1. what are the various levels of analysis at play for Apple as it addresses the CSR challenges presented in the case?
2. Is Apple responsible for the alleged human rights violation? f Apple continues on the same path, what should it do differently?

APPLE AND ITS SUPPLIERS: CORPORATE SOCIAL RESPONSIBILITY Sun Hye Lee, Michael J. Mol, and Karel Mellahi wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitled, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, NGG ON1; (1) 519.661.3208; (e] cases givey.ce: www.iveycases.com. Copyright @ 2016. Richard Ivey School of Business Foundation Version: 2016-03-22 Will it ever be good enough? That was the key question facing Apple Inc., (Apple) the California-based multinational technology company that was known for its innovative hardware, software, and online services. Apple had been accused of having allowed labour rights violations in China at Foxconn, a major supplier of its products in 2009, but the company had worked hard to overcome these issues to avoid any negative ramifications for its corporate image. Yet on December 18, 2014, new evidence was presented in a British Broadcasting Corporation (BBC) documentary that showed that labour rights violations continued to occur in China, this time at Pegatron, another large Apple supplier that specialized in the assembly of Apple's iPhones This documentary questioned Apple's repeated statement in its 2014 supplier responsibility progress report that "Each of those workers has the right to safe and ethical working conditions." Jeff Williams had been promoted to the role of senior vice president for Operations only 15 days earlier, when he was put in charge of what Apple called "end-to-end supply chain management . . . dedicated to ensuring that Apple products meet the highest standards of quality." Given the huge progress that Apple had achieved, was the company simply being singled out unfairly because of its size, visibility, and earlier problems? Indeed, Apple now had an excellent reputation in terms of corporate social responsibility (CSR) and, in 2014, had been ranked fifth on Forbes' "best CSR reputations" list." As Apple's stock market value moved ever closer to US$1 trillion," did outside observers hold Apple, the most valuable company ever, to a higher level of corporate social responsibility? Alternatively, had the company still not fully come to terms with the nature and magnitude of its CSR challenges? It had indeed proven to be difficult to maintain control over Apple's vast operations, particularly when most activities were undertaken through outsourcing to independent suppliers that were mostly situated in offshore locations, such as China, far from Apple's base in California. Perhaps the most important question of all was what Williams and Apple could do to tackle the allegations. Would it suffice to adopt a defensive strategy, by simply denying that the problem was structural in nature and pointing to Apple's many and costly efforts? Or should Apple's management instead engage with the issue and instigate further CSR changes in its sourcing strategy? If so, what changes should be implemented? In short, how should Apple and Williams respond?doing as much as Apple does to ensure fair and safe working conditions. to discover and investigate problems. to fur and follow through when issues arise. and to provide transparency into the operations of our suppliers." CSR CHALLENGES In its 1014 progress report. Apple condently remarked \"At Apple. we believe in making complex things simple_":l' This statement was an apt description of its products' appeal to conSLuTLers and in the area of product design. Apple retained Iirm control to ensure it could deliver on this promise. but when it came to supply chain management, an approach ofsimpliflcation could have its limitations. Given the global nature of Apple's supply chain the various products it produced. and the technological complexity of these products, Apple needed to work with a wide array ofsuppliers. To fulfill its "promise," Apple needed to be aware ofand appropriately manage all these relationships. Doing so raised various challenges. Some of these challenges related to the various formal and informal national institutional regimes that applied to various offshore locations. Apple and its suppliers operated in very different cultural. legal. political, social. and economic environments. For example. its two key suppliers. Foxconn and PegatrorL conducted dieir manufacturing operations mostly in mainland China. The top 200 suppliers on Apple's supplier list were scattered around the world. ranging from Korea. Japan and Taiwan. Ilirough to Ireland and the Czech Republic?5 As much as Apple may have wanted to malce complex things simple, it oouldnol single-handedly change Iliese diverse national environments to suit its own purposes. Apple and its suppliers faced mmplelely different stakeholders with different expectations. Apple needed to deal with high expectations from consLuners. employees. investors. NGOs. and governments in the United States and other developed countries. while most of the suppliers were located in emerging countries that had much lower expectations and different social values and nouns. Fm't'ms, for instance. commented on the Panorama documentary: \"While these issues are faced by every manufacturer. only Apple was specically named in the programme. More than any other company. Apple has been the leading target for carapaigners on working conditions, but it seems unfair to single out one manufacturer for the alleged sins of an industry." No solitary manufacturer can walk into the supply chain and demand worlcing conditions far in advance of the prevalent conditions of the country. Change will he gradual. and measured over years. ifnot decades.