Work, People, and Productivity - Essay Example

WORK, PEOPLE, PRODUCTIVITY Number: Lecturer: WORK, PEOPLE, PRODUCTIVITY Introduction This project focuses on a Taiwan Organization named Foxconn. The organization is the worlds’ leading manufacturer of electronic components and the fourth largest information technology company by revenue. The company has a management model that has seen it emerge as the top electronics manufacturing company, but at the same time involved in many controversies. It has partnered with several leading technology manufacturing companies among them Apple Inc. This write-up focuses on the operations of the Company in China where majority of its manufacturing operations are located. It will provide the history of the company and its foundations and the list of clients and partnerships. The paper will also focus on the relationship between Apple Inc. and the management style adopted by the company and its productivity. Finally, the controversies associated with the company will be briefly discussed. 1. History / Background Foxconn technology Group is a trading name for Hon Hai precision Industry Company limited which was founded in 1974 as a manufacturer of electrical components by Kuo Tai-Ming westernized as Terry Guo (Foxconn technology Group, 2013). Guided by the belief that electronics will be an integral part of everyday life in offices, industries and homes, Terry Guo invested approximately US$7,500 in Hon Hai. The company is a Taiwanese electronics manufacturing company with its headquarters in Tucheng, New Taipei, Taiwan (Foxconn technology Group, 2013). The company manufactures electrical connectors for computer components that have been used by several major computer manufacturing companies. Initially, the Foxconn name was only a trade name used by Hon Hai precision industry Company limited before it was later given to a subsidiary company. Hon Hai opened the first manufacturing company in mainland China in 1988 (Jay, 2004). At about this time, the company went public in the Taiwan stock exchange; it was experiencing great expansion and growth in Asia (Jay, 2004). In the mid 1990’s, the company opened research and development centres in the United States and Japan (Jay, 2004). They also started production of computer cases and within a year it was the leading manufacturer of PC cases in 1996 (Jay, 2004). In the late 1990’s Foxconn set up manufacturing plants in the United states, Ireland, Scotland and United Kingdom (Jay, 2004). Breakthrough was seen in 2001 when the company set up a manufacturing company in the Czech Republic and took over production of Apples’ iMac computers. Additionally, it took over the production of Intel’s motherboards in Puerto Rico (Foxconn technology Group, 2013). In 2002, the company started the production of mobile telephone components after a slight drop in computer sales. It also commenced the establishment of a new facility in mainland China worth $1 billion (Jay, 2004). Due to the slow sales of computers at the beginning of the decade, the company acquired the Motorola cell facility in Mexico and also set up a $1 billion Factory in Taiwan (Jay, 2004). According to Jay (2004), is at the beginning of the decade that the company ventured into new areas by developing a 3C strategy of developing computer, communication and consumer appliance components. The company is increasingly expanding and setting up plants in many more countries including Itu Brazil. The Company has long distinguished itself as a good performer raking in billions of dollars in revenue from its manufacturing plants all over the world. It is still being led by its founder Kuo Tai-Ming (Foxconn technology Group, 2013). 2. The major players users and Consumers Foxconn is an electronics manufacturing company that specializes in original design and manufacture of electronic components. Its clients include major European, American and Japanese companies that deal with electronics and information technology (Foxconn technology Group, 2013). The company manufactures notable products known in the market which include: iPads, BlackBerry, iPod, iPhone, PlayStation 3 and 4, Xbox 360, Xbox One and Wii (Jay, 2004). Foxconn Company boasts of a large clientele made of almost all the leading mobile and PC manufacturing companies in the world. The leading continent that consumes the products by Foxconn is the United States. This is because the majority of the technology producing companies are in the United States (Foxconn technology Group, 2013). These companies include: Cisco: dealer and manufacturer of computer Networking devices including switches, routers, network adapters among other. Apple Inc.: a major manufacturer of computers, laptops, iPads, iPhones and other mobile devices. Dell: desktop PC and laptop manufacturing company. Google: a leading company in the provision of internet advertising, marking and search engine. Additionally, it is a major provider of the android operating system that is used in majority of smartphones. Hewlett-Packard: leading producer of computers and printers and other computing devices; Microsoft: developer of computer operating systems and other software. Other consumers of Foxconn products in the United States include Vizio, Motorola and Amazon.com. Other players include Acer Inc. in Taiwan that produces the Acer machines mainly desktop PCs and laptops. Blackberry limited from Canada that manufactures the BlackBerry mobile and smartphones. Japan’s Nintendo, Sony and Toshiba dealing with mobile phones, TVs, Mobile phones, cameras, Laptops among other electronic gadgets. Others include Nokia Company from Finland dealing with manufacture of mobile phones and Micromax Mobile from India. 