Group 4&52014-12-82009104388 Jiun Jeon

2013100261 Seonhui Yu

2014008323 Rene Trebbe

2009100100 KoKimSergio

2010100352 Seungpyo Hwang

2014-2 Quality Management

A proposal on adoption TQM at Apple Korea’s A/S system

Contents1. 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

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

2

year is over, they got their phone refurbished and sold it at high price.

In addition, Apple Korea didn’t 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.

3

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 center’s interior environment and

Employee’s expertise and kindness. It shows that other Smart Phone Brands: Samsung,

Pantech, LG and Apple Korea. Customer’s 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

4

After Service System of Apple Korea has changed in 2013. In 2009, ratified

outsourcing companies did not fix customer’s 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 couldn’t 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. That’s 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.

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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 Korea’s 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 customer’s 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 customer’s 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

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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

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

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The Staff takes the Phone to Apple Diag-

nosis Center

It usually takes 5 days for a Refer Phone to arrive.

The Customer takes the Refer Phone

back.

Sometimes the Refer phones are not in

stock so Customers take the Temporary

Phone

The Custoer visits an Apple AS center

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.

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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.

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Iphone needs tech support

repair service

request repair service from an Apple Authorized Service Provider

request repair servicedirectly from apple

request repair service from carrier

bring or sendiphone to thestore

ExpressReplacement Service

take or receivereplacement iphone

Yes

wait and/or check the repair status online

No receive or pick up the iphone from the store and submit replacement phone if it was taken

iphone is repaired

<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 they’ll 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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Service

PricePolicy

High customer satisfaction with iphone tech support in the USA

Infrastructure

manyGenius Bars

good store infrastructure

a lot of Apple AuthorizedService Providers

possibility to send iphone to apple

short repairment times

good accessibility

A lot of damages is covered by warranty

out of warranty service coveres still some damages

status updates by text messages

high problem-solving rate

possibility to get areplacement iphone

3. Root cause analysis and proposed practices

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

3.1. Customer dissatisfaction and cause and effect diagram

3.1.1. Proposal objective

It is clear that Apple Korea’s iPhone After Service is not performing particularly well

in the area of customer satisfaction. Customer dissatisfaction is a significant factor that

hinders Apple’s 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 Korea’s 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 Apple’s 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:

Customer’s 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.

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3.2. Low service performance

LOW SERVICE

PERFORMANCE

POLICY

A/S CENTERS Employee

CAUSES OF LOW SERVICE PERFORMANCE

Lack sense of responsibility

Unfriendly Employee

Responsibility evasion to customers

Lack of service centers

Long waiting times

Refurbishment policy

Extra charge

No part replacing or repairing

No motivation because of

penalty

Lack of knowledge

Lack of training

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

16

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 customer’s 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.

Another party that will be happy with this change is the shareholders as they have expressed

their concern of Apple’s attitude towards customers.

Training employees for better service quality to customers.

Show that the management care for their customers

Shift the company´s image from being completely profit oriented towards people

oriented.

Motivating employees with incentives rather than penalties.

Changing policies into prior version

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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

that play a role in service performance are shown in the fishbone diagram made for the root-

cause analysis.

Methods that can be used are:

Virtual communities

PR

Interviews Q

Questionnaires

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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 Korea’s 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 today´s customers are also becoming more

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

19

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.

Using Why-Why diagram, it seems that Apple Korea’s performance is not even close

to global corporate image. However, they do offer products that are highly attractive to

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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.

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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navercast.naver.com/magazine_contents.nhn?rid=1103&rid=&contents_id=72210

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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-tech-

support/index.htm/

www.edaily.co.kr/news/NewsRead.edy?

SCD=JE31&newsid=01102086593003688&DCD=A00503&OutLnkChk=Y

www.hankyung.com/news/app/newsview.php?aid=201007139111g economy.hankooki.com/

lpage/industry/201011/e2010112416391070260.htm

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to-be-picked/

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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