Oligopoly of Microsoft and Apple - Term Paper Example

 Apple VS Microsoft Table of Contents Aims and Objectives 1 3. Literature Review 4 3.1 How Competition is Useful 5 3.2 Competing Sales Campaigns 5 3.3 Advertising perspective 11 4. Methodology 13 5. Project Planning and Resources 14 Aims and Objectives The research that follows takes inception from studying market structures and the features that make them unique. Moreover, the oligopolistic market structure will be the keen emphasis throughout this paper. An oligopoly is defined as a market structure dotted by a few large suppliers producing branded goods and services, most of the market concentration of is taken up by these large players. A few important characteristics are worth mentioning about an oligopoly, marketing and advertisement are very important with such a level of competition, the heightened levels of competition also act as one of the barriers to entry for new firms trying to jump into the market. Interdependence between these large players is another unique aspect of an oligopoly. All moves pertaining to pricing, investment, and advertisement are closely monitored by each player. Economists usually use a game theory model to demonstrate the workings of such a market. In lieu of the description above we move more towards the topic under study. The software industry has been witnessing an eternal rivalry in the form of competition between two of the giants, Microsoft and Apple. These two legendary companies have engaged in advertisement warfare internationally and flooded the PC market with countless software. Both are the pioneer companies in the technological world. Since the incorporation of these two brand names, there has been a constant rivalry between both Apple and Microsoft. Just a year older firm Microsoft, initially had an edge over Apple. It was in the late 90’s that the game took a turn and Apple gained that edge that was previously maintained by the Microsoft. But this edge was mainly in terms of the market value. The history of rivalry can be traced back to the foundation of these two extraordinary firms. Microsoft is an American multinational and a public listed company. The firm was established on April 4th, 1975. The company started operating as a monopoly as no other competitor was present to compete with the products and services that were being provided by Microsoft. Microsoft develops and manufactures computing products and only that it also licenses wide array of products and services related to computing. The main achievement of Microsoft was that it dominated the home computer operating system by developing a line of operating systems. It was on these operating systems that the whole computer used to work. MS-DOS was an operating system developed by Microsoft which was followed by the famous Microsoft Windows. Microsoft office was another achievement of the firm. But it was soon enough that the competition emerged and Microsoft had to diversify its product line. During the recent years Microsoft entered the video game industry by developing Xbox. It also diversified into the consumer electronics and the digital services market. Windows Phone OS and MSN are examples of its diversification into the consumer electronics and the digital services market. Apple which is one of the major competitors of Microsoft entered the market in 1976. It was just a year after the foundation of the Microsoft. Just like Microsoft, Apple is also an American multinational corporation and a public listed company. Apple is a company that designs and markets consumer electronics, computer software and personal computers. The company’s most important achievement was its best-known hardware products which included the Macintosh line of computers, the famous iPod, iPhone and the iPad. Apple was previously named as Apple Computer, Inc. But in the year 2007, it removed the word “Computer” from its name. This was mainly done to reflect the company’s expansion because it was diversifying itself into the consumer electronics industry while maintaining its traditional focus on to the personal computers. Apple has developed software which includes Mac OS X operating system, iTunes, iWork, the Safari web browser, a mobile operating software iOS and many others. This research proposal would help understand different factors which revolve around the competition of Apple and Microsoft. It would analyze the competition in terms of the steps that both Apple and Microsoft have taken over these years. This proposal would analyze as to which company has been more successful in terms of advertisement and marketing. It would further give an answer to the questions regarding other competitors who cannot beat either when it comes to consumer base. 2.1 Research Question Are Microsoft and Apple really competing with each other in terms of sale and marketing? 