3. The relationship between Foxconn and Apple Apple Inc. initially known as Apple Company is a producer of computers and mobile devices. Initially, the company produced its own computers but later decided to offshore all its manufacturing (Economic Policy Institute, 2014). This resulted in a partnership between Apple Inc and Foxconn Company. Foxconn became the primary manufacturing partner for Apple Inc. products the computers series Foxconn has been the favorite manufacturing partner with Apple Inc. the relationship was a successful one with Jobs being the CEO of Apple Inc. The relationship was established when Foxconn reduced the prices on components, such as printed circuit boards, connectors and the assembly process (Eva, 2013). However, in the recent past several factors have affected this relationship. Foxconn was steadily growing as one of the leading companies in the manufacture of electronic components. This made it difficult for Apple Inc to control the operations in the company. Incidencessuchchangecomponentseekingapproval strained the relationship (Eva, 2013). Additionally, Foxconn was intensely frustrated by the increased complexity of apple’s items including the iPhone 5. Apple wanted to produce the iPhone in large volumes within a very short period which proved difficult for Foxconn (Eva, 2013). They were forced to increase labour and working hours by 20% that was quite unrealistic. This resulted in glitches in the final product (Eva, 2013). The executive change at Apple Inc. also affected this relationship, with the exit of Jobs as the CEO of the company. Incoming CEO Mr. Cook is more concerned and emphasizes more on risk diversification thus contracting another company to handle the production of some of its devices (Economic Policy Institute, 2014). Foxconn’s operating margins in the past six years has seen a drastic decline from 3.7 % in the first quarter of the year 2007 to approximately 1.5 % in the third quarter of 2012. On the other hand, Apple’s margins increased at 39.3 % in early 2012 from 18.7% in 2007. These changes depict the pressure on Foxconn to operate on low margins while handling the increasing demands from Apple to produce large volumes (Jenny, Ngai, & Mark, 2013). Due to the strained relationship as a result of these factors, Apple has sought partnership with another Taiwan company called Pegatron Inc. to handle the production of its devices. This step was fueled by the glitches in the iPhone 5 and the fact that Foxconn is lessening its dependence on Apple and are now producing its own Tablets (Eva, 2013). Additionally, Pegatron were willing to accept lower profit margins compared to Foxconn, therefore, Apple took it as an opportunity to improve on their falling margins. Currently, the two companies still maintain a cordial relationship though the business relationship is a little tainted (Jenny, Ngai, & Mark, 2013). 4. Ways of management in Foxconn / How Foxconn manages it factories in some many countries. Foxconn has always maintained a successful business management model Since 1974. This model has always been guided by the three Foxconian visions: 1) Revolutionize the conventional and inefficient outsourcing model through the use of proprietary one stop shopping vertical integrated eCMMS model (Foxconn technology Group, 2013). 2) Make the use of electronic products an attainable reality for all mankind through most efficient Total Cost Advantages (Foxconn technology Group, 2013). 3) Strive to achieve a win-win model for all the company stakeholders including shareholders, community, employees and the management. Most importantly the company has always been headed by a visionary disciplined and focused leader. They also run a business model focused on the products’ speed, quality, Engineering services, flexibility and cost saving (Foxconn technology Group, 2013). It also employs eCMMS which is e-enabled components, Modules, Moves and Services. This is a vertical one-stop shopping business model. The company has one of its largest manufacturing plants in China that has approximately 500,000 employees. It also has nine more plants in nine cities in China. Its choice of China is attributed to the low labour costs in China and Asia at large (Jay, 2004). To meet its deadlines in terms of consumer demands as was the case with Apple Inc., the company subject employees to work overtime and are eventually paid for the extra hours they put in for the company (Foxconn technology Group, 2013). The company uses a robust and strict management model that has been termed as military approach to management particularly in its facilities in china. Some of the management tactics used include: Absolute obedience In the Chinese factories, absolute obedience is demanded from the employees. This is made clear during the recruitment stage. According to the company’s CEO Terry Gou, ‘outside the laboratory there is no high technology, only execution of discipline’ implying that the rule of absolute discipline and obedience is inherent at Foxconn (SACOM, 2010). Some of the supervisors in these factories are security personnel, former army officials who have experience in instilling obedience and discipline in the employees (SACOM, 2010). Production Quota and Work Traps. The management always sets a production target for the employees. The target in one of the factories is at 5000 pieces per day. This is the minimum quota which often changes in case of an influx of orders from clients such as Apple or BlueBerry (Foxconn technology Group, 2013). In such cases, the quota is sometimes increased to 1000 pieces per hour. The management has a habit of testing the production limit of the employees by increasing the quota on a daily basis until the