Foxconn's iPhone plant 'paralyzed' as thousands strike

According to the article “Foxconn's iPhone plant 'paralyzed' as thousands strike: Report” published on 6 October 2012 (http://articles.economictimes.indiatimes.com/2012-10-06/news/34293829_1_apple-and-foxconn-foxconn-technology-group-china-labor-watch) the article talks about the workers strike of the Foxconn manufacturing plant in China. The article reports that thousands of workers went on strike due to several working environment issues. As Foxconn is a large producer of Apple’s Iphone 5, a brand new smart phone that was recently released into the market, this strike of thousands of workers effectively crippled Apple’s iphone 5 production line.

“The reported strike comes at a crucial time for the U.S. corporation, weeks after kicking off its largest-ever global rollout of the smart phone. Apple is already struggling with supply constraints” is a line taken from the article stating that the supply of iphones has been effected.

In my opinion and basic knowledge of microeconomics, the strike that crippled Apple’s iphone factory effects the supply of iphones trough-out the world. Let us focus on a given country. For example, Malaysia, Apple company’s products have always been known to be ‘top-notch’ or a high quality product, because of this Apple products have always been high in demand through-out the Malaysian population. The strike that paralyzed Apple’s iphones production reduced the supply of iphone 5s to Malaysia causing the supply curve of the Iphone 5 market to shift to the left.

 This results in price for the iphone 5 to increase and the supply to decrease. With this consumers will be at disadvantage as the price for an iphone 5 would be significantly higher as well as consumers would struggle with the decreased quantity of iphone 5s available in the market. The government can assist consumers by subsidising Apple’s iphone 5 and make up some of the phones cost so that the price of the iphone 5 can be reduced. However, this increase in price will most likely cause consumers shift to other substitute smart phone products such as, Samsung galaxy XIII. This is known as the substitute effect, where if the price of one good increases the demand for another good increases. If this were to occur Apple would experience a drop in profit and lose out their loyal customers to their competitors, and their competitors would benefit in the increase of demand for their product. To avoid the competitors to take advantage of this situation the government can control taxes to reduce or increase demand for the products, such as, increasing taxes on the competitors products, Samsung Galaxy XIII, this will delay or reduce the amount of people considering to purchase this product, this reduce the amount of market power Samsung will have and avoid a possible monopoly. Similarly, if the consumers of Apple’s iphone 5 were to switch to other smart phone producers, the markets of complementary goods for Apple iphone 5 such as, iphone 5 cases, iphone 5 accessories, and iphone 5 paid applications would also suffer from this strike, as these markets are complimentary goods for the iphone 5, the complimentary effect states that, if the demand for one good decreases the demand for its complimentary good also decreases. As a result, complimentary goods for the Apple’s iphone 5 would suffer a decrease in demand shifting their demand curve to the left causing price and quantity to decrease. This would result in profit loss for complimentary goods of Apple’s iphone 5 which may cause people to leave the market all together.

"In addition to demanding that workers work during the holiday, Foxconn raised overly strict demands on product quality without providing worker training for the corresponding skills," the Watch said in a statement on its website” this is a line taken from the article stating how Foxconn pressure their workers to perform.

Another agenda that could arise from this strike is that workers in China would refuse to work due to poor working conditions. This could result in the supply of labour decreases. Similarly to how a product market works, if the supply of labour decreases the supply curve will shift to the left.

As a result the cost for workers increases and the quantity supplied decreases. If this were to happen, producers will struggle to find workers for their factories and facilities. Also, producers would have to pay higher wages to attract more workers, this would result in their overall cost per-unit to increases as well as their fixed cost. However, this does not only effect producers who are seeking new employees, other producers also have to raise their wages as well as change their working environment to better please their existing employees to avoid losing them to other producers offering better wages and better working environments. This battle between producers to keep their employees as well as attract new employees to work for them would result in wages and working conditions to improve in several different industries. As a result, workers would benefit from this as they will be given plenty of different choices of work as well as higher pay and more suitable working conditions.

In conclusion, this strike has resulted in Apple’s iphone 5 supply to be drastically reduces impairing its supply line which will result in the price of an iphone 5 to increase and the quantity supplied to decrease. This may also result in Apple competitors products to increase in demand as well as Apple complimentary goods to decrease in demand. Nevertheless, workers benefit from this strike as they will be given larger range of choice for a new working environment and better pay. Existing workers also benefit from this as firms will improve their employee satisfaction to maintain their work force. In my opinion this strike has cause several benefits and cost to both producers and consumers, I have to say that workers would benefit the most as to compared to producers and consumers from this strike as all firms in general would take action to maintain their employees. Thus, all workers, existing and one seeking work will benefit where else only competitor producers would benefit from this strike and consumers would be at disadvantage as their choices are reduces and prices are increased.