Monopoly and Microsoft - Essay Example

Section/# Table of Contents: Introduction Monopoly and Microsoft: Microsoft’s Approach to Profitability and the Engagement of the Monopoly as a Function of Capitalist Drive Conclusion Works Cited Introduction: The question of whether or not Microsoft represents a monopoly has long since been settled. With fully 90% of all computers running Microsoft operating systems, the reality of the current market speaks for itself. However, even though it is been demonstrably proven that Microsoft is in fact a monopoly, a further question that must be engaged is whether or not this monopoly could somehow represent a benefit to the consumer. As will be demonstrated in this brief analytical response, it is the belief of this author that an monopoly, regardless of its shape, size, or form, is ultimately destructive to the market and harmful to the end consumer (Kapoor, 2009). As such, the case of Microsoft and a discussion of economic theory, as well as the behavior that Microsoft has indicated over the past several decades, will be engaged as a means of understanding this particular approach. Furthermore, it is the hope of this author that the reader will come to a more profound level of understanding with respect to the fact that monopolies are ultimately harmful and do not represent a net benefit to the society as a whole (figures 1 and 2 within the appendix of this brief work demonstrate the harm that a monopoly can have with regards to increased prices paid by the end consumer). Monopoly and Microsoft: In understanding the monopoly that Windows has on the user experience of operating a PC, one should not only look to the way in which the firm dominates the operating system itself. Instead, a quick consideration of recent history reveals that Microsoft has long cultivated the monopoly that it now holds (Ohlhausen, 2004). For instance, Microsoft purposefully packaged Internet Explorer within Windows 95 and after as a means of decreasing the market presence and overall level of profitability that Netscape could have in the market (Gisser, 2011). As this was an effective tool towards decreasing competition, and Microsoft soon learned the benefit of packaged software’s ability to further define the market that it had already captured, much the same technique was employed with regards to the audio/video player of Windows Media Player (Vogelstein, 2004). Realizing the a litany of different startups were threatening to take market share from Microsoft, the same strategy of packaging Windows Media Player into the operating system as a means of integrating the product with what can only be described as a captive market (Greene et al. ,2004). As can be firmly noted, the monopolistic model of competition is ultimately harmful to the market and to the consumer. The only entity that benefits from such a model is obviously the producer. As figure 1 and figure 2 both denote, a certain level of deadweight loss is portended by the monopoly. As a graphical representation helps the reader to understand, this deadweight loss is actually stolen from the equilibrium price and demand; thereby making the good under monopolistic competition greatly higher priced than it would be in normal competition. As previously denoted, this in and of itself is engaged by the monopoly seller as a means of incurring further profits. Figure 1: Figure 2: Microsoft’s Approach to Profitability and the Engagement of the Monopoly as a Function of Capitalist Drive Likewise, in seeking to understand the approach that Microsoft has engaged, it can only be defined as one that is bounded by rational self interest in the sense of continuing to accrue further levels of profitability and continue to integrate into further markets (Cohen et al., 1999). Even a cursory review into the current time does not reveal a Microsoft that allows its fate to be pinned upon the success or failure of an operating system; rather, when one looks at the face of Microsoft, one can see a firm that has recently expanded to purchase a controlling interest in Nokia’s mobile phone business (Alsop, 2001). Moreover, expansions upon almost each and every front can be evidenced as the operating systems of PCs no longer serve as the backbone of Microsoft’s engagements with the market; rather, tablet operating systems, Window’s phone operating systems, and primary hardware such as Xbox and Zune will likely soon eclipse the overall level of profitability that Microsoft has been able to enjoy in the PC operating system market (Naros, 2010). Conclusion: All of this is important due to the fact that it is the same business approach that Microsoft made in the initial stages of integrating with the PC operating systems market (Lopatka, 2009). As such, it only stands to reason that if the firm is allowed to continue to exercise these very same determinants to growth that it utilized as a function of capturing the operating systems market, then a further level of monopoly may well result for Microsoft within other spheres of the market. This in and of itself is a troubling fact (Werden, 2001). Due to the previously discussed drawbacks that Microsoft’s monopoly portends, it is doubtful that any level of market or consumer benefit can be evidenced by further monopolization of additional markets within the business sphere (Khan et al., 2004). In this way, decisions to reduce Microsoft’s monopoly power should be engaged by decision makers and leaders at each and every turn as a function of creating a more fair and equitable market that could address the needs of the consumer and redress the existence of the monopoly. 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Khan, S, Islam, F, & Ahmed, S 2004, 'Is Microsoft a Monopoly: An Empirical Test', American Business Review, 22, 2, pp. 130-134, Business Source Complete, EBSCOhost, viewed 22 October 2013. Kapoor, A 2009, 'What Is the Standard of Causation of Monopoly?', Antitrust Magazine, 23, 3, pp. 38-41, Academic Search Complete, EBSCOhost, viewed 22 October 2013. Lopatka, JE 2009, 'ASSESSING MICROSOFT FROM A DISTANCE', Antitrust Law Journal, 75, 3, pp. 811-845, Business Source Complete, EBSCOhost, viewed 22 October 2013. Naros, T 2010, 'SLAPPING MICROSOFT'S WRIST', BusinessWeek, 19 November, Business Source Complete, EBSCOhost, viewed 22 October 2013. Nocera, J 1999, 'Microsoft's Trials', Fortune, 140, 11, pp. 50-51, Business Source Complete, EBSCOhost, viewed 22 October 2013. Ohlhausen, MK 2009, 'SYMPOSIUM: THE END OF THE MICROSOFT ANTITRUST CASE?', Antitrust Law Journal, 75, 3, pp. 691-703, Business Source Complete, EBSCOhost, viewed 22 October 2013. Vogelstein, F 2004, 'HAVE TECH'S BULLIES BEEN TAMED?', Fortune, 149, 8, pp. 33-38, Business Source Complete, EBSCOhost, viewed 22 October 2013. Werden, GJ 2001, 'Microsoft's Pricing of Windows and the Economics of Derived Demand Monopoly', Review Of Industrial Organization, 18, 3, p. 257, Business Source Complete, EBSCOhost, viewed 22 October 2013. Read More