Strategic Lessons from a Converging
Internet Industry 2000-2010
Reference no 310-245-1
This case was written by Markus Schimmer, Professor Dr. Günter Müller-Stewens and Peder Sponland, University of St Gallen. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.
© 2010, University of St. Gallen
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From the first discussions of a “galactic network” in 1962, the Internet has developed into an enormous information infrastructure. While it has initially been a governmental research tool, its full public access in 1994 propelled the network into a global cultural phenomenon. Four years after its public initiation, already more than 50 million private users were online, followed by an unlike larger number in the years thereafter. With about 2 billion users in 2009, the Internet has also grown into an own global economy of unprecedented size. This new economy is driven by a relentless force of technological and conceptual innovations stemming from an innumerable number of parties scattered around the globe. Its speed of change and innovation make it to a highly competitive arena. Apple, Microsoft and Google have been the most successful companies within this arena for a long time. Throughout the previous decades, they have internalized the economic laws and technological characteristics of the Internet in their business thinking. Their strategies and competitive moves did not only form the information economy as we know it today, but do also provide showcase examples of how profitable market positions can be achieved in the Internet. This case study covers a decade of information economy market evolution and answers some very fundamental and insightful questions: How did Apple, Microsoft and Google successfully navigate and define the competitive arena of the Internet? Which roles did their unique strengths play for their strategies? Which specifics of the Internet did they have to account for? How could they sustain their competitive advantages within such a hostile environment?
Apple, Microsoft, Google and the Internet Industry in 2000
Apple was founded in 1976 by Steve Jobs and Steve Wozniak; stressing the importance of making computers easy for all customers. The first proof of this was the revolutionary Apple II computer, which consumers could use straight from the box. Before IBM entered the PC market in 1981, Apple was the industry leader. The company went public in 1980; the largest IPO since Ford Motor Company in 1956. Apple has traditionally relied on proprietary design that only it can use. One of Apple’s advantages is its capabilities in both hardware and software development. Hardware was traditionally designed “from scratch” to differentiate it from competitors’ products. This made the cost structure quite high. Software, such as Apple’s own operating system and applications, was developed and bundled with Apple products. In this way, Apple has been able to deliver complete solutions to customers, leading many to favor Apple products and allowing the company to charge premium prices. Apple is strong in multimedia due to its early focus on relevant technologies in that area. Today, most people interested in media related areas, such as movie editing and music development, use Apple. Under Steve Jobs, Apple has always been very...