Technology Group A English Essay Example

in their selection as they were required to choose approved or recommended vendors by Memos.

According to Edi Juanita, the general manager at Flatirons Electronics Technology, a leading company in the MS market, multinational Memos could potentially achieve a gross profit margin of 5060%. In contrast, Chinese contract manufacturers had an average margin of only 3% (Exhibit 3).

The case was prepared by Professors Robert G. Cycles and George Seriatim, along with HUBS Doctoral Student Betting Change. It was developed from published sources and is meant for use in class discussions. It is important to note that HUBS cases are not endorsements, primary data sources, or examples of effective or ineffective management.

Foxing Technology Group, previously named Hon. Ha Precision Industry Company Ltd, was established in 1974 by Terry Go. Originally operating as a trade name under Hon. Ha, it became a subsidiary of the company in 2000. Foxing Technology Group rapidly grew to become the biggest multinational corporation in the MS industry. Its range of services encompassed Joint-design, Joint-development, manufacturing, assembly, and after-sales support for its upstream partners. The company's primary objective was to deliver highly cost-effective solutions.

Foxing and its subsidiaries engaged in the production of goods for multiple companies including Apple, Nintendo, HP, and Motorola. They also manufactured cell phones and parts for Sony's Monika and Plantation 2 sets, as well as ND computer parts for Dell.

Since 2005, Foxing has emerged as the dominant player in the MS market, surpassing Flatirons. In 2009, Foxing's revenue exceeded $60 billion, accounting for 26% of the market. However, despite this triumph, Foxing experienced a substantial decline in its growth rate. Its sales only increased by

0.5% in 2009 compared to an impressive growth rate of 14.5% in 2008.

The increase in labor costs could impede Foxing's growth rate, leading to lower profit margins and potentially making it unable to offer competitive prices. Despite having a vertically integrated business model that makes it a one-stop-shopping destination, Foxing's main advantage, as pointed out by Pamela Gordon of Technology Forecasters, is its pricing. In an interview with Bloomberg, Gordon highlighted that Foxing was able to secure Apple's phone manufacturing order with minimal profit margin due to the low labor cost in China.

Despite its Taiwanese origin, Foxing predominantly conducted its operations in mainland China and had emerged as one of the largest exporters in the country.

The Company and its subsidiaries had around 00,000 employees. The majority of these employees were located at Longhead Science and Technology Park. This park was established by Terry Go in 1988 as the first factory in China. It was positioned in Sheehan, a city in Gudgeon Province in Southern China. Sheehan is located north of Hong Kong and is also China's first Special Economic Zone. Foxhound's mainland headquarters is situated there to take advantage of the affordable land and labor in the region.

The factory initially had a small workforce but experienced rapid growth. In 1995, Mr. Go purchased a larger piece of land, which eventually became Longhead Science and Technology Park. This park encompassed approximately 1.6 square miles and served as a comprehensive community for the company. It consisted of assembly lines, dormitories, restaurants, banks, a fire brigade, a hospital, an employee swimming pool, a grocery store, and an Internet cafe (Exhibit 5). Mr. Go fostered

a culture centered around his own personality and leadership style. He emphasized the significance of unwavering loyalty from employees and believed that the company's interests outweighed their personal gain.

The photos of Mr. Go with Chinese officials were exhibited throughout Longhead, and it was the responsibility of his managers to remember a document known as "Go's Quotations." Mr. Go set an example by ensuring that products were named and released on schedule and he would regularly inspect production lines or assist in repairing equipment by touring the Longhead campus late at night. It was well-known that Mr. Go worked for 16 hours a day and emphasized discipline within his management team. On the Longhead campus, over 500 monitors broadcasted company news and workplace programs that were produced by the company's television production team.

To maintain order and protect the plant, over 1,000 security guards were hired. The assembly lines had a tense and fragmented atmosphere. The production process was divided into numerous simple tasks, resulting in each ACH worker specializing in one task and performing repetitive movements. Additionally, as reported by a 21-year-old frontline worker, talking on the production line was not allowed, bathroom breaks were restricted to 10 minutes every two hours, and workers faced frequent yelling.

