Near as I can figure they began falling behind, the 10-10 and Super XL, along with their brand-name recognition, pretty much kept McCulloch and Homelite alive towards the end. The PM8200 (Mcculloch's last big saw attempt) just couldn't compete with a 288 or 064. They were too broke to design new saws so they basically modified older ones. A PM8200 block and tank look an awful lot like a 1970's 10-series block and tank. The Homelite 330's (a later mag-built 50cc saw) are 12-13lbs, which is 2-3lbs heavier than a Stihl 026 and only 1lb less than a 372 sans bar. Who's going to pick a saw that's 3lbs heavier than their german competitor and has less dealer support? Not me! The further behind they fell, the harder it would be to recover. Eventually it all caught up with them and they just collapsed.
Also, Stihl and Husqvarna kept looking for bigger and better things while Mcculloch and Homelite didn't. Compare a Stihl 056 or Husqvarna 2100 to a Homelite 650 or PM8200. (All weights unless otherwise specified are powerhead only) A 650 is 23lbs, a PM8200 is in the neighborhood of 19lbs, a 2100 is ~20lbs, and a Stihl 056 Mag II is 20.7lbs. Now let's add in displacement. 650 = 100cc, 8200 = 82cc, 2100 = 99cc, 056 = 94cc. So, classified by displacement (biggest to smallest) to weight (lightest to heaviest) ratio (roughly estimated) you get 2100, 056, 8200, 650. Not all those saws are from the same era, but they're close and the displacements are not the same, but