CASE 1 – FOXCONN TECHNOLOGY GROUP (A)

Statement of the Problem

With the rampant suicide of employees at Foxconn, what improved measures must Foxconn do to address this issue?
What are also the business decisions to make (price increase, etc.) in order to support and sustain the changes that the
company must do in order to address this issue?

I. State the different areas of consideration

STRENGTH  Company produces high quality products
 Largest and fastest growing multinational company in the EMS
(Electronics Manufacturing Services) industry
 With various manufacturing plants
 CEO which is open in doing something for the employee problem
they encounter at Foxconn
WEAKNESS  Military-style work culture which leads to harsh working condition
 Lack of corporate social responsibility
 Labor-extensive manufacturing firm
 Foxconn is a sweat shop
 It caters low skilled workers
 Discriminating hukou system
 Depressed living conditions
 Low compensation
 There is no work/home balance
 Longer working hours
 No established labor law

OPPORTUNITIES  Major electronics brands shifting to outsourcing of manufacturing to

leverage on economies of scale
 Foxconn has an advantage as the largest EMS on negotiating factor
regarding pricing

THREATS  Labor issues

 Ethical issues
 Increasing operating expenses and declining margins that might
cause closing down of business in a worst case scenario

III. SOLUTIONS / ALTERNATIVE COURSE OF ACTION

 No improvement on the current remedial practices
Remedial practices include
- Asked each employee to sign a “no suicide” pledge
- Installed a million meters of nets
- Increases monthly salaries twice
- 24-hr hotline service to council employees
- Hired sociologist and psychiatrists
- Invited Buddhist monks to conduct religious ceremony

 Improve the remedial practices, ask for cooperation with customer (like biggest customer- Apple)
- to improve financials of company to support and sustain the changes; and the government - to
Improve labor laws and social condition of employees

Some of the improvements to undertake:

a. Improve working conditions of Foxconn by:
- motivate employees
- Getting work done efficiently
 - Less manufacturing time
- Improve living conditions including better quality housing
- Counselling
- Medical facilities
- Improve compensation
- Team building activites to promote work/life balance and help manage stress
b. Ask customers to support financials by:
- Increase pricing
- Sponsorhip on the team building activites
- Donations in construction of new dormitories
c. Tap the help of the Chinese to improve the following:
- Improve labor laws to protect employees
- Eliminate or improve hokou system

IV. STATE YOUR RECOMMENDATION BASED ON THE ACA

Improve the remedial practices that the company has undertaken. The improvement will answer the following:
- Absence suicides threats in employees
- Answer issue on ethics and publicity
- Maintain a good reputation
- Improve efficiency and productivity of employees
In addition, tapping the help of customer like Apple will answer the threat on the company’s profitability and
closure. The improvement on labor laws will standardize labor on China which will also improve not only the labor
in Foxconn but also on all the companies in China. Consequently, Foxconn will be in equal footing with other
companies in China.

V. CONCLUSION AND DETAILED ACTION PLAN TO IMPLEMENT

Improve working conditions of Foxconn
 Promote internal communications among employees
 Additional dormitories in each plant location to improve housing (lesser people in dormitory)
 Team Building activities to include “off day” learning seminars, done quarterly, lead by a third party
facilitator, attendees are paid and involve forum to discover situation and new needs of employees

QUESTIONS:
1. What is foxconn's general strategy? Foxconn is a vertical integrated one-stop-shopping business
model. It provided joint-design, joint-development, manufacturing, assembly, and after-sales
services to upstream partners and was committed to providing the lowest “total cost” solution.
The core competitive advantage of the company is the low price.

2. What does it means to be an EMS vendor? An EMS vendor manufactures products for Original
Equipment Manufacturers (OEMs) as strategic supply chain partners. EMS is hard to differentiate
in terms of manufacturing and quality certifications. They generally competed on the basis of
price.

3. What exactly are the margins? Since price is the basis for competition, margins are very thin.
Average margin of 3%. In fact on Foxconn, margin could go as low as -19.8% (Mar 2009).

4. What does this mean for EMS companies? This mean that to continue to compete in terms of prices
and to be able to sustain, operating expenses should be maintained at lower levels. Since the
company is a labor intensive company, labor should be the no. one consideration in maintaining
at lower levels.

5. Where do the people who work for the company come from? Majority of the workers of the company
are migrant workers. They come from rural areas of China namely Henan, Hunan, and Hubei (top
three provinces)

6. What experience do people who take these jobs have? People are low-skilled workers (a small
fraction of the employees obtained education beyond high school ).

7. But why did foxconn hire migrant workers? Lower wages, why not just people from poor urban
classes? Because these people don’t have options.
8. it seems that working for Foxconn is not the best thing in the world. why are jobs in such high demand,
then? Because Foxconn compared with other manufacturing companies in China has more
improve situation, and compensation.

9. What is the relationship of Foxconn to the Chinese government? There was no collaboration with the
government

10. referring to exhibits 3.2 & 3.3. both suggest that there is something bigger happening at the country
level.what is it? social discrimination (implementation of hokou system and no established labor
laws that would protect employees.

11. Given the broader institutional context, is this Foxconns's fault? what was the causes of the suicides, and
what is the solution? This is not Foxconn alone. It may also be the responsibility of the government
(no establish labor law) and OEMs who take advantage the competition of EMS (in terms of
pricing).

Causes of Suicide:
 Military-style work culture which leads to harsh working condition
 Lack of corporate social responsibility
 Labor-extensive manufacturing firm
 Foxconn is a sweat shop
 It caters low skilled workers
 Discriminating hukou system
 Depressed living conditions
 Low compensation
 There is no work/home balance
 Longer working hours0
 No established labor law

Solution:
Improve the remedial practices, ask for cooperation with customer (like biggest customer- Apple)
- to improve financials of company to support and sustain the changes; and the government - to
Improve labor laws and social condition of employees

12. How effectively has Foxconn responded to the problem? The remedial activities of the company is
not effective in the sense that this will only a short term solution and not sustainable.

13. so what would the solution be?what is Foxconn's proposed solution?

Some of the improvements to undertake:
a. Improve working conditions of Foxconn by:
- motivate employees
- Getting work done efficiently
- Less manufacturing time
- Improve living conditions including better quality housing
- Counselling
- Medical facilities
- Improve compensation
- Team building activites to promote work/life balance and help manage stress
b. Ask customers to support financials by:
- Increase pricing
- Sponsorhip on the team building activites
- Donations in construction of new dormitories
c. Tap the help of the Chinese to improve the following:
- Improve labor laws to protect employees
- Eliminate or improve hokou system