Microsoft became a monopoly because of unique and innovative technology developed and introduced by the corporation during the 1980s. Nobody in the world was able to compete and develop the same low-cost and effective solutions as Microsoft did. The main factors which help Microsoft to obtain the monopolistic position are a strong brand image and expert system, excellent website, and customer support. Resource-based philosophy and innovations create new opportunities for market development and brand recognition.
Microsoft achieves market power with the help of loyal customers and the popularization of its products. Monopoly is defined as: “market condition in which there is only one seller of a certain commodity; by the long-run control oversupply, such a seller can exert nearly total control over prices” (Bank, 2005, p. 77). Market power is evidenced in share of market, market leadership, and brand preference. The actual proof of such power, and intended use, is not a straightforward or clear-cut situation. Prices may also be established through research. Various prices may be tested in limited areas and the “best” price selected. Research of customers’ opinions and reactions to products is often sought as a basis for price. Sometimes products are tailored to meet predetermined price points, and product quality is changed so that prices can be maintained and product-line requirements and distributors’ price points met. Markets are characterized in different ways.
In PC market, bigness can lead to keen competition and economic efficiency. Horizontal and vertical integration produce economies of scale, the former often resulting in broader national and international markets, the latter in the coordination of various levels of marketing and manufacturing activities. In a sense, the culture breaks down the barriers between work and play so that employees gain an intrinsic reward (in the form of pleasure from actually doing work) rather than just extrinsic rewards (in the form of pay). They focus on the structure and functioning of markets and pay particular attention to economic concentration and power. Economic models, although helpful, investigate “economic men” often from the point of view of the total economy, and not the individual. Thus they do not suffice for the study of market dimensions pertinent to behavioral scientists (Mckenzie, 2004).
Despite the great advantages and opportunities of the Microsoft monopoly it violates the rights of potential consumers and prevents fair competition. In many cases, consumers pay too much and are denied new products and good quality, consumers always lose when competition is denied, For Microsoft, technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques have added greatly to the efficacy of planning activities (Bank, 2005).
Microsoft’s monopoly control over a market is illegal under antitrust law. “The ability of developers to create products that are compatible, which Microsoft then drives out of the market with anti-competitive tactics, suggests that if Microsoft were prevented from abusing its market power, a competitive market would produce compatible products” (Microsoft Monopoly, 2010). Alternatively it could be driven by the demands of the customers who may want to put more trade with the business and who might take their trade elsewhere if the business cannot respond. As such, the Internet and PCs industry enables Microsoft to pursue a low-price strategy while maintaining profitability (Mckenzie, 2004). The case United States v. Microsoft proves that the current policy of the company violates the rights of consumers and “denied access to new and better products, and stifled overall quality improvements” (Microsoft Monopoly, 2010). The decision as to whether or not to enter this stage and pursue rapid growth may be influenced by the business leader wanting to make more money, desiring to lead a large business or perhaps for the status. There are industries in which this is already proving possible: indeed, in some sectors, we are starting to see wholesale migration from physically-based methods of doing business to virtual methods. The reasons for such a rapid increase are obvious: the target market of the affluent young (often men) fits well with the demographics of the Internet; regular surfers on the Internet are highly likely also to hold stocks and shares. The monopolistic position is created by such unique products as Windows, Internet Explorer and Opera Software (Bank, 2005). For a company like Microsoft, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks of inflation, currency devaluation, and expropriation.
In sum, the monopolistic position of Microsoft is explained by innovative products and strong market position. According to the per se doctrine, some business practices are illegal per se. Included are horizontal and vertical price agreements (except those permitted by fair-trade laws), division of markets by competing firms, and price-fixing by reducing production. Such practices connote the opposite of competition. Associated with price-fixing, trusts, mergers, intimidation, and special arrangements, they symbolize undue economic power, unnatural advantage, and the opposite of economic fair play.
Bank, D. (2005). Microsoft- Monopoly. Econ.
Mckenzie, R. B. (2004). Monopoly: A Game Economists Love to Play-Badly! Southern Economic Journal, 70 (1), 32.
Microsoft Monopoly Caused Consumer Harm. (2010). Consumer Federation of America. Web.