Apple Adopts Cold War Tactics

by Rich on January 19, 2012

Apple’s recent announcement that it joined the Fair Labor Association is good news for the effort to promote humane labor standards. As a cynical and tactical effort, though, I think it’s comparable to the US military buildup during the Cold War which contributed to the collapse of the Soviet Union.

Apple is the only consumer electronics manufacturer with anything other than razor thin margins. Most manufacturers subsist on single-digit margins and squeak by on volume and struggles for efficiency. Apple, thanks to Tim Cook, is incredibly efficient, and their ability to focus on a small number of products and premium profits (at comparable prices) make their margins the envy of the electronics world. That’s how they sell a small fraction of the world’s mobile phones but rake in 2/3 of the world-wide mobile profit.

With a huge margin advantage, Apple can press the fair labor issue. If they’re able, though public pressure, to set expectations around labor standards for electronics manufacturers, they can raise the cost of manufacturing a few percent. Samsung can’t absorb this increase. Neither can LG, HTC, or HP.

For Apple, a few percent is unfortunate for their bottom line, but they’ll still make a fortune. Competing on labor standards could move Apple from being perceived as a premium price/premium quality participant to comparable or even value priced while maintaining premium quality.

How can HP, Asus, or Samsung compete with that?

Previous post:

Next post: