The Transformation of Apple's Business Model

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Case Details:

Case Code : BSTR212
Case Length : 21 Pages
Pages Period : 1996-2006
Organization : Voltas Ltd.
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : Diversified

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

In the financial year 2005, Apple sold 23 million iPods; in other words, one iPod was sold every 1.5 seconds, across the globe that year. Apple's stock which was trading at around US$ 40 in April 2005 rose to US$ 75 by December 2005.

Background Note

Apple was founded by Jobs, Steve Wozniak and Ronald Wayne in 1976. They started off selling the personal computer (PC) Apple I at US$ 666.66. The PC was reasonably priced and was sold mainly to individuals with interest in computers. Apple Computers was incorporated on January 03, 1977 and in the same year, Apple II was launched. Priced at US$ 1,298, it had color graphics and used a cassette drive for storage.

In 1978, the cassette drive was replaced by a floppy disk drive. Apple II became popular in 1979, after the release of VisiClac.⁷ Within first three years of its launch, Apple II raked in US$ 139 million in sales.

Apple's subsequent release Apple III in 1980 met with failure. Apple III did not have a cooling fan and several of its pieces were recalled due to overheating. In 1981, Apple released the updated version which became popular among computer professionals, with sales in one year at US$ 583 million in 1982.

In 1981, International Business Machines Corporation (IBM)⁸ introduced the IBM PC which was built on Intel's⁹ microprocessors and used the PC-DOS¹⁰ operating system. After IBM's entry into the market, Apple's competitive position changed as IBM PC became the common standard for personal computers. With the onslaught of IBM PCs, though Apple's revenues were still increasing, its market share decreased rapidly.

In 1983, Apple came up with Lisa, which had a graphical user interface (GUI),¹¹ and Windows that allowed several programs to run simultaneously. The PC was priced at US$ 9,995 and was a commercial failure due to its high price and limited software capabilities...

Excerpts >>

7] VisiCalc was the first spreadsheet program for personal computers. The program was developed by Software Arts and distributed by Personal Software (later VisiCorp).

8] IBM, is involved in computer hardware, software, infrastructure services and consulting services. In the financial year 2004, the company reported revenues of US$ 96.29 billion.

9] Intel Corporation was founded in 1968 as Integrated Electronics Corporation. Intel is a US based multinational corporation renowned for designing and manufacturing microprocessors and specialized integrated circuits. The company also makes network cards, motherboard chipsets, components and other devices. In 2004, it recorded revenues of US$ 34.2 billion.

10] PC-DOS was one of the widely used operating systems in the mid 1980s.

11] A GUI is a method of interacting with a computer through graphical images and widgets (components like window, text box or buttons) in addition to text. GUIs display visual elements such as icons and windows.