Explain how Apple’s philosophy and organizational culture have impacted how it handles ethical decisions.
Why is Apple’s industry so competitive and how could this affect the ethical risks in Apple’s operations?
How do you think Apple has handled the various ethical issues that is faced in the past?
Chapter Introduction Headquartered in Cupertino, California, Apple Inc. experienced many challenges throughout its business history. In 1997 Apple's share price was $3.30. Fifteen years later its share price rose to $705.07 (although its share price decreased to $425 the following year). In 2014 Apple split its stock 7-1, meaning each share was worth a seventh of its previous value, and stockholders were given seven extra shares of stock to make up the difference. Apple's stock price has become a key benchmark for the technology sector. For the past eight years, Apple earned first place among Fortune magazine's World's Most Admired Companies. To millions of consumers, the Apple brand embodies quality, prestige, and innovation. Although companies tried to copy the Apple business model, none have been able to discover what it is that makes Apple so unique. Apple is ranked first in innovation by Fortune magazine and is a market leader in the development and sales of mobile devices. Many believe Apple's success stems from a combination of several factors, including the remarkable leadership skills of former CEO Steve Jobs, a corporate culture of enthusiasm and innovation, and the high-tech products for which Apple is known. These combining qualities allow Apple to revolutionize the technology and retail industries. Apple’s History Apple's first product, the Apple I, was vastly different from the Apple products most are familiar with today. This first handmade computer kit was constructed by Apple cofounder Steve Wozniak. It lacked a graphic user interface (GUI), and buyers had to add their own keyboard and display. Cofounder Steve Jobs convinced Wozniak that it could be sold as a commercial product. In 1976 the Apple I was unveiled at the Home Brew Computer Club and put on sale for $666.66. Jobs and Wozniak continued to create innovative products. Soon their new company, Apple Computer Inc., surpassed $1 million in sales. However, the mid-1980s brought difficult times for Apple. In 1983 the company introduced the Apple Lisa for $10,000. The product flopped. In 1985 Steve Jobs was ousted after internal conflicts with the Apple CEO. Its computer products the Mac I and the Newton were not successful, and the company underwent several CEO changes. With declining stock prices, the future of Apple was in jeopardy. Steve Jobs returned to Apple in 1997 to try and save the struggling company. The return of Jobs introduced a new era for Apple. Jobs immediately began to change the company's corporate culture. Before Jobs's return, employees were more open about Apple projects. After he returned, Jobs instituted a “closed door” policy. Aside from efforts to protect intellectual property internally, Jobs was also a proponent of using litigation against rival companies suspected of patent infringement. Apple sued Nokia, HTC, and Samsung in 2009, 2010, and 2011, respectively. Perhaps the most notable lawsuits were made against Samsung, where both companies filed suits against each other across nine countries over a three-year period. In total, Apple and Samsung filed over 40 patent infringement lawsuits and counter suits related to intellectual property rights. The companies decided to end litigation outside of the United States, choosing to focus instead on cases that are still active in the United States. Today Apple continues to remain vigilant in protecting its technology and ensuring information remains proprietary. Jobs also created a flattened organizational structure; rather than go through layers of management to address employees, he addressed them directly. Perhaps one of the most noticeable changes, however, was Apple's expansion into new product lines within the electronics industry. In 2001 Apple launched the iPod—a portable music player that forever changed the music industry. The company also introduced iTunes, a type of “jukebox” software that allowed users to upload songs from CDs onto their Macs and then organize and manage their personalized song libraries. Two years later Apple introduced the iTunes Store, where users could download millions of their favorite songs for $0.99 each online. The introduction of the iPhone in 2007 was a turning point for Apple and the beginning of a paradigm shift for the entire world. The iPhone was a revolutionary new smartphone with the music capabilities of an iPod. The success of the iPhone cannot be understated. In 2015 iPhone market share was nearly tied with Android smartphones in the United States. The new generation iPhone 6 accounted for close to half of all new smartphone sales. The same year that Apple introduced the iPhone, Jobs announced Apple Computer, Inc. would be renamed Apple Inc. This signified that Apple was no longer just a computer manufacturer but also a driver in consumer electronics. Some saw this as a shift away from computers toward consumer electronics such as Apple TV, iPods, iTunes, iPhones, and iPads. However, it may be more accurate to say Apple is reinventing computers, or at least what they look like and how they are used. With the introduction of tablet computers such as the iPad, Apple began to take market share away from its top competitors in the computer industry, but