Eco 500: Managerial Economics
17 TW 3
Southern New Hampshire University, College of Continuing Education
Submitted to Professor Dr. Claire Starry
Sharon Wright
March 5, 2017
Instructors comments
page 5
Claire Starry:
or by creating barriers to entry, which was the way in which Microsoft was able to protect its OS business. Because of difficulties transferring programs and files across operating systems (at that time) it was harder for a new operating system provider to enter the market and compete with Microsoft.
Page 6
Claire Starry:
Source: Chart copied from ….be sure to correctly cite anything you copy into your paper. Otherwise, you are plagiarizing and taking credit for someone else’s work.
Page 8
Claire Starry:
not at that time. Google was not around or just in its infancy.
Claire Starry:
or the way Microsoft generates revenues. For example, what has happened to the distribution of revenues from various parts of its business? How was that beginning to change around 2000?
Page 10
Claire Starry:
you should have longer term trends. There is little change over a one year period. If you want to show this information, you should just show annual totals.
Claire Starry:
include source information, find data closer to the time of the case study.
11/12
Claire Starry:
source of data to create table.
Claire Starry:
source of data.
Page 13
Claire Starry:
where did you copy this chart from? You are plagiarizing–which can result in a zero on your assignment.
Claire Starry:
this is about 15 years after the time of the case study. What is your recommendation for what Microsoft should have done in the late 1990s?
page 14
Claire Starry:
where does Microsoft’s competitive or comparative advantage lie? Is its stronger in applications oriented toward businesses rather than consumers, while Apple products tend to appeal to consumers? How can Microsoft use its competitive advantage when evaluating investment opportunities?
Claire Starry:
this is today, not the version available in the late 1990s.
Claire Starry:
this is a good point. However, when considering Microsoft’s situation in the late 1990s, was it as evident that the company had a stronger competitive position in the business sector versus the home and personal use sector?
Claire Starry:
evaluate the operating systems of 1995 to 2000.
http://www.webopedia.com/DidYouKnow/Hardware_Software/history_of_microsoft_windows_operating_system.html
What was Microsoft doing to improve its competitiveness in this and other business areas? What new business areas was it developing?
Page 16
is this today’s set of goals of the ones that existed in 1995-2000
Claire Starry:
Apple has a different target market and product mix. It has emphasized production of products, such as computers, smart phones, tablets, etc., while Microsoft was focused on software with less emphasis on hardware.
page 17
Sharon,
I made comments on your paper.
You address many of the issues that Microsoft current faces and its current goals and product development. Unfortunately, this is not what is asked for in the assignment. You are asked to put yourself in the place of an economic advisor in the 1995 to 2000 period and develop recommendations for Microsoft. What was happening to the tech industry at that time and how was it affecting Microsoft at that time?
Table of Contents
Introduction 3
Milestone One 4
Critical Element 1: Identification of the Issue 4
Critical Element 2: Discussion of the Economic Model(s) 6
Critical Element 3: Analysis of the Root Causes 8
Milestone Two 9
Criteria One: Research Relationship 9
Criteria Two: Mathematical Concepts 9
Milestone Three 13
Scenario One and Three: Recommendations 14
Criteria Two and Three: Market Structure 15
Criteria Four: Goal 16
Criteria Five: Implications 17
Conclusion 18
Introduction
Microsoft represents one of the largest suppliers of hardware and software produced from 1975-2012.Keeping market share with increased technology will continue to create an advantage. (Statcounter, 2017).The mission statement for Microsoft intends to enable people and businesses throughout the world to realize their full potential. The company considers its mission statement as a commitment to its customers. Microsoft represents one of the industry leaders in accessibility innovation and in building products that are safer and easier to use. The company also has a notablevision in which it relies to deliver its results to the customers. Accessible technology eliminates barriers for people and business. It seems convenient to make an economic analysis about the main brands produced by the Microsoft and how the company faces some challenges in the consumer electronics industry. Most importantly, it may seem appropriate for individuals to understand some of the recommendations that the company may implement in realizing its objectives as a multinational corporation.
The internet has made the information and intellectual property at the forefront of any company that is evolving within this industry. Information and communication will create a different economy which is based on the internet. Privatization of the internet is changing the way that commerce will be directed through regulation and globalization. It seems important for persons to understand some of the recommendations to realize the objectives as a multinational company.
