Microsoft Monopoly Assessment of Microsoft's Monopoly Microsoft Essay

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Microsoft Monopoly

Assessment of Microsoft's Monopoly

Microsoft has for decades engaged in commercial activities both with its direct enterprise customers and its many distribution channel partners that could be considered monopolistic. While Microsoft has long asserted it is one of the most efficient competitors there are in an oligopolistically-based market of enterprise and consumer software, in reality its strategies and tactics show a pattern of deliberate monopolistic behavior (Information Management, 2009). Microsoft initially used complex contracts that defied legal interpretation to limit their Original Equipment Manufacturers (OEM) from installing any other operating system besides MS-DOS and later Microsoft Windows (Werden, 2001). At this same time Microsoft also devised a pricing strategy that made it economically impossible for its OEM customers including Dell, Gateway, IBM and many others from installing or even supporting any other operating system. Most recently Microsoft was fined by the European Union (EU) for bundling its Internet browser, Internet Explorer, with the Windows XP and later Windows 7 operating systems (Meese, 1999). Microsoft has been regularly investigated for antitrust violations, and this analysis includes an assessment of how the company became so adept that violating and defending itself against accusations of antitrust violations.

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Also included is an assessment of how the company gained considerable strength as a monopolistic force in the computer software industry. The assessment concludes with an assessment of the good and bad aspects of monopolies from a more cross-industry perspective.

The Making of a Monopoly

Microsoft discovered early in their OEM sales of operating systems and development components that via the use of contracts that tied licenses to specific hardware units, the company could literally control their OEM partner's product strategies (Werden, 2001). Microsoft sought to create barriers to entry for operating systems and development tools as well, concentrating on their pricing, product strategies and bundling to redefine the demand curve for these programs faster than the market dynamics alone would create on their own time (Information Management, 2009). This forced a higher level of inelasticity in the market, driving competitors to attempt to imitate the economies of scale that Microsoft has. This had the long-term effect of creating an oligopolistic market and the short-term immediate effect of driving smaller, less-capitalized competitors out of the market.….....

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