Despite being closely supervised, employees frequently exceeded the legal limit of working hours and sometimes worked two or three times as much. According to a survey, over 70% of employees worked more than 10 hours a day during shifts lasting between 10 and 12 hours. Although overtime was not mandatory, those who did not work extra hours received only the minimum wage, which was around $90 per

month (equivalent to 60 cents per hour) in 2007 and rose to $132 per month in early 2010. New workers starting with a salary of $44 per month in 2005 had the potential to earn up to $157 per month with a monthly work schedule of 30 days. By 2007, this amount had increased to $230 per month when factoring in overtime pay.

Foxing Employees

A survey was conducted in late 2010 by twenty universities from mainland China, Hong Kong, and Taiwan. The survey included 1,736 workers from twelve Foxing factories in nine mainland cities. Out of the three factories located in Sheehan and Sunhat, approximately 1,500 responses were collected. The workers' average age was 21, with the youngest worker being 15 years old. Most of the workers had migrated from other provinces, with Henna, Human, and Huber being the top three cities of their original residence. Only a small percentage of the workers had education beyond high school. The distribution of workers' education level and the corresponding average wage can be seen in Exhibit 6.

The college graduates earned considerably higher salaries than the other groups, as they were mostly employed in office settings developing software programs. A large portion of the workforce consisted of low-skilled workers employed on assembly lines, particularly at locations like Longhead. Although the pay may have appeared modest from a perspective in developed countries, numerous workers aspired to join Foxing. In comparison to smaller manufacturing factories that frequently struggled to provide timely or promised payments to their employees, Foxing was considered one of the top choices for individuals working with oilseeds.

The employees at Foxing were provided

with official agreements and received financial aid for accommodation, meals, and insurance. They also had the choice to reside in free company dorms which could accommodate eight to ten individuals per room. As per a 2010 study, the average monthly expenditures for an ordinary Foxing worker were around $160, suggesting a notably low quality of life. Although these workers managed to fulfill their fundamental requirements, saving adequate funds for purchasing a home or handling potential health problems proved difficult.

Labor Practices in China

The issues discovered at Foxhound's Longhead facility exemplified a broader societal challenge in China: the need to reconcile the desire for job creation by attracting international manufacturing companies due to low labor costs, with the necessity for jobs that adhere to international standards for working conditions. Despite China's one-child policy, its population still grew by approximately 14 million people annually.

The country was facing the task of creating 100 million new jobs by 2013, with an expected influx of 70 million people entering the workforce from 2004 to 2014. Additionally, the aftermath of the financial crisis since late 2008 caused significant job losses due to a negative demand shock. In 2010, China's competitive advantage was at risk as labor wages needed to be increased to match inflation, posing a threat to companies like Foxing that provided crucial employment opportunities for Chinese society. However, labor practices in China were poorly regulated and enforced. Therefore, the government had to take prompt but careful action to address various significant challenges.

The All-China Federation Trade Union (CUFF) was ineffective in safeguarding workers' rights due to its lack of independence from the government. It was

unable to confront the government's meager minimum wage policies and inadequate social welfare measures. Labor laws were insufficient and poorly implemented prior to the economic reform in the 'ass. The traditional "cradle to grave" employment system in Chinese businesses was gradually replaced by a "contract system". The 1995 Labor Law mandated written contracts for all employees.

Despite a lack of compliance, there was a significant proportion of workers in China who were employed without contracts. This includes 15% of urban workers and an astonishing 70% of rural workers. In order to combat labor exploitation and mistreatment, China's National People's Congress introduced the Labor Contract Law on March 20, 2006. The law officially came into effect in January 2008 with the goal of making it more difficult for employers to terminate employees and improving benefits such as retirement provisions.

Furthermore, the Labor Contract Law stated that the maximum working time should be eight hours per day and 44 hours per week. Employers were also required to follow local government-set minimum wage standards. For specific details about minimum wage rates in selected cities, please see Exhibit 7.

