It was basically poor management. I think they treated Commodore as more of a tax write off than a real company. Had they pumped money into advertising and R&D, it would have still been on top.
One thing that always bugged me about Commodore and Apple is that they would waste money on new case designs. Had Commodore designed a standard Amiga case and kept it basically the same from model to model, the money saved could have been sunk into R&D for the chipset designs, motherboard and software.
I also think they should have transitioned themselves from a computer manufacturer to a software company that also set standard reference designs which they license out to motherboard manufacturers.
Andrea