2014-2 Quality Management

Group 4&5
2009104388 Jiun
Jeon
2013100261
Seonhui Yu

A proposal on
adoption
TQM at
Apple Koreas
A/S system

2014008323 Rene
Trebbe
2009100100 KoKimSergio
2010100352 Seungpyo Hwang

Contents
1.

Introduction...........................................................................................................................2

2.

Problem identification and improvements.................................................................................3

2.1. Customer Focus................................................................................................................3
2.2.

Employee Involvement..................................................................................................5

2.3. Process Approach..............................................................................................................6

2.4. Current situation..............................................................................................................7
2.5. Apple Support in the USA..................................................................................................8
3.

Root cause analysis and proposed practices.............................................................................11

3.1. Customer dissatisfaction and cause and effect diagram........................................................11
3.1.1. Proposal objective..................................................................................................11
3.1.2. Root causes analysis...............................................................................................12
3.1.3. Expected Outcomes................................................................................................13
3.1.4. Method to monitor.................................................................................................14
3.2.

Low service performance.............................................................................................15

3.2.1. Proposal objectives.................................................................................................15
3.2.2.

Changes that can address the root causes.............................................................16

3.2.3.

Expected outcomes............................................................................................17

3.2.4

Methods to monitor...........................................................................................17

4.

Conclusion...........................................................................................................................18

5.

Recommendation..................................................................................................................19

6.

Reference............................................................................................................................20

1. Introduction

Apple is a truly the most influential company to development of smart devices. Their
vision and mission are followings; providing human tools, dedicated to the empowerment of
man, helping change the way we work, learn and communicate. Man is the creator of change
in this world. And should not be subordinate to machines or systems. After it released iPhone
3G in 2008, they worked their vision and mission quite successfully with not only computers
but also smart phone.
Apple Korea launched iPhone 3GS in 2009, with the slogan of the fastest, most
powerful iPhone yet. They introduced a totally new product and worked as a pioneer of
market for smart phone in Korea. Since 2009, they launched all series of iPhone in a row. In
2012, Korea has the highest smart phone penetration rate, around 70%, in the world. The
figure well exceed that of world average. iPhone series had market share from 5 to 7% in
Korean market. The company currently released the latest series of iPhone, iPhone 6 and
iPhone 6+.
Among various products Apple offers, we focused on iPhone. To put it more
concretely, we are going to cover After Service of iPhone series. Since it made an appearance
on Korean market, iPhone worked as a symbol of innovation. However, compared to that
kind of status, its current performance in After Service is quite not good. They have been
ranked 1st in terms of customer satisfaction index. After they revised its After Service
regulation, customer satisfaction became worst in the first half of 2014. Apple Korea was
somewhat desperate for revising its After Service regulation when it comes to profit of Apple
Korea. Many Korean customers misused the refurbished phone system. Before warranty of 1
year is over, they got their phone refurbished and sold it at high price.
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In addition, Apple Korea didnt take responsibility for After Service. Instead, Apple
Korea has authorized two Korean companies, Daewoo electronics and Ubase, to work as
official service centers. These companies caused customer dissatisfaction. The service center
charges too much for minor problems and it took very long time to even get a refurbished
phone. There were also too many consumer relief application to the Korean Consumer
Agency (KCA). The poor After Service was even covered in parliamentary inspection of the
administration.
The aim of this report is to provide a general overview of After Service performance
of iPhone in regards to providing customer satisfaction. To improve quality of service, we are
going to analyse current After Service system of US, which is accepted as a model answer.
Then, in the Total Quality Management point of view, we will suggest amendments to the
current After Service system of Apple Korea.

2. Problem identification and improvements

In this part, we will analyse performance in After Service of iPhone through various
cases. And then, we will make suggestions in terms of Total Quality Management. Even
though their current performances are not active in all the six principles of TQM, we analysed
their performances in terms of Customer Focus, Employee Involvement and Process
Approach.

