Case 4 Apple Computer, Inc. 4-1
CASE 4
APPLE COMPUTER, INC.
This teaching note was prepared by Donald P. Roy, University of
Memphis, for classroom discussion rather than to illustrate either effective
or ineffective handling of an administrative situation.
CASE SUMMARY
This case provides an overview of marketing activities that Apple
Computers has undertaken since its inception in 1976. Apple's
entrepreneurial spirit and revolutionization of the computer industry
demonstrated in its early years gave way to a series of missteps and
managerial upheaval in the late 1980s and throughout the 1990s. Despite
Apple's loyal customer base, which the company estimates to be 28
million, Apple has experienced a steady decline in personal computer
market share.
The primary focus of this case is Apple's situation as of the end of 1997.
In its latest shakeup in top management, CEO Gilbert Amelio was ousted
in July 1997, after only one year on the job. His interim replacement was
Steven Jobs, one of Apple's co-founders who was ousted in a 1985 power
struggle with then-CEO John Sculley. Upon assuming the company's top
leadership role, Jobs faced several decisions that could ultimately
determine the company's fate. Decisions concerning product development
and licensing of the Macintosh operating platform were priorities. In
addition, Jobs insisted he was not interested in staying on as CEO on a
permanent basis, so he was involved in the search for a new top officer for
the company. After the case was written, Apple announced the launch of
the IMac, a $1299 low-end computer. Once again, Apple made another
strategic change in market focus.
TEACHING OVERVIEW
The Apple case is a good example of a company that started from scratch,
grew into a multi-billion dollar corporation, faltered, then found itself
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struggling to regain the stature it once had with its customers. Beginning
in the mid-1980s and running through 1997, Apple has been beset by
problems with top management. These problems with company
executives have led to frequent strategy shifts and missed opportunities for
Apple. Co-founder Steven Jobs returned as CEO in 1997 and quickly
made decisions that at least in the short term gave Apple some stability.
However, the future leadership of the company is in question as Jobs has
indicated he does not want to be permanent CEO. Will the next CEO try to
stay the course set by Jobs, or will Apple experience yet another major
strategy shift? Discussion in this case can revolve around Apple's
marketing strategy and the future of the company's leadership.
SWOT ANALYSIS
Internal Strengths:
 Loyal customer base (estimated to be 28 million users)
 Known for offering user-friendly products
 Employees committed to developing innovative products
Internal Weaknesses:
 Competitive disadvantage compared with Compaq and Dell in the
made-to-order personal computer market
 Turbulence in CEO position has left customers, employees, and
shareholders uncertain about Apple's future
External Opportunities:
 The growth of the Internet and computer networks has increased the
potential number of individual and business customers
Case 4 Apple Computer, Inc. 4-3
 Low-end personal computer market as users shift away from "net
machines"
 Alliances formed with such companies as Sun Microsystems and
Microsoft allow Apple to collaborate rather than compete with partners
in key businesses such as software and the Internet
 A market for high-performance personal computers ($2,000 and above)
that is more profitable than the low-end segment of the personal
computer market
External Threats:
 A shift in demand by users of network computers away from "net
machines" in which Apple invested heavily to low-end personal
computers, a segment in which Apple is just entering with the iMac
 Apple's reversal of its decision to license the Macintosh operating
platform could result in difficulty attracting alliance partners for future
projects
 Growth in the made-to-order personal computer market, a market in
which Apple is not prepared to compete
PROBLEM/DECISION STATEMENT
What marketing strategies should Apple put in place to compete in the
various product categories in which it operates in order to end years of
seemingly little direction?
STRATEGY ALTERNATIVES
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1.
Develop a market presence in either the low-end (under $1,500)
or high-end ($2,000 -$4,000) segments of the personal computer
market. The low-end segment is the fastest growing segment for
personal computers, and Apple is just launching products in this
market, while competitors Compaq and Packard Bell have
developed strong market shares in this segment. The high-end
segment may be attractive to Apple as an opportunity to
showcase its technologically advanced products.
2.
Develop products aimed at Internet and network uses. This
segment of the computer industry is in its early stages of
development. Apple is already developing a network computer,
which will retail for $700 to $900. Apple would be one of the
first companies to have such a product available.
3.
Reverse its decision to discontinue licensing of the Macintosh
operating platform. Allowing other manufacturers to clone the
Mac platform would result in more machines on the market using
Apple's technology.
STRATEGY RECOMMENDATIONS
It is possible that a case could be made for any of these alternatives given
the rapidly changing nature of the computer industry. For example,
expanding a market presence in low-end computers might be desirable
because of the popularity of products in that segment, but it may not be
very profitable. Likewise, developing network computers might appear to
be attractive because of the lack of a dominant manufacturer, but the longterm viability of such a product has not been determined at this time.
IMPLEMENTATION ISSUES
It appears that Apple has not maintained a focus on one particular market.
Low-end (iMac) personal computer market, high-end personal computer
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market, and the network computer market are all considerations for
implementation. The decision whether or not to license the Macintosh
operating platform is a separate alternative that will have a long-term
impact on Apple regardless of the decision made.
TEACHING QUESTIONS
1.
Describe how Apple's unique culture has contributed to its present
situation. If you were the chief executive, how would you deal with
this culture?
It appears that Apple's consensus culture has played a role in both its
development from a garage-based business to a multi-billion dollar
company and its inability to keep pace with changes in the market. As
interim CEO, Jobs has moved away from the "feel good" culture and has
harshly criticized those employees he believes are not performing as he
thinks they should be. The new CEO will face a dilemma: Apple's culture
is largely responsible for the development of the company, but its slow-tochange tendency is largely responsible for its current problems. How the
CEO handles dilemma will determine how Apple fares in the early years
of the 21st century.
Case 4 Apple Computer, Inc. 4-6
2.
How have Apple's frequent strategy changes brought it to where it is
today? What do you see as the single most costly error made by
executives?
The slow-to-change performance of Apple has put it at a disadvantage in
many product categories. Apple's reluctance to license the Macintosh
platform allowed Microsoft to pass it by with the DOS platform. The
Newton hand-held computer was plagued by technical problems and slow
improvements, and Apple was passed by 3Com's Palm Pilot in both
performance and price, leading to the decision to discontinue Newton
development. Discussion on the most costly error made by executives
could take any of several directions.
3.
Describe Apple's current strategy.
Apple has been consistent only in its inconsistency in strategies over the
years. Apple wavered on licensing the Mac operating system to create a
clone industry, and then withdrew from this approach. Apple decided not
to enter the low-end segment of the market and then flip-flopped by
introducing the iMac in the low-end market. Apple has announced plans
for two operating systems. The company plans to introduce upgrades for
the MacOS and later introduce a new operating system called Rhapsody.
Finally, Apple is focusing on applications on the Intranet and enterprisewide clients/server networks. It will continue to focus on Macintosh
technology improvements and attempt to maintain relationships with its 28
million customers. The future of the company and top management
remains clouded.
4.
Propose a strategy to take Apple Computers into the twenty-first
century. Keep in mind such factors as Microsoft Windows and the
Internet. Describe how you would implement your strategy
The answer to this question should be based on the discussion of the
Strategy Recommendations and Implementation sections. The fact that
Apple offers products in several different categories means that discussion
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could take place on a variety of marketing decisions (e.g., network
computers, personal computers, etc.). The strategies proposed by the
students should address how strategy for a given product line fits with
Apple's overall marketing strategy.