Solved: During the 1990s Apple Computer saw its global

share of
During the 1990s Apple Computer saw its global share of

During the 1990s, Apple Computer saw its global share of the personal computer market fall
from above 10 percent to less than 5 percent. Despite a keenly loyal customer base, Apple
found it more and more difficult to compete in a market dominated by the majority standard:
PCs with Microsoft’s Windows-based operating system and Intel’s microchips. Indeed,
software developers put a lower priority on writing Mac applications than on Windows
applications.
a. In the late 1980s and 1990s, Apple vigorously protected its proprietary hardware and
software and refused to license Mac clones. What effect did this decision have on long-run
demand?
b. In the early 1990s, Apple enjoyed high markups on its units. In 1995 Apple’s chief, John
Sculley, insisted on keeping Mac’s gross profit margin at 50 to 55 percent, even in the face of
falling demand. (Gross profit margin is measured as total revenue minus total variable costs
expressed as a percentage of total revenue.) At this time, the business of selling PCs was
becoming more and more “commodity-like.” Indeed, the price elasticity facing a particular
company was estimated in the neighborhood of EP =- 4. Using the markup rule of Equation
3.12, carefully assess Sculley’s strategy.
c. In the last decade, Apple has discontinued several of its lower-priced models and has
expanded its efforts in the education and desktop publishing markets. In addition, recent
software innovations allow Macs to read most documents, data, and spreadsheets generated
on other PCs. Do these initiatives make sense? How will they affect demand?

During the 1990s Apple Computer saw its global share of

ANSWER
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