Apple Case Study

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STRATEGIC PLANNING AT APPLE INC.1

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Fabrizio Di Muro wrote this case under the supervision of Professors Kyle Murray and Miranda Goode solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2009, Ivey Management Services Version: (A) 2010-01-11

INTRODUCTION

Apple Inc. is one of the world’’s most sucessful and most recognizable companies. Over its 30 year existence, the company had seen a lot of changes in the computer industry. What would the future hold for the computer giant in a rapidly changing world? HISTORY OF APPLE

Steve Jobs and Stephen Wozniak founded Apple Inc. (Apple) on April 1, 1976, in Jobs’’ garage.2 The two partners had been introduced to each other in 1971 by a common friend, Bill Fernandez. In 1972, Jobs enrolled at Reed College, but he dropped out after only one semester. A couple of years later, in 1974, Jobs started working as a technician at Atari. Later that year, Jobs visited India for spiritual enlightenment and returned to California in the fall. Upon his return, he joined the Homebrew Computer Club, where Wozniak, who was working with Hewlett Packard (HP), was already a member. As a hobby, Wozniak manufactured microcomputers that were cheaper than other existing microcomputers.3 Jobs saw Wozniak’’s invention and, since he was interested in starting his own business, he convinced Wozniak that, as a team, they could manufacture personal computers (PCs) for sale. Early Products

Apple’’s first computer was manufactured in Jobs’’ garage and was called Apple I. The Apple I differed significantly from other computers offered at the time: it used a MOStek 6502 processor (instead of the Intel 8080 processor), it had fewer parts (a TV was used as a display unit), and its price of US$666.664 was less than its competitors’’ prices. In May 1976, Jobs and Wozniak displayed the Apple I to the other 1

This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of Apple Inc. or any of its employees. 2 http://www.markusehrenfried.de/mac/applehistory.html, accessed March 28, 2008. 3 http://www.ioltechnology.co.za/article_page.php?iSectionId=2892&iArticleId=3456594, accessed March 17, 2008. 4 http://news.bbc.co.uk/2/hi/technology/7091190.stm, accessed March 21, 2008.

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members of the Homebrew Club. A local dealer present at the demonstration ordered 25 units, a deal that represented Apple’’s first sales revenue.5 At this point, Wozniak quit HP to join Apple. Over the ensuing 10 months, 200 Apple I computers were sold.6 The Apple I targeted individuals who were interested in computers and electronics. Overall, 1977 sales for the Apple I totalled US$774,000.7 Apple was incorporated on January 3, 1977.8 Later that year, at the West Coast Computer Fair in San Francisco, the two entrepreneurs introduced the Apple II as a general purpose computer.9 The Apple II was also built on a 6502 processor. It interfaced directly with a color video monitor and had color graphics, as well as an audio cassette drive with a storage capacity of 4 KB RAM.10 The Apple II was priced at US$1,298.11 In 1978, the audio cassette drive was replaced with a floppy disk...
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