Apple Inc: Setting New Inventory Management Standards

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Case Details:

Case Code : FINC079
Case Length : 17 pages
Period : 1993-2011
Pub. Date : 2012
Teaching Note : Available
Organization : Apple Inc.
Industry : Computer and Technology Industry
Countries : India,US,Global

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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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Apple Inc. Contd...

In 1983, Apple introduced the first commercial computer Lisa. Lisa was incorporated with graphical user interface (GUI), and Windows operating system that allowed several programs to run simultaneously. Lisa was priced at $9,9957 and was a commercial failure due to its high price and limited software capabilities. In 1983, John Sculley (Sculley) became CEO of Apple. Sculley had previously been the CEO of Pepsi.

In 1984, Apple launched Macintosh (Mac), which also incorporated GUI and ran of Mac OS (Mac Operating system). It was priced $2,4958. At that point of time, Apple estimated that it would sell 80,0009 units. However, the company could not achieve its target and sold only 20,000 units.

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Due to over production of computers and actual sales being less than the estimated sales, the company piled up large inventory which led to loss of 17% of the net income to the company. In the meeting of April 10 and 11, 1985, Sculley asked Jobs to step down from the position of vice president and general manager of the Macintosh department. In September 1985, Jobs resigned from Apple with some of the employees and started NeXT.10

In 1993, Apple introduced the Newton, a Personal Digital Assistant (PDA), into the market. Newton was a commercial failure. After the Newton's failure, Apple lost market share and its technological edge in its businesses. In mid-1993, Mike Spindler (Spindler) who was the Chief operating Officer (COO) of the company was appointed as CEO and Sculley who was then CEO was promoted to the Chairman. But after 5 months, Sculley resigned from the post.

The period 1993 to 1996 was tough for Apple. Spindler also could not do much. In January 1996, Apple reported a loss of $6911 million due to the price war in Japan and mismanagement of inventory. Apple cut prices in an attempt to clear out the bloated inventories of low-end Macs. In February 1996, Gil Amelio12 (Amelio) became CEO of Apple. Amelio planned to streamline Apple's product line and increase the cash reserves. He wanted Apple to cater to the higher margin segments like servers and Internet access devices. In 1996, Amelio requested Jobs to function as an informal advisor. In 1997, Apple purchased NeXT for $400 million.

Excerpts - Next Page>>

7] Obsolete Technology Website,
8] Obsolete Technology Website,
9] "All Started with the Apple 1,"
10] NeXT was a computer company that built machines which ran on a UNIX-derived NeXTstep operating system.
11] B. Schlender, Brent, Martin, Michael H, "Paradise Lost: Apple's Quest for Life after Death," Fortune, February 19, 1996.
12] Amelio was the CEO of National Semiconductor before joining Apple.

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