by e.r.w.i.n.
Could Foxconn’s Wage Rises be a Competitive Advantage For Apple?
[Via Forbes]
Now here’s something I hadn’t thought about: could the pressure on Apple, thus Foxconn, to raise manufacturing wages in China be utilised as a competitive advantage by Apple against competitors such as HP and Dell?
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Apple can do the right thing here and also be making good business decisions. It makes a very good profit on its devices, so it has a little money to put into the pot for the employees.
But its competitors make significantly less on their products. They have hardly any profit at all. So increased prices going to employees reduces those profits even more.
Apple’s innovative approach to supply has gotten itself here. It can build this devices at prices that the other companies can not compete against, making it almost impossible to create devices that make a profit.
So, Apple allows wages to rise, adding a few dollars to its costs, perhaps hurting its profits slightly, although this could increase sales from the goodwill it creates, as well as producing a lot of workers who may now be able to buy Apple’s products themselves. A possible win-win for everyone.
But other companies cannot do the same without devastating their bottom line. They are in a no win situation. If they keep wages low to keep their profits, they become persona non grata in the marketplace, as their potential customers turn away from them.
Or they raise wages and see their profits fall.
And who was responsible for getting Apple in this position making its assembly process so versatile and innovative that by raising wages they hurt their competitors? The current head – Tim Cook.
When this period of our history is written, Jobs will be a big part but the genius of Tim Cook will be seen as the truly amazing part he has been.
February 23, 2012 at 10:57 am
Is Apple the only company operating at Foxconn? According to my research, the Chinese government still has a great deal of say in how Foxconn is run and it certainly is not going to raise wages in its factories. I, for one, am very, very tired of hearing about how bad Apple is. Who is trying to take them down and Why?
February 23, 2012 at 11:32 am
Foxconn has already raised wages so i don’t see where the Chinese government had done anything. In fact, I believe that starting wages are not double what they were a few years ago.
In addition,Apple provides educational resources for employees, many of whom left rural areas without a lot of education. Apple teaches something like 60,000 of them.
When you are number 1 you get attacked, that is pretty much how American media works. Anytime anyone uses Apple in a headline, their hits go up.
But Apple is doing the same judo moves and jedi mind tricks that it used on the industry. Instead of doing what every other corporation does – deny, stonewall, etc. – Apple openly responded. They started doing open audits. They join the FLA (which costs something like $100,000 to do) and have independent inspections. They make changes.
Now how does any group attack them? (Well, I read one that did but upon further questioning their big beef was that Apple had not returned their calls ;-) Apple shows openly they are trying their best. All they have to do is say “Why us? We have been open. What about all those other guys?” They feed the narrative back to the media. Now the media can get hits by saying “Apple is doing what is right. Why not everyone else?”
I think Apple is being brilliant here and again will demonstrate how far behind all the other companies are with respect to 21st century management.