What is the primary barrier to entry in the operating systems market? How does Netscape’s product threaten to remove this barrier?
Microsoft has succeeded in creating a monopoly in the operating systems market with its Windows operating system. To start with, running an operating system requires very many software programs. In addition, in order to ensure that the end-user finds the operating system attractive, a lot of software programs are also required. These factors act as the primary barrier to entry in the operating systems market.
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The main reason why Microsoft has managed to create this primary barrier through its Windows operating system is that majority of the applications today are either run or written on Windows. In addition, since the end, users usually look forward to the availability of many applications, the entry of another operating system has been very hard. Furthermore, a new entrant would find it time-consuming, expensive, and prohibitively difficult to come up with an alternative operating system.
Moreover, the fact that Microsoft has already asserted itself as a leading player in the operating system market means that the company has enough resources to shake off any attempt by competitors to dislodge it from the position it currently holds. This has therefore created a high entry barrier in the operating systems market, further cementing the position of Microsoft as a monopoly in this market. However, this barrier is now threatened by the latest development of new Internet Browser programs, notably Netscape.
The introduction of the Netscape software is now a real threat to the monopoly that Microsoft has enjoyed for so long in the operating systems market. Netscape has threatened the primary barrier to entry in the operating system market by enabling software developers to design software that relies on the browser as a platform for running the program. What this means is that software developers can now design software running on windows, in addition to other operating systems. In other words, the new software is an alternative “platform” or can support the writing of applications running on other operating systems as well, and not just Windows.
What are Microsoft’s pricing and distribution strategies for Internet Explorer? How does this compare to Netscape? Why would Microsoft pursue this pricing strategy?
The pricing and distribution strategy that Microsoft has adopted for Internet Explorer is different from that of its competitors. Microsoft does not charge its Internet Explorer; it is usually free, although there is a catch. In order to use the free browser, the end-user also has to integrate it with the Windows operating system. As such, one cannot use the internet explorer with any other operating system other than Windows.
The pricing strategy has enabled Microsoft to differentiate its product from the one offered by Netscape. This pricing strategy has allowed Microsoft to acquire a significant share of the market at the expense of Netscape. In addition, Microsoft has strongly discouraged manufacturers from integrating the browsers from competitors with Internet Explorer, arguing that it should only be run on windows. To further leverage the power of its operating system, Microsoft has discouraged Internet Content Providers, Internet Service Providers (ISPs), and Online Service Providers (OSPs) from making the browsers from competitors available and instead encouraged them to use Internet Explorer.
The strategy appears to have worked for Microsoft because it has not only managed to protect its Operating System (Windows), but it now actually has a larger market share than Netscape. This growth in market share is mainly attributed to the strong relationship that Microsoft has managed to establish with its customers and distributors. Also, Microsoft has been very active in its quest to encourage website developers to customize their Web sites so that they only run on Internet Explorer browsers.
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Microsoft is convinced that eventually, it will be too much of a burden to develop both Internet Explorer and Netscape browsers. The idea is to win over developers now by stressing certain features of its Internet Explorer, in addition to convincing the developers that, over time, switching costs will have increased dramatically. Such a strategy is important for Microsoft because it has enabled the company to acquire a larger market share.
Is the internet browser software market a separate relevant product market from the operating system market?
The Internet Browser software market is a separate product from the operating system market. However, Microsoft sought to integrate the two products in the hope that the Internet Browser would ride on the success of the Windows Operating System that had gained a near-monopoly in the market. Microsoft reckoned that because more than 80% of Intel-based PCs were running on Windows’ operating system, integrating the Internet Browsers with the operating system and discouraging the end-users from using Windows operating system as a platform to run other browsers would help to popularize its internet browser.
How do control of the start-up sequence and desktop screen allow Microsoft to leverage internet providers to use Internet Explorer? How effective was this strategy?
Microsoft has managed to control the desktop screen and start-up sequence. As a result, Microsoft has managed to convince some of the leading Internet Service Providers (ISPs) in the US to use Internet Explorer. The anticompetitive agreement between Microsoft and nearly all the most popular and large Internet Service Providers (ISPs) has enabled the company to control desktop screen and start-up sequence.
Over 80% of all PCs in the United States come preinstalled with the Windows operating system. As such, when the lists and files of ISPs are included in Windows operating system, end users find it easier to subscribe to the service. As a result, nearly all the ISPs in the United States now want to secure placement on the desktop of PCs running on Windows. The agreements between the ISPs and Microsoft enables the company to leverage the monopoly of its operating system by conditioning the inclusion of these ISPs in Windows list so that Microsoft’s Internet Explorer browsers can be exclusively or primarily provided as the browsers that these ISPs promote.
What are some of the ways in which Microsoft’s actions adversely effect competition and innovation? Does this show evidence of harm to consumers?
The actions by Microsoft to force the website developers and manufacturers to only use Internet Explorer with Microsoft operating system has adversely affected innovation and competition in the industry. To start with, the strategy that Microsoft has adopted is an attempt to ensure that it retains the monopoly of its operating system. Even when other companies such as Netscape came up with a new innovation that allows the end user to use the operating systems as a platform for launching several browsers, Microsoft takes advantage of the popularity of its Windows operating systems and forces the manufacturers and website developers to exclusively use internet explorers with the windows operating system, and not any other explorer.
Microsoft’s dominance has also affected the major ISPs as they now almost exclusively use internet explorer. In addition, the anticompetitive agreements between ISPs and Microsoft have greatly shunned competing browsers from pursuing this major channel of distributing their browsers. This is a very way of killing innovation and competition in the industry. The actions by Microsoft have the potential to harm consumers because as long as they have purchased a PCs operating on Windows operating system, they cannot use any other explorer other than Windows internet explorer.