2.1. Customer Focus

Customer Satisfaction

This graph is Smart Phone Satisfaction Index from second half of 2012 to first half of
2014. The graph considered 4 aspects of After Service; closeness of After Service center,
process and the consequences of the repair, After Service centers interior environment and
Employees expertise and kindness. It shows that other Smart Phone Brands: Samsung,
Pantech, LG and Apple Korea. Customers After Service Satisfaction of Samsung, Pantech
and LG were increased as time goes by and became quite similar. However, After Service
satisfaction of Apple Korea dropped to the lowest.

Understanding Customer needs and Expectation

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After Service System of Apple Korea has changed in 2013. In 2009, ratified
outsourcing companies did not fix customers phone. In that time, policy of Apple Korea was
to give refurbished phone to customer. However, On November 8th, 2013, Apple Korea
decided to provide partial repairs. So customers now can repair their volume buttons, speaker,
and displays in the ratified outsourcing companies. However, the change in regulation
actually resulted in customer dissatisfaction. Those situations are well presented in the
following cases.
In 2014, Mr. Oh Won-kook and Ms. Park Soo-min get disappointed after they got
Afer Service from ratified outsourcing companies. Mr. Oh only wanted to repair battery of his
iPhone when he visited the company. However, a few days later, an engineer of later ratified
outsourcing company told him that they couldnt change battery only and he should pay for
refurbished phone. Mr. Oh just wanted to stop the process and get his iPhone back, however,
he cannot stop the repair process neither. Ms. Park went to the ratified outsourcing company
because of scratch on her iPhone and get a refurbished phone. However, when she was going
home, she found out that her refurbished phone had problem as well. She asked the
outsourcing company to fix it again. However, the engineer told her that they cannot do it
because of regulation. Both people end up with file a lawsuit against the company.
In spite of this situation, Apple Korea is not planning to change their After Service
regulation. Thats because After Service of iPhone not a big concern of Apple Korea at this
moment. Moreover, Apple Korea is still fighting on the lawsuits that Mr. Oh has filed against
the company. This reaction worsened public opinion more and more.

2.2. Employee Involvement

Employees of ratified outsourcing companies do not have expertise compared with

Japanese employees. They did not get a proper training. The employees does not know well
about how they should repair iPhone. They simply give refurbished phone back to the
customers after the Apple Koreas Diagnosis Center give refurbished phone to the ratified
outsourcing companies.
When compared to Japan and US, employees are also greatly lacking in their
expertise as well. There are Apple Genius Bars in Japan and US. Genius Bar is Apple After
Service center. There are Geniuses, iPhone experts. They are responsible for Customer
Service and provide immediate help to the customers and consult the customers problems.
Also, they are very kind to customers. They diagnosis which part of the phone needs to be
fixed in front of customers. They also tell customers about how much the costs would be.
In terms of employee involvement, employees are not deeply related to their task.
They are not well trained but they have to answer customers questions. It makes even worse
because they would lose self-sufficient and attachment to their tasks. In addition, Compared
to Japan and US, there are not enough After Service experts in Korea. In customers point of
view, they are wasting their time as well as money compared to Japan because they are not
able to get a high quality After Service.

2.3. Process Approach

After Service process of Apple Korea has not changed by a lot since 2009.
Consumers have to wait longer than other countries because cycle time of After Service is too
long in Korea. It even takes 5 days for a customer to get refurbished phone. On the Other
hand, thanks to the Geniuses, it takes only 1 day or even a few hours in Japan. Following
figure is After Service process in Korea

g
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C
e
h
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t
n
c
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A
I5
d
iv
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s
f
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k
.
b
P
y
a
o
m

In addition to long waiting time, there are two problems in this process. First, they
have complaints about the quality of refurbished phones. Refurbished phones were proved to
have many defects, like a scratch. According to After Service policy of Apple Korea,
customers cannot change a defective refurbished phone again when there are no functional
problems. Customers have no choice but to use refurbished phone with scratch.

