Channel Conflict at Apple

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Case Details:

Case Code : MKTG108
Case Length : 19 Pages
Period : 1976-2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Apple Computer, Inc.
Industry : Computers
Countries : United States of America

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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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The Dawn of Apple Contd...

In 1972, Jobs joined Reed College but dropped out after the first semester. In 1974, he joined as a video game designer at Atari, one of the pioneers of video gaming. During the same year, he went to India in search of spiritual enlightenment and returned to California in the autumn.

He later became a member of the Homebrew Computer Club³ (Club), of which Wozniak, an electronics genius working with Hewlett-Packard (HP)⁴, was already a member.

In 1975, Wozniak, purely as a hobby, manufactured a microcomputer that was cheaper than the existing microcomputers like the Altair 8800.

When Wozniak demonstrated the machine at the Club, Jobs, who had always been interested in starting a business, persuaded him to manufacture personal computers (PCs) for sale. To start with, Jobs and Wozniak built the prototype at Jobs' garage and named it Apple I.

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Unlike other computers that were built on Intel⁵ 8080 processor, Apple I was based on the MOStek 6502 processor and was offered at US$666.66, a price which was lower than the prices of other computers. It had relatively fewer parts than any other computer manufactured at that time; a television was used as the display unit.

In May 1976, Jobs and Wozniak demonstrated Apple I at the Club. A local computer dealer who saw the demonstration ordered about 25 units on the condition that the machine would be assembled for the customers.

On Jobs' suggestion, Wozniak quit HP and joined Apple. In the next ten months, the two friends sold about 200 Apple I computers.

Apple I was mostly marketed to individuals with an interest in computers and electronics -- such as members of the Homebrew Computer Club; its sales in 1977 were about US$774,000.⁶ Apple Computer was incorporated on January 03, 1977.

In the same year, during the first West Coast Computer Fair in San Francisco⁷, Apple II was shown to the public as a general purpose computer. Priced at US$1,298, it was built on the same 6502 processor, but had color graphics, and used an audio cassette drive for storage with 4 KB⁸ RAM...

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3] Homebrew Computer Club, started in 1975, consisted of a group of people who mostly were from either electronics or programming background. The meetings acted as a place for exchange of information and tips about programming, electronics and also trading of new computer related products.

4] Hewlett-Packard (HP), founded in 1939, was initially a manufacturer of test and measurement instruments. HP introduced the first handheld scientific electronic calculator in 1972.

5] Intel Corporation was founded by Gordon E. Moore in 1968. The company designed and manufactured microprocessors, integrated circuits, motherboard chipsets, etc.

6] < http://www.sba.gov/INV/apple.html >

7] San Francisco is the fourth largest city in the state of California. The southern part of the San Francisco Bay Area came to be known as Silicon Valley, due to the concentration of semi-conductor and computer-related industries. < Source: http://en.wikipedia.org/wiki/Silicon_valley >.

8] KB is the short form of Kilobyte, a unit to measure memory of a computer. 1KB = 1024 bytes (sometimes 1000 bytes), 1024KB = 1MB (Megabyte) and 1024 MB=1GB (Gigabyte)