Milestone One
Critical Element 1: Identification of the Issue
Apparently, Microsoft used its size and position to disadvantage of the competitor companies and maintains their lowposition in the market. Notably, during the time of its establishment in the consumer electronics industry, the internet browsers wars began. (Naughton, 2005). An internet browser represents software that makes it possible to access the web or internet. The way that they work is that they use a code; Java stands as an example of that code that tells the computer how to view the information, this interface then allows the web pages to be displayed on the computer. (Grauschopf, 2016) Netscape browser is one ofthe first browsers that allowed access to the web for most consumers. Indeed, when Netscape began, thereexisted no other competitor in the market at the time, and they had a 90% share of that market. It was new technology and it has changed the way in which the world now has access to the internet.
Interestingly, Microsoft responded with the creation of Internet Explorer. Netscape then offered the browser at no cost, which was essentially offering the code to the public without cost. This browser was able to run on many different platforms or operating systems. Internet explorer from Microsoft then bundled the browser with the software or operating system. (Palmer, 2009). Microsoft wanted to create and keep the market shares and revenue from being split among different competitors. Surprisingly, by offering the browser, which was embedded in the operating system allowed Microsoft to have an advantage, as they were the largest producer of computers. Technical advances will also create an advantage with the software they produce. Microsoft must keep ahead of these technology curves.
Microsoft has a problem associated with the barrier of entry into the electronics market. Such a situation provided Microsoft with an unfair advantage with the software and operating systems. The issue states that the windows system contains far too many different applications that would impose an unfair advantage to enter the market. Different companies wouldn’t have the opportunity to enter this software market with Microsoft. Othercompanieswould not have compatible programs that would be similar to those from Microsoft. In order to enter the browser market on a comparable level would be unattainable.
Undoubtedly, one of the strategies that can be used to create a monopoly is the creation of a systematic way to limit competition or create ways to limit competition which they then can create a marketing and pricing strategy (Naughton,2005). Again, by the development of Internet browsers, which act as the means to access the internet or the World Wide Web, Microsoft could lose its hold on the market.
In the mid twentieth century, there only existed a fewoperating systems in the world. As a matter of fact, there only existed a few operating systems that could serve the customers who usethe available web browsers. The early operating systems could notenable customers to access the internetwithout the utilization of file systems. In this case, the operating systems could only understand the basic computer operations. The users of such web browsers could only access the internet by bookmarking popular directory pages. With time, Microsoft came into the market and rejuvenated the trend in establishing more robust operating systems.
In 1983, Microsoft announced Windows as the new operating system that would shape the trends in the market. Many customers realized the unique features of the product hence shifting their attention from other competitors who produced operating systems for the various computer machines. Apple, represented the only competing productin the market that went against Microsoft’sWindows. Apparently, with the changes in time, the product line transformed from a very simple interface which used separate codes.Microsoft wanted to compete with Apple and secure its position as the leading producer of functional operating systems in the United States and global market.
Chart 1
Chart 1: The usage share of various browsers produced by the competing consumer electronics companies.
Critical Element 2: Discussion of the Economic Model(s)
Many customers have a high demand in utilizing an efficient operating system that will help them to accomplish their tasks. Such a situation represents one of the reasons why Microsoft finds it convenient to explore the market segment of computer operating systems(Statcounter, 2017). So, by gaining a competitive advantage they can continue to experience an economy based on the sheer scale of their businesses. Microsoft, by bundling with their personal computer market, will continue to have an advantage with software, and computer systems that they offer. Profitability will also continue to climb without the ability of others to compete in this market. The browser also had the capability to direct users to sites that are dominated by Microsoft.
Microsoft, as the leader in the production of computers,needs to address the concerns of the consumers demand for a browser that would allow access to the web. This was created from the demand of software that would allow internet access easily. By incorporating and supplying the browser into the operating system would create that market. It would also be efficient to reduce Netscape’s dominance in that market for Microsoft. Internet explorer had the market share of 95% by the year 2000. (Statcounter, 2017). Microsoft could continue to expand revenues due to its dominance in the consumer electronics industry.Presently, with the high-tech industry, there exist some changes to the market and Netscape has now been redesigned as Firefox. Advances in technology can lead to the loss of revenues if not kept current and ahead of the demand.
Microsoft’s sustainability in the realm of the computer world will be the ability to stay focused on the technology and continuing to be the leader of technology that is demanded by the consumer. They were behind the curve with cloud computing but are now beginning to catch up to present technology, they also choose not to compete with the smart phone or mobile device technology. They must stay competitive or they could be consumed and eliminated by others in the market (Naughton, 2005). Social media strategies must be tied to the revenue goals to ensure the ability to quickly change to the needs of the consumer. This will continue to work towards the company goals within all the different company aspects. The enormous size of Microsoft implementing strategies quickly can be extremely challenging. Monopolies can limit consumer good, by becoming inefficient with technology and goods. Smaller companies can be purchased by these multinational companies then integrated as they choose. Internet explorer has been experiencing a decline in the market.