2.4. Current situation

Many customers decided to go to unratified Apple After Service center because

customers had so many complaints with ratified After Service companies. Compared to
Official After Service centers, unratified companies does not give refurbished phone to
customers. Instead, they can just fix problems. There are more than 200 unratified After
Service companies at Yongsan Electronic Mart and Techno Mart Just in Seoul. More and
more Customers go to those companies because it is much cheaper to fix their iPhones. For
example, it only costs 36,000 Won to fix battery and 27,000 won to fix home button.
Moreover, customers can repair their phone much faster, usually only one day at the
unratified companies. The problem is that those companies use cheap or fake components
imported from China. These components can cause serious problems. iPhone might not work
properly. It can lead to more inappropriate After Service.

2.5. Apple Support in the USA

To show a better example of apple support, we introduce the apple support in the
USA, which is different from the support in Korea.

In the USA, the customers have the possibility to choose from several possibilities
when their iPhone is damaged. First, they can request repair service from their carrier.
Second, they can request repair service from a local Apple Authorized Service Provider. Last,
they can contact apple directly for repair service. Here the costumer has to decide whether he
sends the iPhone to them by mail or make an appointment with a Genius Bar at a local Apple
Retail Store.

When the iPhone is send to apple, they will check it for the reported errors. After
that, they will decide if it is better to repair the actual iPhone or if it is better to deliver a new
one. The service though apple takes approximately three to five business days. Apple also
offers an Express Replacement Service, which makes it possible for the customers to get a
replacement iPhone during the time repair time of his own iPhone. The customer gets this
replacement iPhone approximately two to three business days after he requested it.

Each customer benefits from a One Year Limited Warranty, which is valid from the
day, the iPhone was bought. This warranty covers nearly all kinds of damage, for example
defects in materials or defects in workmanship. Even when the one year warranty is expired,
some damage like for example liquid damage is often covered by the out-of-warranty service.
The customer also has the possibility to buy extra insurances, like the AppleCare+ for a
further and longer coverage of most damages.

To follow the process of repair, the customer has the possibility to check the repair
status of his iPhone online. There exists also a relatively new method to get order status
updates by text messages.

<iPhone tech support process>

In the USA, apple performs very well in the tech support of iPhones, which leads to a
high customer satisfaction. According to a survey by the NPD Group, nearly 60 percent of
current Apple device owners say theyll buy another product from the company as the result
of in-store service. Also apple tries to continuous improve its performance with new features
like the above mentioned status updates by text messages. But apple performs not only well
in the iPhone support, but also in the computer section. According to a survey by
consumerreports in April 2013, apple is tops even in computer tech support. With a score of
86/100 is performs apple much better than the second, Lenovo with a score of 63/100.

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<Reasons of high customer satisfaction with the tech support service in the USA>

3. Root cause analysis and proposed practices

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3.1. Customer dissatisfaction and cause and effect diagram

3.1.1. Proposal objective

It is clear that Apple Koreas iPhone After Service is not performing particularly well
in the area of customer satisfaction. Customer dissatisfaction is a significant factor that
hinders Apples improving service quality management. In the cause and effect diagram,
there are four main causes that bring poor customer satisfaction. They include service, policy,
price, and customer. Service policy/regulation is crucial which can bring customers satisfied.
By implementing certain measures and standards of quality management to meet or increase
customers expectations, by limiting their negative image and reputation, we believe that
Apple Korea have the potential of accelerating customer satisfaction and stay competent in
smart market in Korea for a long time.

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Moreover, Apple has a comparatively negative brand image in Korea and many
Korean customers complain about their A/S quality. This makes customers less likely to feel
pride and satisfaction for Apple. The misbecoming policy of Apple Korea also causes poor
satisfaction. Accordingly, Apple takes unconditional refurbishment and extra charging policy
which doesn't corresponds to Korean market and Korean consumers. All these factors
contribute to bringing poor customer satisfaction.

