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1. How has Apple performed in the PC industry? What is your evaluation of its performance in the PC business? As for strategy, Apple started out with the right idea. The company did not allow third parties to purchase its hardware and used only proprietary designs. Apple II did very well. They did not count on the release of IBM PC’s and they quickly lost market share. Despite the launch of the Mac, Apple suffered. The problem with their strategy here was that their product was not compatible with other products, and the quality of the machine was not enough to entice new customers or maintain the loyalty for their past customers. The slow processor speed and lack of compatible software overshadowed the elegance and ease of use. When Sculley entered the company in 1985, he saw fit to change the strategy and target specific markets. As indicated by the drastic increase in sales and market share (8% market share), this was a definite turning point for the company. Apple also finally launched IBM compatible peripherals and this move made a huge difference in customer loyalty. The distinct difference in Apple’s products also instilled loyalty and they were able to sell their machines at a premium. Gross profit was at an impressive 50%. For the time being, Apple did really well. Even this strategy eventually needed to be reevaluated as IBMs prices dropped and Apple again lost market share. Their profit was suffering as they had 9% budgeted to Research and Development, compared to 1-5% at other companies. It was at this time that Apple forged an alliance with IBM. The combination of the internal capabilities of the two industry powerhouses should have been explosive. Instead, it backfired for Apple and they again sought out ways to increase margin, ultimately ending with Sculley’s replacement Amelio going back to the premiumprice differentiation strategy, and that failed

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