employee production limit is. Additionally, there are work traps to test and enhance employee vigilance. For instance, a component may be intentionally removed to test whether the employee is keen in their work, if the employee fails to notice this, they are punished. This increased employee productivity and vigilance in their work (Foxconn technology Group, 2013). Production Bonus and Competition. The company has a bonus award scheme where employees are awarded bonuses twice a year for outstanding performance. The criterion is based on the departments and production lines thus employees will receive different bonuses based on the department, productivity and relationship with the management (SACOM, 2010). The performance of each employee is as A, B, C, D and distinction who receive different bonuses, this forces the employees to compete with one another. This has enhanced productivity in Foxconn’s manufacturing facilities. Strategic partnership The company has been known to establish strategic partnerships by offering incentives such as reduced price of components in their facilities (Foxconn technology Group, 2013). This has enabled them to partner with the greatest companies in the worlds as they have been mentioned before. They also have a culture of maintaining a close relationship with the clients. Quality controls. The company maintains a strict system of quality control to ensure their products meet the basic required standards before delivery to the market. This has seen many leading companies seeking partnerships with Foxconn. Foxconn is committed to continual education and investment in its workers both locally and globally. This has made the production easy and of quality hence creating a deep relationship with its clients (Foxconn technology Group, 2013). 5. Controversies Despite its expansion and growth, the company has been marred with controversies associated with operations in its facilities particularly in China. The controversies are discussed below; Working conditions There have been allegations that there are poor working conditions in the company. These conditions have been as long working hours, lack of a good relationship between the management and the employees, racial discrimination by Taiwanese workers to their Chinese counterparts (SACOM, 2010). An audit done by Apple Inc. Showed that the company was compliant with the basic laws. However, the audit substantiated some of the allegations. Some of the allegations that came to light included the fact that some employees were routinely paid insufficiently for the overtime they work in the company (Mark, 2012). The report further suggested that the employee accidents were common in the workplace. Employees stand for a long duration and are further tormented by increased working hours. The management rule evident in the company that involves absolute obedience without question which cannot allow employees to complain of these conditions. Furthermore, the authoritarian or dictatorship mode of management makes it difficult for employees to advocate for better working conditions. Another major controversy about the working conditions involve a young worker from Shenzhen named Zhang Tingzhen whose medical support from the company was threatened after he suffered an electric shock in the work place (SACOM, 2010). Child labour. Foxconn has admitted employing young people below the age of 16 as interns in their companies, in China. However, reports indicate that children have been spotted at the Foxconn factory in China (Mark, 2012). The Apple Inc. Audit report shows that the company has employed over 74 young people below the age of 16. Employees have admitted that the management does not check the age during the recruitment process hence resulting in employment of children. Suicides There have been a number of suicide cases at Foxconn that has attracted the media over the years. Most suicides are with working conditions in the company. An example is the death of an employee due to the loss of a prototype. Other suicides are linked to the low basic salaries. The rate has, however, reduced since 2010 due to improvements in the major issues causing these deaths (Mark, 2012). Factory accidents; A number of accidents in the Foxconn factories have reported over the years. One major accident was the explosion of two Chinese factories that was caused by aluminium dust which claimed the lives of four workers (Mark, 2012). Other incidences include the poisoning of approximately 140 workers from toxins used to clean iPhone screens (Mark, 2012). Reference Economic Policy Institute. (2014, April 11). apple-foxconn-labor-practices-china. Retrieved April 18, 2014, from epi.org: http://www.epi.org/event/apple-foxconn-labor-practices-china/ Eva, D. (2013). Apple Shifts Supply Chain Away From Foxconn to Pegatron. The Wall Street Journal, 5-10. Foxconn technology Group. (2013). Foxconn Technology Group. Retrieved April 17, 2014, from Foxconn.com: http://www.foxconn.com/index_En.html Jay, P. (2004). International directory of company histories, Volume 59. Michigan: St. James Press. Jenny, C., Ngai, P., & Mark, S. (2013, August 12). The politics of global production: Apple, Foxconn and Chinas new working class. The Asia-Pacific Journal, 11(32), 5-15. Mark, D. (2012, January 25). Apple-Poor-working-conditions-inside- Chinese-factories-making-iPads. Retrieved April 18, 2014, from dailymail.co.uk: http://www.dailymail.co.uk/news/article-2092277/Apple-Poor-working-conditions-inside-Chinese-factories-making-iPads.html SACOM. (2010, October 12). Workers as Machines: Military Management in Foxconn. Retrieved April 18, 2014, from Germanwatch.org: http://germanwatch.org/corp/makeitfair-upd1010rep.pdf Read More