Critical Element 3: Analysis of the Root Causes
Microsoft is the fourth largest multinational company and Google follows as the fifth. Microsoft began in 1975 and with historical data from the last forty plus years they have a unique position in which to operate. Microsoft has different areas that produce revenue such as the software division which includes the Microsoft Office, Windows operating systems, online services, and device division. Microsoft has held a monopoly position in relationship to the operating system market (Hruska, 2016). Previously Microsoft held at above 90% market share in operating systems, but that has dropped to 89.23%, this doesn’t seem like much but it could signal a trend in the market share for the industry.
Microsoft needs to identify ways in which to make sure that the loss of growth which could affect the revenue stream for the company is limited or restricted in ways to ensure that they can maintain and keep the market share in the operating systems within computer industry. (Statcounter, 2017) Existing sectors of the market are allowing for competition that could impact Microsoft. Losing any of the barriers to entry for Microsoft will have an effect on the overall revenue streams that this company enjoys. Microsoft’s enormous size can allocate resources to different areas which can give them a competitive advantage when new developments or trends are noticed.
This strategy that Microsoft has marketed allowed for free upgrades for the operating system, Windows 10. The strategy is that with the purchase of most new computers the software is preinstalled and that this would not jeopardize or have an impact on Microsoft’s revenue. This was also the strategy with the free browser software decades before. Windows 10 works with the application software that is a touched based system which mimics smartphone and tablets. This allows people to learn and adapt to newer technology. Windows 10 is a universal application platform, which includes the Bing search engine application designed in the operating system. Creating something before the consumer knows that it is beneficial could provide Microsoft with a leading edge.
Milestone Two
Criteria One: Research Relationship
The research will rely on the qualitative methodology as the main technique of obtaining and analyzing the economic situations facing Microsoft. The method seeks to establish a deeper understanding of the various economic situations facing Microsoft and how the company can implement various strategies to achieve its goals. The findings in the research will enable various individuals to understand the historical trends of brands produced by Microsoft in the consumer electronics market. Moreover, the research will collect some data from some of the firms competing with Microsoft. (Naughton, 2005). Some of thefirms inconsiderationwill include Apple Corporation and Samsung. However, a great portion of the research techniques will focus on the economic elements facing Microsoft.
Criteria Two: Mathematical Concepts
Indeed, Windows 10 looks and feels similar to that of the mobile app on many Smartphones. One of the key products is the Smartphone. Goggle has been working towards an interface that will work with developing an operating systems that interface with a personal computer and mobile applications. Google is the 5th largest company presently right behind Microsoft. Yet Microsoft does not compete in the smartphone operating market they are presently less than 1% of the market share. If Microsoft continues, working presently to develop this technology they could gain a significant market share as the technology develops to integrate operating systems that work seamlessly with personal computers and smartphones.
Cloud based technology allows the access of software that can be used on computers and smartphones. This technology has allowed consumers the ability to store data and access software through different apps that are available on multiple devices such as smartphones and personal computers and tablets. With cloud technology the cost of hardware and software which can be accessed through the cloud can be less costly. It is easy with different applications to share data through the browser applications. Microsoft is following Amazon in this market and places second.
Chart 2: The visual representation of the trends in desktop operating systems shows that Microsoft Windows is in the dominate position as shown below.
Table 1
Month Windows Mac Linux FreeBSD SunOS Other
March, 2016 90.45% 7.77% 1.78% 0.00% 0.00% 0.00%
April, 2016 88.77% 9.57% 1.65% 0.00% 0.00% 0.00%
May, 2016 89.69% 8.52% 1.79% 0.00% 0.00% 0.00%
June, 2016 89.79% 8.19% 2.02% 0.00% 0.00% 0.00%
July, 2016 89.79% 7.87% 2.33% 0.00% 0.00% 0.00%
August, 2016 90.52% 7.37% 2.11% 0.00% 0.00% 0.00%
September, 2016 90.85% 6.92% 2.23% 0.00% 0.00% 0.00%
October, 2016 91.39% 6.43% 2.18% 0.00% 0.00% 0.00%
November, 2016 90.95% 6.74% 2.31% 0.00% 0.00% 0.00%
December, 2016 91.72% 6.07% 2.21% 0.00% 0.00% 0.00%
January, 2017 91.41% 6.32% 2.27% 0.00% 0.00% 0.00%
Table 1: Percentage of windows usage since March 2016
Table 2
Desk top Operating System Total Market Share Mobile/Tablet Operating System Market Share
Windows 7 47.20% ISO 62.60%
Windows 10 25.30% Market Share of Windows Mobile Windows Mobile 29.64 %
Windows XP 9.17% Market Share of Symbian 7.50%
Table 2: The comparison of market share with the mobile operating systems.
