Monopoly of Microsoft - Essay Example

Monopoly of Microsoft Monopoly is a condition in which only a single firm controls the entire market without having much competitionsfor their goods or services. In such monopolistic markets, because of the immense financial resources of the giant organization, they will never allow other small firm to develop. They may not experience any pressure of competition from others and can fix higher prices for their products. The consumers may not have many choices in the market because of the monopoly. “In the absence of government intervention, a monopoly is free to set any price it chooses and will usually set the price that yields the largest possible profit” (Stigler, 2008) Small scale industries may not develop if monopoly exists in the market. Even though monopolist market conditions are legal, in many countries it is legally in order to save the interests of the customers. The United States follows a free market economy in which individuals can freely engage in business or service activities. “The amount of money an individual or business can charge for a product is set by the supply and level of demand for that product. Popular products that are scarce will have higher prices than unpopular and readily available products.” (Is Microsoft a monopoly? If so, why does it matter?) Monopoly of Microsoft in the computer software industry is a hotly debated topic all over the world. Some people have doubts whether the Microsoft case is an example for monopoly or not. They argue that Microsoft is not doing anything deliberately to monopolize the market. Microsoft has a larger market share because of their product quality and hence supporters argue that Microsoft cannot be blamed for the monopolistic conditions in the market. But opponents strongly believe that Microsoft has cleverly monopolized the market. Analysis of Microsoft as a monopoly “Microsoft became a monopoly because they were able to create and enforce universal data interaction standards for personal computers. Microsoft did this by creating a series of operating systems (DOS, then Windows), and by defining the kind of machine that could run their OSs.” (Why is Microsoft a Monopoly?) Most of the Intel computers are designed to work well with Microsoft operating systems (Windows) In fact Intel forced to design their microprocessors or computers to suit the needs of Windows operating system because of the immense market share Microsoft has. The power and strength of Microsoft is so huge in the market so that even a big organization like Intel forced to develop custom made processors for Microsoft. “As a matter of legal and economic fact, Microsoft is at least "monopolistic." It has such a commanding share of the operating systems market that it can, in many respects, behave like a monopoly” (Wilcox) Recent reports has shown that Microsoft has tried to take control of Yahoo, one of the main competitors of Microsoft. This attempt clearly shows that Microsoft is actually trying to swallow their competitors in order to keep their monopoly. Many software, creates problem while running with Windows if it is not compatible with Windows. In other words Microsoft doesn’t want to run any software on Windows which they may feel creating competition for them. Moreover they are doing lot of modifications in their operating system and other software so that the users need to upgrade each and every year spending lot of money. For example the recent .docx format created to use with Microsoft Office word 2007 is not compatible with MS office 2003. The users forced to upgrade their existing MS office 2003 to 2007 in order to use the .docx format files. The above actions are simply the indicators of a monopolistic firm. “The Windows operating system is enormously popular, but the potential for a competing firm to provide a similar product exists. In fact, Macintosh is a small but important competitor in the computer and operating system market. Linux has also emerged in recent months as a viable alternative to Microsoft Windows.” (Is Microsoft a monopoly? If so, why does it matter?) But Microsoft is not providing enough space for these competitors to grow. Previously the Apple computers which use Motorola microprocessors and Macintosh operating system were extensively used for graphic designing purposes because of its better performance in handling heavy images. But now Microsoft has established their supremacy in this area also by utilizing better performed Intel microprocessors. In the opinion of U.S. District Judge Thomas Penfield Jackson, if Microsoft wished to exercise their power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market. (Wilcox) Microsoft doesn’t want to do this since even for the existing market price, they were able to accumulate immense profit by selling more units. Low price is another strategy mostly the monopolistic firms adopt in order to destroy even feeble competition. For example, China was able to sell their products at much cheaper prices on global market because of mass production. Though, their single unit profit may be less, because of the larger production and larger volume of sale, they were succeeded in accumulating more profit and monopolizing most of the international markets. Many people believe that Microsoft must be divided into two or three smaller companies in order to reduce their monopoly. They believe that the reduction of monopoly may be resulted in more competition and hence Microsoft will be forced to improve their software quality at a lower price and hence the consumers will be the ultimate beneficiaries. On the other hand the supporters of Microsoft argue that such an act will destroy the confidence of the company as a whole and also there is no point in punishing a company simply because of their better product and services. “Trends suggest that the power of Windows may decline over the next few years. Most reviewers of Apples new Leopard operating system have noted that its superior to Windows Vista. Long-term, however, the greater threat to Windows continued dominance is probably the Internet itself.”(Albro) Conclusions Microsoft has definite monopoly in software development especially in the area of operating systems. This monopoly allowed Microsoft to fix the price of their product at their own will because of the lack of competition in the market. In order to reduce monopoly of Microsoft, some people believe that only the division of Microsoft into two three small companies is the possible solution. Trends from the market showed that Microsoft may lose their monopoly in the near future because of their failure in developing an error free Vista. On the other hand Apple is successful in developing a far better product compared to Vista. Works Cited 1. Stigler George J., (2008), Monopoly, Retrieved on May 2, 2009 from http://www.econlib.org/library/Enc/Monopoly.html 2. Is Microsoft a Monopoly? If So, Why Does It Matter? Retrieved on May 2, 2009 from http://www.thisnation.com/question/027.html 3. Wilcox Joe, Judge Calls Microsoft a "Monopoly" Retrieved on May 2, 2009 from http://news.cnet.com/2100-1040-232565.html 4. Albro Edward N., Eight Years Later, Is Microsoft Still a Monopoly? Retrieved on May 2, 2009 from http://www.pcworld.com/article/139458/eight_years_later_is_microsoft_still_a_monopoly.html 5. Why is Microsoft a Monopoly?, Retrieved on May 2, 2009 from http://www.zaimoni.com/George/MicrosoftMonopoly.htm Read More