\" A second set of challenges related to maintaining close buyersupplier relationships. Apple was notorious for its price policy. squeezing suppliers to produce products at lower and lower costs}? An executive from one of Apple's iPad producers stated that \"the only way you malce money working for Apple is guring out how to do Iliings more efciently or cheaper. . . and then diefll come hack the next year. and force a ll] per cent price cut.\"'l" Companies such as Fosconn dealt with conicting demands: meeting higher working standards. which included paying higher wages. reducing working hours. investing in safely programs. and providing training. while also accepting lower and lower prices from Apple. Forconn appeared to have made an effort. to improve working conditions and meet die required labour standards. This effort was recognised by the Fair Labour Organization which announced improvements in labour practices in Foxconn factories. Ironically. however. Foxconn started losing orders from Apple around the same time Iliat it had improved its labour practices. perhaps due to the increased per unit costs.\" Apple began tog'ive more andmore volume to rival supplier Pegatron_Apple argued that TiiTtCook. himselfa supply \fPage a 931mm impossible to avoid in cases like this. but they did pose a fourth set ofchallenges faced by Apple: Did it want to satisfy its harshest critics. or was it enough to please a mainstream Apple consumer? APPLE AND OFFSHORE DUTBDURBNG \"Designed by Apple in California" and \"Assembled in China." read a statement imprinted on the back of Apple's iPliones and iPads and on the bottom of iIs Mac products. neatly capturing Apple's strategy of offshore outsourcing. As of 1004. will: the closure of its very last US. manufacturing line. Apple was outsoLu'cing all ofils production and assembly lines to global suppliers. mainly in China."j Prior to that. Apple was rather proud ofits products being produced in America. But like other western companies. Apple found it difcult to resist the lLu'e ofoffshore outsourcing. It was estimated that around 90 per cent of the iPhone's parts were manufactured overseas. German and Taiwanese contractors provided advanced semiumiductors. while Korean suppliers provided memory and display panels. Those components. coupled with cliipsets supplied from Europe and elsewhere. were ultimately assembled in China.\"I Apple's sophisticated supply chain offered the needed flexibility to meet fluctuating demand Just before the debut ofthe first iPhone in 100?. Steve Jobs realized that the screen material needed be changed from plastic to glass so it would not get scratched. He was quoted as saying. \"I want a glass screen. . . . lwant it perfect in six weeks)\": lIlll'hile no American mrnpany could produce the glass screens in a month a Chinese company was able to malre them. To meet Apple's last-minute changes and orders. thousands more workers were needed overnighL leading to work shifts being increased at short notice."R As put by Jennifer Rigoni. Apple's former worldwide supply demand manager. \"They [Ilie suppliers] could hire 3,000 people overnight. . . . 9.. What LLS. plant can find 3.000 people overnight and convince them to live in dorms. It also helped that wages in the Chinese factories were very low. Aurording toCLW's 20H- repor't. the base wage of Pegatron factory workers in Shanghai was d'l equivalent of approximately Eljll' per hour.\" The same report disclosed that most workers wanted to leave the factory afler having experienced such harsh working conditions. In one of the Pegatron factories. AVY in Su'tou. more than a quarter of die new workers left within a two-week period I offshoring. however. was not looked upon favourably in Ilie United States because it was considered to amount to a loss ofjob opportunities. In February Elli l . when the president of Ilie United States. Barrack Obama. asked Jobs. \"Why can't Iliat work come home?" Jobs answered conclusively. \"'fhosejobs aren't mrning back."32 An anonymous executive of Apple gave a sullen response saying. \"We shouldn't be criticized for using Chinese workers. . . . The United States has stopped producing people with Ilie skills we need."5'1 The company overtly announced that moving work overseas was an inevitable choice and the mnlinuing relocation of jobs was driven not only by lower costs.\" Despite die public conlroversy about Apple's choices and the loss of domestic job opportunities in the United States. the relocation seemed to malre perfect sense. Offshore suppliers in China. lndia. and elsewhere had a proven ability to produce what was needed. whereas the United States did not have enough capable and skilled workers.\" To some extent. it was simply a nLuTtbers game. But Apple also argued that it could produce more jobs in the United States through offshoring because American workers could Ilien focus on higher value-added activities such as research and design."5 Offshore outsourcing might have signicantly reduced Apple's operating costs. At the same time. however. it also decreased Apple's level of control and. monitoring over manufacturing processes and practices.