Foxconn Additional Questions:

1. What is Foxconn's Strategy? Is this sustainable?

Terry Gou, Foxconn’s founder, fostered a culture centered on his own personality and
leadership. He demanded intense loyalty, telling employees that the company’s benefit was
more important than their personal benefit. He led by example to make sure that products
came out on schedule and he would spot-check production lines and help repair equipment
even at late in the evening. Also, the production process was broken down into many simple
tasks, so each worker specialized in a single task and performed monotonous motions. Besides
working under close supervision, employees tended to double or triple the legal limit of working
hours.

Although this kind of management strategy may benefit the company, it has a negative effect to
its employees. In China, the migrant workers are discriminated and most of the workers in
Foxconn are migrant workers. With this strategy, Foxconn’s employees will be more vulnerable
to the stresses of a highly-regimented manufacturing culture. Thus, in the long run, this may
result to unmotivated employees and it may not sustain the business.

2. What is the cause of the suicides?

One victim became desperate because of the “noisy and unbearably exhaustive” working
conditions and the other took his own life for being suspected and punished for losing a
prototype of Apple’s 4G iPhone. There were allegations of employee mistreatment. Other
possible causes were due to the company’s low wages, long working hours, and tough working
conditions.

3. How do you evaluate the company's response?

Effective risk management should consider physical, human, and financial factors. Foxconn may
already have considered this in their response with the suicides issues in their company but
these are for short-term only. There actions are somewhat reactive actions only. Foxconn did
not provide long-term solutions to their employees’ problems.

4. What should Foxconn do now to address the problem?

Foxconn should also consider long-term primary stress prevention. They should also provide
solutions which could prevent the employees suffering from mental and emotional problems.
The Foxconn’s workers are mostly migrant workers and they are already suffering from
discrimination in their country. Since they are already being discriminated they may experience
more difficulty in handling pressures from work, family, and personal life. With this, Foxconn
should also consider changing its military-style work culture and management system. Given the
reported reasons why some of the employees at Foxconn committed suicide, we could infer that
the working environment, work culture, and the management style are the root cause of this
 problem. Foxconn should also consider the welfare of its employees and not just focus on its
profits.

5. What is Foxconn's business model?

Foxconn has a vertical integrated one-stop-shopping business model by integrating mechanical,

electrical and optical capabilities altogether. It covers solutions ranging from molding, tooling,
mechanical parts, components, modules, system assembly, design, manufacturing,
maintenance, logistics, etc. Moreover, the competitive advantage of Foxconn was price. They
could offer competitive low price because of the low labor cost in China.

6. What is the profile of Foxconn workers?

 The average age of the workers was 21.1 with the youngest being only 15 years old.
 Most workers migrated from other provinces, among which Henan, Hunan, and Hubei
were the top three cities of original residence.
 Only a small fraction obtained education beyond high school.
 Majority of the workers worked at the assembly line and were low-skilled workers.
 The workers could sustain their own lives, but they had little hope of accumulating
enough money to obtain a mortgage or handle any potential health problems.

7. Why are Foxconn jobs in high demand?

Thousands of workers wanted to join Foxconn because compared to other smaller

manufacturing factories that often failed to pay their employees on time or in the promised
amount, Foxconn was one of the best places to work for low-skilled workers. The employees
were provided with legal contracts, got subsidies for housing, meals and insurance, and could
choose to live rent-free in company dormitories.

8. What is happening in country level?

Despite the one-child policy, China’s population continued to grow at an annual rate of about 14
million people a year. The country faced the need to create 100 million new jobs by 2013. 70
million people were expected to enter the workforce between 2004 and 2014. Meanwhile, since
late 2008, a negative demand shock following the financial crisis had caused millions of job
losses. In 2010, increasing labor wages to keep up with the pace of inflation in China
substantially threatened its competitive advantage. On the other hand, the labor practices in
China were poorly regulated and enforce. Establishing independent labor unions is also not
allowed in China. Their labor laws were both undeveloped before the 90’s and poorly enforced.
On January 2008, China enacted a new Labor Contract Law in order to prevent labor abuse and
mistreatment. The law made it harder to dismiss employees, boosted employee benefits such as
retirement provisions, set the maximum working time as 8 hours per day and 44 hours per
week, and required employers to meet the minimum wage standards set by local governments.
 While low labor costs had consistently been a key source of the country’s competitive
advantage, people started to feel an increasing headship from living in a more expensive urban
area.

Moreover, discrimination against migrant workers was a pervasive phenomenon. Urban

residents tended to feel that they were superior to those of rural origin and indeed they enjoyed
privileges not granted to migrants. Even having a stable job, migrant workers lived in constant
fear, anxiety and insecurity. The new generation of migrant workers faces a serious identity
crisis and, in effect, this magnifies psychological and emotional problems.

9. Given the broader institutional context, is this Foxconn's fault?

Foxconn may not be the only one to blame for the suicide of their employees. We could also say
that the real cause of the suicides was in fact a larger social problem. Discrimination of migrant
workers is prevalent in China.

10. What did Foxconn do to address the problem and what else should be done?

In response to the suicides, Mr. Gou showed willingness to do everything possible to stop the
tragedy and Foxconn immediately adopted a series of remedial practices like letting the
employees sign a “no suicide” pledge, installed 1.5 million square meters of nets, increased the
monthly salaries twice, established 24-hour hotline service, hired sociologists and psychiatrists,
and even invited Buddhist monks to conduct a religious ceremony to dispel misfortune.

Foxconn should also consider long-term primary stress prevention. They should also provide
solutions which could prevent the employees suffering from mental and emotional problems.
Foxconn need to create a new atmosphere of its people management culture.

11. Do they have a sustainable business model? Are they innovating?

Foxconn adopts a one-stop shopping vertical integrated eCMMS model to revolutionize the
conventional inefficient electronics outsourcing model. eCMMS stands for e-enabled
Components, Modules, Moves and Services. eCMMS integrates mechanical, electrical and
optical capabilities altogether. It covers solutions ranging from molding, tooling, mechanical
parts, components, modules, system assembly, design, manufacturing, maintenance, logistics,
etc. Through the eCMMS model, Foxconn is not only the world's largest 3C manufacturing base,
but also the shortest supply chain at the same time. Moreover, Foxconn’s vision has always
been to provide technological products and solutions that bring convenience to people’s
everyday lives. This make their company innovative. With this, Foxconn’s business model can be
considered as sustainable since the company is more customer focused instead of the profit and
may remain sustainable as long as Foxconn continue its focus on the customers’ needs and
wants. The Foxconn Technology Company has put a greater importance to meet the
expectations and increase the satisfaction level of the customers.