2.2 Predicted Answer I believe Microsoft and Apple are really trying to gather a market share through their intense competition 3. Literature Review While total monetized value for Microsoft and Apple were pretty similar last spring, the tide has turned now. May 26, 2010, onwards Apple managed to lead Microsoft for the first time. The Graph below (Yahoo Finance) shows that Apple's capitalization has increased from $223 billion to over $306 billion (as of April 14). Microsoft's, in that time, has slithered from $219 billion to $212 billion. In summary: Wall Street at this time thinks that Apple owns a far higher growth potential and imminent investment prospects than those available at Microsoft. The tall stock price of Apple is the only inhibitor for investors to replicate their success story with apple last year. 3.1 How Competition is Useful Since the very beginning of these two technological corporations, there always has been a fierce sort of competition between them. However, this fierce competition has led to the birth of the most advanced personal computers, phones and software. So from the consumers’ point of view the battle between the firms has proved to be fruitful. Both the companies have tried over the years to satisfy customer needs and wants. With the changing environment and technology, customer needs. It is in this area through which companies have tried to gain edge over each other by trying to satisfy the changing consumer needs and whoever does that well become the market leader. This is what happened in the case of Microsoft and Apple. Both tried to make the best use of the latest technologies in order to satisfy the changing customer needs but did that in different technological parameters. This competition between Microsoft and Apple is reflected in their sales and the advertising campaigns. The main focus of this study would be the sales and advertising strategies used by both the companies while dealing with the competition. 3.2 Competing Sales Campaigns Beginning with the sales perspective, initially Microsoft had an edge over Apple. Microsoft had an edge over Apple initially because its products were technologically more strong and user-friendly. The above graph shows a comparison between the sales of Apple and Microsoft from the years 2007-2010. In the year 2007, sales of Microsoft were greater than the sales of Apple. As the sales of Microsoft increased the sales of Apple also increased relatively. Then in 2008 the sales of Microsoft declined and similarly the sales of Apple also declined. This was a relative decrease again. Towards the end of 2008 the sales of Microsoft increased and the sales of Apple again showed a relative increment. Towards the start of year 2009 there was again a decline in the sales of both the companies but this time the decline was lesser as compared to the decline observed during 2008. Then in the year 2010 the story of the competition between sales of Apple and Microsoft showed a different story. In 2010 the sales of Apple crossed the sales of Microsoft and this was a new start for the company. It was in 2010 that sales of Apple raised to the level of the sales of Microsoft. Apple took a significant lead in the smartphone race, capturing 15.7% of the worldwide market last year, compared with just 4.2% for Microsoft. However, both Gartner and In addition, Apple had a strong 87.4% share of the worldwide tablet market last year, agreeing to IDC. Gartner envisages Apple will keep a 69% share this year and will still have 47% by 2015. Windows doesn't show up in that projection. .( Source: Gartner Inc.). IDC predict Microsoft's Windows Phone will beat out Apple's iOS for mobile market share by 2015, with Gartner expectant of a 19.5% share for Microsoft and 17.2% for Apple.( Source: Gartner Inc) The motive for the changes in transactions of both the corporations was due to the new produces that were announced by both the companies. Apple has always stressed on ground-breaking products, whereas the Microsoft has always been the front-runner when it comes to the arcade of CPUs and software. Apple has struggled very hard to keep pace with the Microsoft as a market leader. It has exasperated taking every extent to beat its rivalry and be the market leader. It was not until 2010 that Apple actually was able to beat its competitors and attained the greatest victory ever. The story started when Apple started differentiating its business. Diversification was the main reason why the sales of both the companies became more viable. A point to contemplate over is that the success story of Apple initiated when it got into a partnership with Microsoft. This comes as a appalling position but this is how it happened. With the continuous letdowns, and Microsoft doing exceptionally well, Apple had to do something. Steve Jobs who was the CEO of Apple came up with a plan of entering into a partnership with Microsoft. In 1997, Microsoft Deal was announced by Steve Jobs. This was a five-year commitment which included that Microsoft will make a US $150 million investment in Apple as well as will release Microsoft Office for the Macintosh line of computers. The chairman of Microsoft, Bill Gates affirmed his plan of helping Apple to return to success. Steve Jobs said: “If we want to move forward and see Apple healthy and prospering again, we have to let of