Why did Apple generally perform well prior to 1991?

Apple followed “Differentiation Strategy” for its business model and charged a ‘premium’

Being Different/ Differentiation Premium Price Productivity Frontier

High WTP High Cost Structure

WTP
Apple:
High WTP and High
Horizontal and Vertical Costs
Integration:
• Own Proprietary Designs Compaq/IBM:
• No licensing to third parties High R&D investments: Low WTP and Low
Popularity: • ~9% revenues were Costs
• Customers ‘loved’ their devoted to Research
Macs and Development Costs
• Apple came to be known • Compaq devoted only
Superior Software: for designing product 5% Porter’s 5 Forces prior to 1991
• Aldus PageMaker from scratch • Other IBM-clone
• Peripherals such as laser printers • Unique Chips, disk drives producers devoted a
and monitors nominal 1% Threat of new entry: Buyer/Distributer Power:

Hence Premium Pricing

• Customers loved their Mac.
• Differentiated product
Competitive Rivalry:
• Superior Design and • Allowed them to • High Cost Structure • Low switching costs
Premium feeling produce High quality • Difficult Business • Presence of volume
increased WTP products which model to imitate heavy IBM-
“Plug and Play”: increased WTP compatibles
• Complete Desktop Solution LOW HIGH
• Hardware, Software and
Supplier Power: Threat of substitutes:
peripherals
• Apple did not have • No substitutes to
external suppliers computers prior to
Conclusions: 1991
From the business model, we can see that apple could charge a premium for Mac due to it’s differentiation strategy.
This coupled with overall LOW-MODERATE forces at play, Apple was performed generally well prior to 1991. LOW LOW LOW

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