INTRODUCTION
In early 2002, CEO Steve Jobs (Jobs) was developing a new strategy for Apple. His recent efforts had focused on positioning Apple products as an integrating platform for a range of household digital devices like cameras, video recorders, music players, etc. Jobs called this the "era of the Digital Lifestyle." With the company performing poorly in the traditional computer market, Apple's future seemed to be dependent on how well Jobs could integrate product development strategies with the digital technologies in the consumer electronics market.
For many years, Apple had differentiated itself in the computer market, be it through its creative marketing efforts in building futuristic product designs or simply through its expertise in developing state-of-the art products. Apple's products enjoyed great popularity in classrooms, web design shops, graphic art studios etc, where high end computing was required. Apple also enjoyed a trusted and loyal customer base (25 million worldwide) that openly shunned the PCs developed by leading players like Compaq, Dell and IBM. But Apple's fan base comprised only a small percent of the total PC market. Infact, in late 2002, Apple held less than 3% of the $190 billion PC market2 and many felt that it was bound to shrink further. Adding to Job's woes was the company's poor sales performance since 2000 (See Exhibit I and Exhibit II).
Based on the new direction that Jobs was steering the company towards, most industry experts agreed that Apple had become a niche player. As reported by one analyst3:
"We no longer view Apple as being in a battle for PC market share -- instead, we see the platform becoming a premium PC, capturing selective demand."
Background Note
Operating ...