Apple Inc Strategy
The two most important factors that made it difficult for Apple to compete in the PC industry were the lack of software availability for the Macintosh operating system and the lack of differentiation of Apple’s products. These two factors are key reasons why Apple’s share of the global PC market still languishes in the 3% range.
Macintosh lagged in available applications early and is still paying the price for this today. In the 1990s, while the number of applications on PCs exploded, the Macintosh remained a relatively closed system. Because the value of an operating system corresponds directly to the quantity and quality of application software that is available for use with it, more people adopted PCs than Macs because of the applications available for it. This then caused software developers to create even more applications for PCs, exacerbating the network effects of using Windows instead of a Mac.
Apple did excel in niche applications, such as desktop publishing and education, but these applications were generally developed in house. Having to develop its own software created significant development costs for Apple that no other PC manufacturers had, cutting into its profitability and keeping the prices of its notebooks higher than the competition. The software integration problem was only partly solved in 2007 when Macintoshes began to ship with Intel processors that allowed them to run a virtual machine that could operate Windows and Mac software.
Another factor in Apple’s difficulty in participating in the PC market was the brand’s lack of differentiation. Throughout the early 90s, the brand was viewed as the “BMW of the computer industry.” With PC prices high relative to income, most consumers were very price sensitive, limiting Apple’s potential market. When Apple did move down market, the firm failed spectacularly, possibly because consumers saw no benefit to switching to a platform with an aging operating system and limited software.
Macintosh lagged in available applications early and is still paying the price for this today. In the 1990s, while the number of applications on PCs exploded, the Macintosh remained a relatively closed system. Because the value of an operating system corresponds directly to the quantity and quality of application software that is available for use with it, more people adopted PCs than Macs because of the applications available for it. This then caused software developers to create even more applications for PCs, exacerbating the network effects of using Windows instead of a Mac.
Apple did excel in niche applications, such as desktop publishing and education, but these applications were generally developed in house. Having to develop its own software created significant development costs for Apple that no other PC manufacturers had, cutting into its profitability and keeping the prices of its notebooks higher than the competition. The software integration problem was only partly solved in 2007 when Macintoshes began to ship with Intel processors that allowed them to run a virtual machine that could operate Windows and Mac software.
Another factor in Apple’s difficulty in participating in the PC market was the brand’s lack of differentiation. Throughout the early 90s, the brand was viewed as the “BMW of the computer industry.” With PC prices high relative to income, most consumers were very price sensitive, limiting Apple’s potential market. When Apple did move down market, the firm failed spectacularly, possibly because consumers saw no benefit to switching to a platform with an aging operating system and limited software.