Microsoft's Position in the Operating System Market

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Date Submitted: 02/09/2011 03:07 PM

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Microsoft’s Position in the Operating System Market

Table of Contents:

1. Introduction 2

2. The model of imperfect competition 3

1. Definition 3

2. Oligopoly 3

3. Pure monopoly 4

3. Microsoft’s sources of market power 4

1. Definition 4

2. Exclusive control over inputs 5

3. Patents: Microsoft’s code 5

4. Windows network economy 5

4. Conclusion 6

References 8

1. Introduction

The world’s most successful operating system developer and founder of the Personal Computer, Microsoft, was set up in 1975 in Albuquerque, New Mexico (Microsoft, 2010). Microsoft first successfully entered the operating system market in 1980 with MS DOS, which became the basis for the world’s most used operating system Windows. The system of Windows gives users access to a large number of applications and the Internet via its graphical user interface. Microsoft sells Windows 7 for around 120€ similar to the price of his major competitor’s operating system Mac OS, which is sold for around 150€ (Amazon, 2010). As statistically every household in the Western world has more than one computer and the entire working environment is based on computers, the market for operating systems is enormous. In addition to that, the industry itself literally forces consumers to buy more and new products as computers are permanently innovated and upgraded. This way, the consumers are constantly given incentives to spend money in order to keep their system secure and performance high. As a consequence, demand for operating systems remains high over time. In 2010, almost 91% of computer users still had an operating system created by Microsoft on their computers (NetMarketshare, 2010). This high market share percentage leads to the claim that Microsoft could by definition be regarded as a firm in imperfect competition. As a matter of fact Microsoft succeeded in...