at Apple. Retrieved from, N. (2011). Google, Sumitomo, Itochu invest in Oregon wind farm. Wall Street Journal. Retrieved from, A. (2010). The worlds most admired companies. Fortune, 161(4), 121-126.Bertolucci, J. (2009). The worlds greenest computers? Macworld, 26, 56-59.Colvin, G. (2009). The worlds most admired companies. Fortune, 159(5), 75-78.Cook, G., & Horn, J. V. (2010). How dirty is your data. Retrieved from, M. A. (2010). Platforms and services: understanding the resurgence of Apple. Commun. ACM, 53(10), 22-24. doi: 10.1145/1831407.1831418DelVecchio, D. (2000). Moving beyond fit: the role of brand portfolio characteristics in consumer evaluations of brand reliability. Journal of Product & Brand Management, 9(7), 457-471. doi: 10.1108/10610420010351411Fisher, A. (2008). Americas most admired companies. Fortune, 157(5), 65-67.Greenpeace. (2010). Greenpeace guide to greener electronics. Retrieved from updated/Kane, Y. I., Sherr, I., & Tsai, T.-I. (2010). For Apple suppliers, pressure to win. Wall Street Journal - Eastern Edition, 256(39), B3.Kane, Y. I., Sheth, N., & Morison, S. (2010). Apple knew of iPhone issue. Wall Street Journal - Eastern Edition, 256(13), B1-B2.Martins, A. A., Mata, T. M., Costa, C. A. V., & Sikdar, S. K. (2006). Framework for sustainability metrics. Industrial & Engineering Chemistry Research, 46(10), 2962-2973. doi: 10.1021/ie060692lMoore, M. (2011, February 27). Apple admits using child labour The Telegraph. Retrieved from labour.htmlMorris, B., & Levinstein, J. L. (2008). What makes Apple golden. Fortune, 157(5), 68-74.Morrison, S., & Sweet, C. (2010). Google invests in wind farms. Wall Street Journal - Eastern Edition, 255(103), B6. 9
  10. 10. Reeves, C. A., & Bednar, D. A. (1994). Defining quality: Alternatives and implications. [Article]. Academy of Management Review, 19(3), 419-445.Rigby, D. K., Gruver, K., & Allen, J. (2009). Innovation in turbulent times. Harvard Business Review, 87(6), 79-86.Taylor, S. A., & Baker, T. L. (1994). An assessment of the relationship between service quality and customer satisfaction. [Article]. Journal of Retailing, 70(2), 163.Tsai, T.-I., Kane, Y. I., & Ye, J. (2009). Employees suicide puts Hon Hai, Apple in spotlight. Wall Street Journal - Eastern Edition, 254(19), B7.Yoshida, J., & Ojo, B. (2009). Point/counterpoint: Why Apples CE dominace is assured or not. Electronic Engineering Times(1573), 4-10. 10