in the process sales of its Mac computer line were also cannibalized by consumers opting for a tablet. Sales of desktops, laptops, and netbooks began to decline after tablet computers were introduced. Although analysts believed tablet sales would continue growing at a rapid rate, the tablet market became saturated with fewer than expected customers upgrading their current tablets to newer versions. Because nearly half of all U.S. households own at least one tablet, this has translated into stagnating industry growth and low sales. Consequently, just as Apple cannibalized its own line of Mac computers with the introduction of the iPad, it appears that its newest iPhone, which features a larger screen, is eroding the iPad market. The dynamic fluctuation in PC and Mac computer sales and the frequent introduction of new smartphones make it difficult to predict future sales of Apple products. Only time will tell if Apple's devices improve in market share or are overtaken by a rival platform. Apple’s Corporate Culture Apple's transition from a computer to a consumer electronics company is unprecedented—and hard to replicate. Although many can only speculate about why Apple succeeded so well, they tend to credit Steve Jobs's remarkable leadership abilities, Apple's highly skilled employees, and its strong corporate culture. The concept of evangelism is an important component of Apple's culture. Corporate evangelists refer to people who extensively promote a corporation's products. Apple even had a chief evangelist whose job was to spread the message about Apple and gain support for its products. However, as the name evangelism implies, the role of evangelist takes on greater meaning. Evangelists believe strongly in the company and will spread that belief to others, who in turn convince other people. Therefore, evangelists are not only employees but loyal customers as well. In this way, Apple was able to form what it refers to as a “Mac cult”—customers who are loyal to Apple's Mac computers and who spread a positive message about Macs to their friends and families. Successful evangelism only occurs with dedicated, enthusiastic employees who are willing to spread the word about Apple. When Jobs returned to Apple, he instituted two cultural changes: he encouraged debate on ideas, and he created a vision employees could believe in. By implementing these two changes, employees felt their input was important and they were a part of something bigger than themselves. Such feelings created a sense of loyalty among many working at Apple. Apple prides itself on its unique corporate culture. On its job site for corporate employees, it assures potential applicants that the organization has a flat structure, lacking the layers of bureaucracy of other corporations. Apple also emphasizes that it does not adhere to the average work day. Instead, Apple markets itself as a fast-paced, innovative, and collaborative environment committed toward doing things “the right way.” By offering both challenges and benefits to applicants, Apple hopes to attract those who fit best with its corporate culture. Apple also looks for retail employees that fit well in its culture. It wants to ensure that its retail employees make each consumer feel welcome. Inside Apple retailers are stations where customers can test and experiment with the latest Apple products. Employees are trained to speak with customers within two minutes of entering the store. To ensure its retail employees feel motivated, Apple provides extensive training, greater compensation than employees might receive at similar stores, and opportunities to move up to manager, genius (an employee trained to answer the more difficult customer questions), or creative (an employee who trains customers one-on-one or through workshops). Apple also offers young people the chance to intern with the firm, become student representatives at their schools, or work remotely during college as phone customer support representatives. Another benefit Apple offers combines employee concerns with concerns of the environment. In an effort to reduce its overall environmental impact, Apple offers incentives such as transit subsidies for employees who opt to use public transportation. Additionally, as part of its long-term commitment to sustainability, Apple is spending $850 million for 25 years of solar power. Its Cupertino facility runs on 100 percent renewable energy and is equipped with shuttles for employees. Apple's free buses are powered by biodiesel. Apple also began construction on a new headquarters facility, named Apple Campus 2. With a budget of $5 billion, the new facilities will include a fitness center, underground auditorium, and 300 electric vehicle charging stations. The new buildings, expected to be completed in 2016, will be LEED certified and incorporate solar technology. The Campus is also conveniently located so that many employees can walk, ride, or carpool to work. These incentives reduce fuel costs for employees while simultaneously lowering emissions released into the environment. Apple’s Ethics Apple has tried to ensure its employees and those with whom they work display appropriate conduct in all situations. It bases its success on “creating innovative, high-quality products and services and on demonstrating integrity in every business interaction.” According to Apple, four main principles contribute to integrity: honesty, respect, confidentiality, and compliance. To thoroughly detail these principles, Apple