Apple Inc: Different Dynamics Influencing the Highly Competitive Pc Industry

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Apple’s initial competitive advantages and the emergence of the Personal Computer With sales of $108 billion in 2011 and shares that have consistently outperformed the market since December 2004, Apple is today one of the largest and most valuable companies in the world. Apple is well known for its high quality, design, functionality and innovation. Since the company was founded in 1976 these unique qualities, particularly innovation, contributed to its success. The Apple I and II were the first easy to use computers in the market; these products were unique and therefore quickly made their way into the market. However, this success faded in 1981, when IBM entered the PC market with a computer that quickly became the standard for the industry. Apple’s ease of use, industrial design and technical elegance no longer justified higher prices and as a result Apple’s net income dropped 62% between 1981 and 1984, which led to Steve Jobs’ dismissal. When Sculley took over as CEO in 1985, Apple started positioning itself as offering a complete desktop solution to “plug and play”, which, in their mind, justified the premium price compared to their competitors. This attempt to differentiate Apple was not successful and after IBM’s drop in prices Apple started competing in price and volume. This was followed by a series of events between 1993 and 1997, which reduced differentiation even more (licenses to make Mac clones, leave the JV with IBM to create a new OS). In 1996, its profit fell to a negative $ 1.6 billion and its gross margin to 10%. Apple’s strategy at that time was not successful in competing with the PC: IBM’s system was relatively “open” (other producers could clone it) and the higher unit volumes attracted software producers. The lack of Apple’s compatible software further limited its sales. Computer manufacturers in the 90’s were involved in a technological war in which every year computers had more storage capacity and faster processors, while at the same...
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