Microsoft Corporation as an Example of a Monopoly - Assignment Example

Monopoly is a market structure characterized by a unique product, single seller, and the impossible entry into the market by other companies. Companies that enjoy monopoly power over the market become the sole suppliers of the products. With a lot of controversies surrounding the companies, two groups of people arose based on their views of monopoly significance to the society. On one side are the protagonists who believe that monopoly companies are beneficial as they benefit the society greatly. Whereas the antagonists, believe that monopoly is wrong since it does not benefit the society greatly as per their anticipations. Whereas proponents argue that monopoly is favorable in carrying out research and development and operation in a contestable market, nonetheless, monopoly would lead to higher prices on consumers, lack of competition. As a protagonist of monopoly championed this practice for cartels as they maintain that its existence leads to increase in the number of research and development projects as they earn more profits. Although, the companies operate solely in the market and get high return it does not invest the funds for research and development. Microsoft Corporation as an example of a monopoly has not shown considerable investment in the field of research and development as thought (Jones and Sufrin 573). On the contrary, as a result of obtaining patent rights companies that operate under monopoly, including Microsoft do not have any incentives to innovate other new varieties of products than specialize in the one. Because of these, many countries impose a limit on the number of years companies can hold to their patent of rights (Salanié 188). Microsoft’s research and development is mainly because of its competitors but once these competitors who operate server operating system market stops Microsoft Company will also no longer see the benefit of carrying out more research and development as it has already come up with a lock-in effect strategy on its customers. Through this strategy, Microsoft can efficiently engage its customers in homogenous solutions made by Microsoft worldwide. It is therefore, definite that monopoly companies do not wish to spend the large amounts of profits it accumulates in research and development. Without a doubt, these monopoly companies would be adamant to produce only those products that are conducive and acceptable to the consumer rather than being innovative and make new products for its customers. In support of monopoly, proponents contend that through monopoly, there exists a contestable market (Salanié 179). However, this is faced by lots of shortcomings as monopolies do not allow easy entry of the companies in the market as stipulated by the fact of being a monopoly. Microsoft is notably one of the companies that have stood up in defense of its monopolistic stand in a bid not to let in other companies into its industry (Cowie 160). Microsoft raised questions based on the contestability as it used its strong market position to buy out its competitors. It therefore, poses a strong barrier of entry by other companies that would wish to enter its industry. Microsoft greatest fear is to lose the opportunities of making massive amounts of profits through the threat of overcapacity once the competitors gain entrance into the industry. Indeed, the proponents’ argument of a competitive market is not valid because the market of monopoly companies cannot be easily accessed. This is because Monopoly Company accumulates a lot of profits with time as they are the sole producers and through the loads of money accumulated it is enough to make it stand out from the rest and take up the opportunity. Though there are proponents who still support a monopoly even when the monopoly companies offer fewer benefits to society. It is therefore, clear that Microsoft is a monopoly company, but it does not portray the benefits. Nonetheless, it tends to make its consumers loyal to it as a monopoly brand in the manufacture of computer programs. Indeed, there are many reasons as to why Microsoft as one of the monopoly companies cannot benefit the society. The immense costs related with Microsoft products gives evidence as to why the monopoly kind of market is not favorable for consumer. Notably, Microsoft Corporation first products were availed in the consumer market at a higher price as the consumers found the products to be the only suitable one in the market. Microsoft took advantage of its monopoly power and used less marginal cost during production as compared to the high sales price (Booth, 28). This was possible as Microsoft had to use lesser cost to meet the growing demand of its customers. As a result, Microsoft Corporation reported high profit margin from the sale of windows operating system. This is enough clarification that companies who enjoy the monopoly go to the extent of letting their customers pay astronomical costs as they are the exclusive providers of service and there are no substitutes Microsoft greatest fear is to lose the opportunities of making massive amounts of profits through the threat of overcapacity once the competitors gain entrance into the industry. Indeed, the proponents’ argument of a competitive market is not valid because the market of monopoly companies cannot be easily accessed. This is because Monopoly Company accumulates a lot of profits with time as they are the sole producers and through the loads of money accumulated it is enough to make it stand out from the rest and take up the opportunity. Indeed, lack of competitors to give a challenging competition to a company like Microsoft Corporation has profoundly influenced the lack of a lot of choices for the Windows systems. Microsoft lacks real competition as it has largely domineered as the vastly known monopoly company for the manufacture of Windows systems for a long period of time that is still used up to date by individuals and companies. Notably, Microsoft Company has created a stifling competition between it and other small companies that wish to compete against it. The market monopoly that Microsoft Corporation enjoys today is due to its identification of the weaker niches that exist with weak competitors. Microsoft main goal was to oversee the rule out of small companies that came into existence in a bid to bring competition in the computer systems industry. Remarkably, Microsoft Company has over the years edged it competitors to maintain its monopoly position in the worldwide market. However, the maintenance of it steady market has not come up easily for Microsoft Corporation it has had to pay hard by playing it rough against its competitors. In most instances, Microsoft Corporation has always laid a strategy ahead into the market in order to get a deeper understanding of the market. Indeed, behind Microsoft’s strategy of domineering the market all by itself its main focus was to oversee itself gaining world dominance as the sole supplier of the Windows Operating system. Without a doubt, monopoly is not an idealistic market system for consumer goods. This is evident as the production of goods for the monopoly market is usually associated with high costs as compared to a competitive market. Besides, the high costs carried by consumers of the products, there is a lack of innovation in the design of the product. All this is because the monopoly market lacks competition and as a result dictates what they wish to do with their products in terms of cost and design of their products. Works cited Booth, D. Hooked on growth: economic addictions and the environment. Philadelphia: Rowman & Littlefield. 2004. Bove, T. Just say no to Microsoft: how to ditch Microsoft and why it's not as hard as you think. New York: No Starch Press. 2010. Cowie, J. The Economics of Transport: A Theoretical and Applied Perspective. New York: Taylor & Francis.2009. Jones, A. & Sufrin, B. EC competition law: text, cases, and materials. New York: Oxford University Press. 2007 Tucker, I. Survey of Economics. Ohio: Cengage Learning. 2010 Read More