Harvard Case Study On Apple

Apple Computer, 2006 Case

Apple was started on April 1, 1976 by Steve Jobs and Steve Wozniak. It humble beginnings led to one of the largest and most successful corporations in history. Today, Apple is a powerhouse of computer technology, putting out some of the most innovative products in the last 15 years. Things weren’t always great for Apple and the company has gone through its share of lows; in 1997, Apple’s stock was a mere $7 a share. Apple has finally found a sustainable strategy and, I believe has laid the foundation to sustain itself for many years to come.

In the beginning, Apple’s strongest competitive advantages were its ability to be the easy to use home computer. They also focused on being much geared towards being highly proficient in graphics and sound, something that IBM PC’s with MS DOS were not. When the Macintosh was introduced in the early 80s, it was a modern breakthrough in the ease of use, industrial design, and technical elegance. However, its slow performance and lack of compatible software limited its sales. Net income fell 17%, and Steve Jobs was removed as CEO. John Sculley came in after turned things around for a while.

From 1985 till 1993, Sculley’s aim was to exploit Apple’s capabilities in graphics and design to make the company a leader in desktop publishing as well as education. He also moved Apple into the corporate world with its superior software. Sales exploded and by 1990 Apple controlled 8% or the worldwide market share and 50% of the education market. Macs were sold as prestige products and the top of the line models went for as much as $10,000. Apple’s cost structure was also high, they devoted 9% of sales to R&D. Starting in 1990, Apple released mainstream products at low prices. He aimed to put out a hit product once every 6 to 12 months.

During this time, Apple also formed alliances with its biggest competitor, Intel. The many joint ventures included creating new system operation software and multimedia applications. Apple also took steps to rework the Mac OS to run in Intel chips. They also developed the first form of PDA’s in this period. When Sculley argued that Apple had to drive down costs, he was replaced by Mike Splindler.

Splindler’s goal was to grow internationally, but Apple lost a lot of momentum during this time. He also reduced R&D funding and killed the project to make Macs run on Intel based PCs. After cutting the work force by 16% and Apple losing $69 million in the first quarter of 1996, he was quickly replaced by Gilbert Amelio.

Amelio’s goals were to set out to improve Apple’s operations by streamlining its product line, slashing its payroll, and rebuilding cash reserves. He wanted Apple to return to making prestige products; high end computers, servers, internet access devices, and PDAs. He set the company back by canceling its next-generation Mac OS. He acquired NeXT, which was the company that Steve Jobs founded after leaving Apple. Amelio added Jobs as an advisor. NeXT had a lead over Microsoft, but could not run Mac software. Amelio led the company through 3 reorganization and several deep payroll cuts. He left Apple in terrible shape, by losing $1.6 billion, and its stock sank to a 12 year low. In 1997 Amelio was forced out and Steve Jobs took back his spot as CEO.

As Jobs returned, he immediately began to turnaround of Apple. He got Microsoft to invest $150 million in Apple and reaffirmed its commitment to developing core products, such as Microsoft Office for the Mac. Jobs invested again in mainstream, affordable computing, with the launch of the iMac, and he cut superficial projects. He made smart investments in companies such as Pixar (which he served as CEO), and produced movies such as Toy Story and Monsters Inc. He increased