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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Excerpts Contd...

The Trouble Begins

MACadam Computer, Inc. (MACadam), located in San Francisco, was a long time authorized Apple reseller. Tom Santos, (Santos) president of MACadam, complained that ever since Apple had started its own stores, it had become difficult for him to procure iBooks with CD-rewritable/DVD combination drives from the company...

Apple Revises the Terms and Conditions

By the end of March 2003, Apple had opened more than fifty stores all over the US, even as the total number of resellers who filed lawsuits against Apple went up. Apple signed yearly contracts with its resellers, making it mandatory for them to renew the contracts every year. During March 2003, as the old contract expired, Apple issued new contracts to its resellers. The due date for signing the contracts was fixed as March 25, 2003. Thinksecret.com obtained a copy of the contract and published some of the important sections of the new contract on its website...

The Conflict Gathers Momentum

On March 31, 2004, Apple resellers started a website (www.TellOnApple.org) which contained articles regarding their conflict with Apple that had been published in various magazines and newspapers. The site was also intended to collect and share any information pertaining to Apple's unethical practices even from customers and employees...

Consumers and Dealers File a Class Action Lawsuit

For the fiscal year that ended in September 2004, Apple retail stores recorded sales worth US$1.185 billion (Refer to Exhibit VI) with a profit of US$39 million. On February 17, 2005, three days after Armes filed his third amended complaint, a five-member group of consumers and dealers filed a class-action lawsuit. The 26-page lawsuit accused Apple of selling used products after refurbishing them. The plaintiffs claimed that they had evidence to prove that Apple was guilty of selling used products...

Conclusion

As a part of its overall growth strategy, Apple continued to open more retail stores. By the end of April 2005, Apple had about 103 retail stores including three stores outside the US - in London, Tokyo, and Osaka...

Exhibits

Exhibits I: Macintosh Advertisement -'1984'
Exhibits II: Photograph of the crowd at 7 A.M. in front of a new Apple Store in Pennsylvania.
Exhibits III: Store Description
Exhibits IV: Price Variation
Exhibits V: Elite Computers
Exhibits VI:
Exhibits VII: Price Matching Program