Despite the country's consistent use of low labor costs as a competitive advantage, individuals are starting to experience increased difficulties due to the high cost of living in urban areas. This issue is further worsened by the recent annual inflation rate of approximately 5%, which has diminished their purchasing power.

Migrant Workers

The increase in the percentage of migrant workers who are low-skilled and low-paid has resulted in additional social problems. In the past decade alone, there has been a significant surge in migrants, with more than 200

million people migrating from rural to urban areas between 1982 and 2000. Around half of this migration occurred after 1995. According to the 2000 China census, the migrant population reached 121 million in 1995, comprising of 79 million migrants within provinces and 42 million migrants from other provinces. Employers favored this large migrant population as it provided a more cost-effective labor alternative compared to local workers.

The Global Wage Report (Exhibit 8) reveals that migrant workers are prone to earning lower wages than local workers. The report indicates that about 60% of the wage gap can be attributed to worker characteristics, such as education level, while the remaining 40% stems from discriminatory treatment faced by migrant workers.

The discrimination experienced by migrant workers resulted from the belief that urban residents were superior to rural residents. Urban residents enjoyed privileges that were unavailable to migrants. The Hugo system, also known as the House Registration System, was implemented in 1958 in China with the aim of restricting social mobility and had an impact on shaping this societal perception. Initially, individuals were classified as possessing either an urban Hugo or a rural Hugo based on their place of birth and later on their ancestry.

Hugo granted residents the right to seek housing, education, and healthcare exclusively in their hometown. During the economic reform in the late 'ass, rapid growth in urban labor demand led to the establishment of various reforms and temporary residency programs. The Hugo system itself also went through changes. However, only a small number of outstanding employees succeeded in obtaining local Hugo status, leaving the majority of rural individuals without much chance of becoming urban

residents.

The employer's main distinction when hiring an employee with an urban Hugo compared to one with a rural Hugo was the additional financial obligations for the former, including pension insurance, occupational injury insurance, maternity insurance, unemployment insurance, and 4 housing provident funds. In contrast, there were no similar requirements for the latter. This preference for migrant workers over local workers by employers was due to these added expenses and resulted in a challenging life for migrant workers.

In addition, migrant workers also had concerns about their families. Their family members did not have access to education and healthcare, and new marriages and births could only be registered in their hometowns. Despite having stable jobs, migrant workers lived in a constant state of fear, anxiety, and insecurity. Nine academics emphasized the need for greater attention and care towards this marginalized group in an open statement. They noted that once these new generation of migrant workers left their homes, they never contemplated returning to agricultural work like their parents.

Upon entering the city for work, migrant workers feel limited in their choices and perceive building a home through hard work as an unattainable goal. This realization diminishes the value of their labor, leaving them feeling stuck with no way to advance or retreat. Consequently, this predicament triggers a deep identity crisis among the new generation of migrant workers, exacerbating their psychological and emotional issues.

Suicides at Foxing Plants

The events at the Longhead plant in 2010 brought attention to the working conditions of low-skilled labor and migrant workers. Prior to 2010, there were occasional suicides at Foxing, with two occurring in 2007 and two in

2009. One of the victims in 2009 felt desperate due to the "noisy and unbearably exhaustive" work environment, while the other took their own life after being suspected and punished for losing a prototype of Apple's G phone. Allegations of mistreatment of employees arose as early as 2006 when The Daily Mail, a newspaper based in I-J, criticized Apple for using Foxing as a supplier due to its sweatshop-like conditions. Journalists who visited the Foxing plants personally observed the low wages, long hours, and difficult working conditions. The dormitories varied in size, ranging from a couple hundred workers per room to about 30 workers. (Exhibit 9 illustrates a typical dormitory at Foxhound's plants in 2010, which had improved conditions compared to 2006). Only fans were installed, leaving workers feeling suffocated during hot and humid summers. There was a persistent unpleasant smell, and no one bothered to clean the common areas.

Known as "the garbage dorm," the armory was infamous among workers. Each floor of the dormitory had a shared public shower and restroom, but workers were prohibited from washing their own clothes. Instead, they were required to participate in a laundry program managed by the factory in order to conserve water. The dormitory buildings were under constant surveillance by security guards who ensured that workers used their access cards for entry. Consequently, workers were prevented from entering other dormitories or inviting friends into their living quarters. It is worth mentioning that although security guards were responsible for card swiping, they did not address safety concerns, resulting in rampant theft within the dormitory complex.