a few things here. We have to let go of this notion that for Apple to win, Microsoft has to lose. We have to embrace a notion that for Apple to win, Apple has to do a really good job. And if others are going to help us that’s great, because we need all the help we can get, and if we screw up and we don’t do a good job, it’s not somebody else’s fault. So I think that is a very important perspective. If we want Microsoft Office on the Mac, we better treat the company that puts it out with a little bit of gratitude; we like their software. So, the era of setting this up as a competition between Apple and Microsoft is over as far as I’m concerned.” (PCWORLD 2011) It was in the year 2001 that the Apple started with its success story. The reason for achieving its goal of huge sales was the introduction of new products in the market. Microsoft has dominated the market of desktop PC’s but Apple changed its approach after so many years of struggle to hold some position in the market which wasn’t even higher. Apple developed its own software of iTunes music player. It launched a new model of Mac which was totally different from the previous models. It came up with its first digital music player iPod which became the necessity of almost every individual in the later years. It was the same year that Apple opened up its own retail stores. Initially it opened only two stores but even these two stores gave a boost to its sales. In the later years, successions came to these basic products. iPhone was another magical product created by Apple which swept the market and kept on doing so until the present. The following graph will show the timeline for the Apple products. According to the timeline, Apple started focusing on fewer products after 2001. Before 2001 and in the initial years, Apple was coming up with so many products but none of them was really a hit. Apple’s main competitive advantage was that it captured the consumer electronics market before Microsoft could do so. This was all a result of the use of the latest technology. The success cannot be only attributed to the use of new technology and new products but it was all possible because the driving force was Steve Jobs. He was very critical about the success of Apple and always was in search of new product innovations. On the other hand Microsoft did not sit idle. It came up with new products as well. When it started seeing the new products introduced by Apple, it became wary of witnessing its success. Microsoft side by side came up with new products as well. The following figure will indicate products of both Apple and Microsoft offered under similar categories and will also indicate which brand has an edge over the other in a particular category. Key Product Category Apple Microsoft Market Edge Desktop Apple Mac OS X Windows Microsoft Hardware iMac, Mac, MacBook, MacMini Peripherals Apple Mobile iPhone Windows Mobile Embedded, Automotive, Zune Phone Apple Music+ Entertainment iPod, iTunes, Apple TV Xbox, CPxG, IPTV, Media Player Apple Software Remote Desktop, Logic pro, iLife, Logic Express, Filemaker Pro Few Hundred Titles Microsoft Internet Safari Browser, Mac Talk Internet Explorer, MSN messenger, Passport, Hotmail, MapPoint, Live, Dozens Apple Looking at the above figure, it is clear that Apple has a market edge in most of the product categories, whereas Microsoft has an edge only in two product categories, namely desktop and software. Though Microsoft has tried to come with new products to match the level of innovation of Apple, but has failed to gain the market edge in most product categories. The latest product innovation at Apple was the introduction of iPad which has once again swept the market. The product design was the main feature that has helped Apple to cross Microsoft in sales. Plus there is a changing trend in the use of PC’s and desktops. Apple has provided the customers with products that can be used on the go and are more tech-savvy and handy at the same time. 3.3 Advertising perspective Microsoft and Apple both have used advertising techniques for the marketing of their products. Apple has spent less heavily on its advertising as compared to Microsoft. Microsoft has to spend more on advertising in order to pool in a single $1 to its revenue. The following figure will represent the amount of budget spent on advertising by both Microsoft and Apple and also some other players in the year 0f 2009. The figure shows that Microsoft was the largest spender on advertising. Also that Apple spent only half as much as Microsoft on its advertising. Apple was the first to open up its own retail stores and Microsoft followed. Advertising was not a main issue at first but with the increasing sales and reputation of Apple products, Microsoft started losing its sales. Apple kept its symbol since the start of its operations. Microsoft logo was also kept same but there were changes made to the slogan with different occasions. Apple mainly depends on the positive word-of-mouth as its advertising strategy. It has opened up its own retail stores to market its own products. It is a very sane and