3.1.2. Root causes analysis

In this part we have analyzed the key issues related to Apple Koreas overall
problems in After Service process in detail with fishbone diagram. We will suggest some
possibilities to improve the overall customer satisfaction. The following key problems are
analyzed separately to identify the different actions that need to be taken for each specific
problem. However, they are all subject to certain practices.

Since some obvious causes of the poor customer satisfaction have been addressed on the
fish bone diagram, there should be proper changes to be addressed by the organization. Most
importantly, improving the service quality and changing the policy suitable in Korea can best
solve many of the causes. There are several ways that can increase customer satisfaction.

Changing the policy suitable to Korean market such as providing unconditional

refurbishment phones, suggesting flexible conditions for customers with Apples one
year warranty, and allow parts replacing or repairing.

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Improving service quality by increasing numbers of ratified outsourcing service

centers in Korea, or establishing Apple store which is directly operated by Apple

Korea at the same time creating genius bars in Korea to aim better service quality.
Applying global standard service contents which are currently applied for global

markets which accept customer complaints willingly for better service.

Reducing refurbish iPhone price or extend repair/refurbish standards to give
customers flexible options.

3.1.3. Expected Outcomes

If the changes can be properly addressed in the company to deal with customer
dissatisfaction, many positive outcomes are expected to take place. When customers feel
more satisfied, several benefits will follow to the company like:

Customers increased satisfaction will bring positive moods to Apple Korea and this

may also lead to increased service quality that they provide to customers.
Brand image can be improved in the perspective of both internal and external

customers.
Increased productivity and market share are expected as a result of customers
satisfaction.
The results of company image rating or surveys can become widely popular by the

media and Internet so that more customers will purchase companies products. This can bring
overall success to the company along with the improved strategies and ideas.

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3.1.4. Method to monitor

In order for Apple Korea to ensure that their customers are quite satisfied with their
service, they need to have a set of ways to check. This is significant as they can serve as
guidelines and help maintain the morale of employees. The ways to monitor include:

Send out questionnaires by on/offline to customers and the results will show their

satisfaction and intention levels.

Have open meetings for each team and discuss complaints at workplace and ideas
about how they can be solved. Also giving rewards for those who suggest some

desirable ideas.
Asking service centers about customers problems and complaints.

3.2. Low service performance

CA USES O F LO W SERVICE PERFO RM A N CE

A/S CEN TERS

Long waiting
times
Lack of service
centers
Responsibility
evasion to
customers

Em p lo yee
Lack of
training
Unfriendly
Employee
Lack sense of
responsibility

N o motivation
because of
penalty

Lack of
know ledg e

LO W
SERVICE
PERFO RM AN CE

Refurbishment
policy
Extra charg e
N o part replacing
or repairing

PO LICY

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3.2.1. Proposal objectives

In the fish bone diagram above, many factors can be attributed to the low service
performance that Apple Korea has created for itself. Most of the elements are because of
employee, A/S centers and because of revised Apple's policy. The customers have to face
unfriendly and less trained employees from outsourcing companies ratified by Apple Korea
that have lack sense of responsibility..

On top of all the unfriendly personnel that the customers may experience, the
customers have to wait long times and employees responsibility evasion to customers. We
think that this has to do with how the employees are trained by Korea. Apple Korea should
have discipline to train outsourcing companies employees and establish strong quality
control measure that adopted for A/S centers. Moreover, employees working at outsourcing
companies A/S centers do not really have motivation to do their best and to make the
customer experience the best they could give them giving refurbished phone to customer can
be regarded as losing profit for their company in spite of the customers situation is subject to
get warranty.

3.2.2. Changes that can address the root causes

The biggest factor that contributes to the low service performance is the employee
sense of responsibility, the attitude that the employee has influences everyone in the center
and as a result the customers suffer from it. If the employee changes his attitude towards his
customers, it will greatly affect how the customers experience their time with Apple Korea.
16

Another party that will be happy with this change is the shareholders as they have expressed
their concern of Apples attitude towards customers.

