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The resilience of the relationship between Apple and Foxconn : scenarios based on the OLI framework

Danau, Deborah
(2016)

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Details

Supervisors
Defraigne, Jean-Christophe
Faculty
Louvain School of Management
Degree label
Master [120] en Ingénieur de gestion
Abstract
This paper is an analysis of the Alliance between two multinationals. On the one hand, Apple Inc., one of the most admired and innovative firm in the world famous for its electronic products. On the other hand, Foxconn, the major Apple’s subcontractor since 2004 that is in charge of Apple products final assembly and manufacturing. The thesis is divided into two sections. First, we will investigate the reasons why Apple decided to outsource the final assembly of its products to Foxconn that is mainly situated in China. We will analyze it by means of the OLI framework that focus on Ownership Specific Advantages, Localization advantages and Internalization Advantages. Second, we will investigate possible evolutions of this alliance. To do so, we will develop six scenarios that seem particularly relevant and likely to happen. The first one will be about the possible consequences of bad working conditions in Foxconn factories situated in China. Indeed, many scandals broke out in 2010 following many worker suicides. We will therefore look at possible consequences. Then, a scenario will investigate the possible consequences of China transition phase. Indeed, the country is facing rising wages and declining number of migrant workers. Therefore, Foxconn may start shifting its activities in other countries. The third scenarios will discuss the potential consequences of robot installation in Foxconn plants. It will probably not incite Apple to stop working with the latter. On the contrary, it is beneficial for Apple. Next, the fourth scenario will hypothesize that the growing Chinese middle class may incite Apple to keep part of its production in China, to stay close to this promising market. The second-to-last scenario will develop the eventuality that Apple jobs will come back in the United States. Finally, the sixth scenario is about the importance of environmental concerns. New regulations to control CO2 emissions may dramatically change Apple supply chain and therefore its alliance with Foxconn.