influential marketing strategy because it provides with a platform where customers can view and purchase products under a single roof. Customers are more attracted to the Apple products because of its product design which is very positive attribute of the products offered by Apple and also provides a strong basis for marketing. People from all the around the world, travel to the Apple’s store openings. They are so excited about the whole experience of witnessing an Apple store opening that they are ready to wait outside the store a day before the main event. What Apple does is that it produces products and then targets it towards the market. But what Microsoft does is that it first finds the market segment and then comes up with a new product accordingly. Apple first innovates and then targets, Microsoft first targets then innovates. 4. Methodology The explanatory research will involve the use of human participants who will be able to tell as to how they view both Microsoft and Apple these days. The research requires 50 individuals who use Microsoft products and 50 who use Apple products. Prior to the research, an Informed Consent Form will be circulated among the individuals who use these products. The informed consent form will provide explanation regarding the research and will inform the participants about their rights and time required for participation. The informed consent form will also ask the participants about whether they would like to fill a questionnaire or would like to be interviewed personally by an authorized researcher. The participants will be selected at random and will be asked to arrive at a specified location for the conduction of the research.. The selected participants will then be asked to arrive at a specified location at a specific time. Upon arrival, the participants will be informed about confidentiality of information they would provide by taking part in the research. Confidentiality will be maintained by not mentioning the names and identities of the participants on the questionnaires and anonymity will also be maintained throughout the process of application of biological statistical techniques and methods. The raw data in the form of filled questionnaires and interview tapes will be successfully collected. The next step would be the application of statistical techniques and methods. The raw data would be displayed in different forms. 5. Project Planning and Resources Talking about the television commercials, both the companies have made use of the TVC’s to advertise their products. Initially the mode of advertising was not that competitive. But then for the past few years even advertising campaigns turned into a battle. The battle got so fierce that both the companies started using ads that directly hit each other. Several examples of ads can be quoted here. Microsoft came up with so many ads that directly hit the Apple brand. Similarly Apple came up with ads that were targeted directly to hit Microsoft. Both the companies do not let go off any chance of fighting back and pointing fingers at each other through its ads. There was an ad made by Microsoft which pointed towards Apple and the theme of the ad was that “Macs are for kids”. Another ad campaign was made by Microsoft “Windows, not Walls”. Apple started its own ad campaign to fight back the Microsoft ads. It started its own advertising campaign of “Get a Mac”. It came up with an ad which portrayed a PC trying to deal with the Vista’s problems. Another ad under the same Apple’s campaign pointed that Microsoft is spending its cash reserves on the ads rather than fixing the problems with Vista. This was just one example of the battle of advertising campaigns. Both the firms try to capture the consumer attention through their ads by degrading one another. It would not be wrong to say that Apple has far been successful than Microsoft when it comes to the advertising campaigns. Microsoft has so many other problems to deal with but it is spending too much on its ads in order to catch up with its major competitor, Apple. This research would help to understand the nature of the companies and as to how they are trying to capture the market. The views of the individuals can be noted down and this would help to know what they presumably like in either company. Moreover specific steps can be taken by the companies in the latter stages to gain a specific market share after reviewing the consumer thoughts. References THE NEW YORK TIMES (2009). Hey, PC, Who Taught You to Fight Back? BUSINESS INSIDER (2009). Microsoft’s Lame New Anti-Apple Ad: Macs are for Kids. SOFTPEDIA (2008). Apple Totally Owns Microsoft in New Get a Mac Ads. ECOMMERCE JOURNAL (2009). Apple’s Competition forces Microsoft to open own stores chain. THE NEW YORK TIMES (2010). Apple passes Microsoft as No.1 in Tech. < http://www.nytimes.com/2010/05/27/technology/27apple.html> BUSINESS WEEK(2011). Apple vs. Microsoft by the numbers. < http://bx.businessweek.com/microsoft-vs-apple/view?url=http%3A%2F%2Fc.moreover.com%2Fclick%2Fhere.pl%3Fr4528154604%26f%3D9791> Yahoo Finance. Apple VS Miscrosoft. Read More