OUTSOURCING TO CHINA: THE BENEFITS AND CONSEQUENCES OF FOXCONN’S STRATEGY

Abstract

Foxconn Technology Group, a multinational Taiwanese company operating primarily out of China, was the world’s largest manufacturer and assembler of electronics during the 2007-2014 timeframe. Responsible for a large volume of consumer products, it had customers such as Apple, Dell, HP, IBM, Nokia, and Samsung, and manufactured products such as the Apple iPad and iPhone, Amazon Kindle, Sony PlayStation 3, Microsoft Xbox 360, and Nintendo Wii. Foxconn’s success relied on many interlocking practices that included but were not limited to: speed to market through rapid design, prototyping, and production; extreme cost control through efficient resource utilization and waste minimization; adherence to state-of-the-art quality control processes and procedures, and vigorous industrial security to protect each client company’s intellectual property. During much of the decade from 2006-2016, Foxconn was accused of employee abuse from a variety of labor rights groups. The tension between its strict management practices and criticisms from labor rights groups reached crisis levels after 2010 when 20 Foxconn employees committed suicide by jumping from the tall buildings in Foxconn’s massive industrial complexes. Are the demands for high organizational performance and labor rights incompatible, or is there some middle ground that will provide the benefits of both? This case asks students to consider what Foxconn and Apple should do to ensure the long term success of both companies.