Training employees for better service quality to customers.

Show that the management care for their customers
Shift the companys image from being completely profit oriented towards people

oriented.
Motivating employees with incentives rather than penalties.
Changing policies into prior version

3.2.3. Expected outcomes

If the attitude of employee outsourcing companies changes, service performance would

be improved definitely. This limitation of the current tension might solve a lot of problems
and attitudes towards customers. The customers will be treated better and therefore the
service performance will be higher and good reviews will be given about Apple.

Improved corporate image

Increased loyalty and respect
Increased customer satisfaction

3.2.4 Methods to monitor

The methods that can be used to monitor if the changes have worked or not are
mostly qualitative research methods, this is because performance is not a measurable value.
There are a lot of different factors that play a role in service performance. Most of the factors

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that play a role in service performance are shown in the fishbone diagram made for the rootcause analysis.

Methods that can be used are:

Virtual communities
PR
Interviews Q
Questionnaires

The reason for implementing those monitoring methods is because of the fact that
service performance is explained by asking the opinion of people about the company's service
and how their experience was with Apple Korea. The same questions could be asked to the
employees who again could be summarized by defining some set variables which rates the
percentage of change.

4. Conclusion

It seems that the strategy of Apple Koreas After Service was effective in the short
term when they first started its business in 2009 with iPhone 3GS. Even though Apple Korea
has the cutting edge product that still dominates the Korean smart phone market, revision of
their After Service policy & regulation has deteriorated their corporate image and increased
customer dissatisfaction since 2013. As a result, changing into strict and inflexible After
Service policy & regulation focused too much on the profit which forbids customer to get
refurbished phone and too little on their customers experience and satisfaction. It could
become a serious threat to Apple Korea because todays customers are also becoming more
18

demanding in regards to value and satisfaction when choosing between different goods and
services.

Their corporate image and deliverables on customer perception and satisfaction is one of
their most serious weaknesses. A reform must be done, and it is not going to be done
overnight, however, with their financial feasibility and their timely arrivals, and valuable
service in regards to providing easy and quick flights to many destinations, they should be
able to turn around and increase customer satisfaction as well as their profits.

5. Recommendation

The company needs to implement a lot of changes in establishing new After Service
policy and forming a tight service control over outsourcing companies. The focus needs to be
shifted from profit orientation to people orientation.

19

Using Why-Why diagram, it seems that Apple Koreas performance is not even close
to global corporate image. However, they do offer products that are highly attractive to
customers. It seems that there must be critical measures should have taken to eradicate
negative image in After Service system in Korean market to rein Korean market. Based on
the critical key problems found, total quality management actions needs to be implemented to
improve the following:

1. Corporate image in the eyes of consumers as well as stakeholders.

2. Increase employee satisfaction by training and empowering the employees.
3. Customer care needs to be improved, by allowing a more open and positive process
and handling of complaints.
4. Charging extra services in a more customer friendly and fair way.
20

5. Leadership statements and style needs to be more empathic and customer focused by
understanding and showing that they care for their customers and employees.
6. Offering the same services corresponding to other countries where Apple does
business.
7. Revising After Service regulation that fits to Korean market system.

6. Reference

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news.mk.co.kr/newsRead.php?year=2014&no=1355331
support.apple.com/kb/index?
page=servicefaq&geo=United_States&product=iphone&select=WARRANTY__PRICING
support.apple.com/kb/index?
page=servicefaq&geo=United_States&product=iphone&select=ADVANCE_REPLACEME
NT
www.cctvnews.co.kr/atl/view.asp?a_id=11537
www.consumerreports.org/cro/news/2013/04/apple-is-tops-when-it-comes-to-computer-techsupport/index.htm/
www.edaily.co.kr/news/NewsRead.edy?
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www.hankyung.com/news/app/newsview.php?
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htm
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www.munhwa.com/news/view.html?no=20131107010316241520020
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www.zdnet.co.kr/news/news_view.asp?artice_id=20131108070434&type=det

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