Despite The Daily Mail's criticism, Foxing gained significant attention in the public

eye due to a continuous series of suicide jumps in the first half of 2010. Three individuals jumped from their dormitory buildings in March, followed by two more in early April. One survivor testified that excessive work pressure led her to attempt suicide. These suicides are detailed in Exhibit 10. In May, six more jumps occurred, and by the end of 2010, a total of attempted suicides reached three, with only three workers surviving.

Public Reaction

The string of suicides quickly grabbed the attention of major media outlets and became widely known to the public. The media was flooded with news articles, editorials, and blog posts discussing the issue.

A comprehensive investigation was conducted by twenty universities from mainland China, Hong Kong, and Taiwan. The investigation resulted in a report that specifically examines the labor practices of Foxhound. Furthermore, nine academics from mainland China and Hong Kong released an open statement with the aim of making the public more aware of the "identity crisis" experienced by migrant workers living and working in cities. These workers are not recognized or treated as urban residents by either the Hugo system or society.

Reports in the cost press have highlighted allegations of labor abuse and mistreatment against Foxing. These allegations primarily involve excessive working hours and military-style management. However, some people argue that the suicides cannot be entirely attributed to problems within the company but rather stem from a broader societal issue. Health experts stress that Foxing's suicide rate is lower than China's average rate, which stands at 13 per 100,000 for males and 14.8 for females.

According to some individuals, the victims at Foxing, who were

mostly young and inexperienced in society, struggled to handle the stress of working there. Tang Wending, a young line supervisor, compared Foxing to other factories and commented that it was a better workplace than many others in China. Similarly, Boy L from the Institute of Social Research in Frankfurt agreed with this perspective and gave examples such as timely wage payment, free food, and lodging.

Despite the positive aspects, Foxing's reputation and image were heavily damaged due to a series of suicides, even though it was previously praised for its job creation. Apple faced significant scrutiny and criticism for its lack of supervision over its Chinese supplier during these tragic events. When questioned about the suicides, Apple's CEO, Steven P. Jobs, stated that Foxing was not a sweatshop and that Apple was actively investigating the situation. In 2010, Apple's COO, Timothy D. Cook, along with other executives and two suicide prevention specialists, traveled to China to assess the operations at Foxing.

The suicides at Foxing were thoroughly investigated by experts. The investigation included surveying over 1,000 workers and conducting in-person interviews with employees and managers. The findings and recommendations were presented to the executives at Foxing. However, none of the recommendations addressed the issue of wages and Apple's aggressive pricing strategy, which had put increased pressure on supplier employees. In 2010, Apple enjoyed a gross margin of 39%, while Foxhound only had a margin of 8.10% (Exhibit 3). This margin decreased even further to less than 1% in the first quarter of 2011 due to higher operating costs resulting from a wage increase. Some doubts arose about the effectiveness of the expert's investigation report and recommendations

since Apple had already conducted a similar investigation in response to accusations by The Daily Mail about sweatshop conditions at Foxing in 2006.

Foxhound's Response

In response to the suicides, Mr. Go expressed a determination to take all necessary steps to prevent further tragedies. Foxing promptly implemented a number of corrective measures, including requiring employees to pledge against suicide and installing 1.5 million square meters of nets to prevent jumps. Mr. Go acknowledged that while this action may seem insignificant, it could potentially save a life if someone were to fall. Additionally, the company raised the monthly salaries twice; first in June from $132 to $176.7, and then in September to $294, benefiting 85% of its Sheehan workers. To provide better support for managers and assembly-line workers, Foxing established a 24-hour hotline service, hired sociologists and psychiatrists, and even arranged for Buddhist monks to conduct a religious ceremony at the Long head plant to ward off misfortune. Despite undertaking comprehensive actions, improving workers' conditions in a meaningful way was exceptionally challenging given the existing social environment.