Criteria Three: Market Structure
Microsoft does control the majority of the market structure within the operating system market. In some of the other business enterprises within the Microsoft business it has a lower market position. Technology is changing the industry. As the demand changes with the advent of newer technologies the market also changes. Regulations and the privatization of the internet also is changing the economic basis for Microsoft. Currently, the newer dynamics of cloud computing and the access to programs that are available in the new paradigm of cloud computing, this could lower the demand for some of the software systems. This software allows the ability for smartphones, tablets or other hand held devices to access the internet and perform basic functions.
Market share is determined by the market demand. As consumers learn to use different technologies the demand shifts. Within the computer industry, browsers are the interface which gives the ability to access the internet. Browsers create demand for consumers by directing the market for different products. This allows for companies to find market penetration. The access to free browsers or free upgrades for software allows for the development of market share. Browser usage helps to gain market share through the ability to penetrate different markets.
SinceMicrosoft enjoys a great influence as depicted by the market elements, the company can easily exploit its customers by adjusting prices of its products. However, the situation can only happen if Microsoftenjoyed the monopoly powers in the market. In this situation, the companyoperates in a monopolisticcompetition where other firms offer almost the same products. It may seem unadvisable for Microsoft to increase the price of its major productsbecause it may lose some of its customers to other competitors like Samsung andApple. However, the firm can engage in pricewar by slightlyreducing the price of its leading products to attract more customers and improve the sales in the long-term. Chart 3
Chart 3:Themarket shares for the internet browsers
Criteria Four: Influences
Microsoft began to work with market share with the internet browsers and still continues to try and influence the market penetration with the advent of more advanced internet browsers. They have been instrumental with the development of ways that technology has changed. They are still in the dominant position with operating systems but this has been changing. Developing Windows 10 and allowing for free upgrade to this system which contains imbedded browsers. Being in the dominant operating system will continue to favor Microsoft.
Bottom of Form
Milestone Three
Scenario One and Three: Recommendations
Indeed, to secure its lead in the electronics industry, Microsoft should emulate the example of Apple Incorporation in targeting the end-market consumers. In the opinion of the International Digital Consumers organization, Windows Phone in 2014 had the most notable improvement in terms of unit shipments to the international markets. Sincethe market average shipments reached 4.2% at the international trade shipments, the company should ensure that the unique product brand accounts for more than a third of the total phone shipments in the international markets. Therefore, the company should continue to ship more of the operating systems. Due to Windows’, dominance as compared to other computer operating systems.
The technical department of the corporation should strive to deliver on the new operating system Windows 10. The new brand should have the ability to work across the various platforms produced by Microsoft. In this situation, the technical team should let focus on application developers to create appsfor Windows 10 before rolling out a new operating system. As a matter of fact, the technical team should make it easy for users of the older visions of Windows to use the old apps and incorporate it into the ecosystems of Window 10. Many experts expect Microsoft to success in the mobile industry. However, the scenario depends on the company’s ability to deliver its promises.
Undoubtedly, it seems appropriate for Microsoft to target as many small business firms as possible. In the modern era, many business agencies rely on computerized systems. The application of computer systems varies from financial departments, accounting departments, human resource issues, andadministrative duties among others.OneDrive, Skype, and Office 365 represent some of the company’s brands that can help business firms carry out their operations. Many business operators would like to have a seamless experience with technological products like Smartphone, computers, and tablets. Therefore, by no means, the company should explore such opportunities and help business operators realize a high level of productivity for economic benefit.
Microsoftshould dedicate itsresearch and development team toconductboth basic and applied research activities, particularly in the field of software engineering and computer science as a whole.Researchers in the organization should put more focus on specialty, computing. As a matter of fact, the company should go an extra mile to engage with leading government, academic, and industry researchers to advance thetechnology and science within the internet. The move will enable the company to improve on the designs of its major products in the market. The company should continue to sponsor some of its projects with promising accessibility applications.Windows 10 represents one of the unique products that the company should focus on researching and developing.The company has the liberty to advance its research and development initiatives in improving its major productslines like the smartphones, operating systems, and personal computers among others.
Criteria Two and Three: Market Structure
Encouraging developers to improve the usability of Windows 10, Microsoft will explore the advantages that come with monopolistic competition. In this situation, the company will establish Windows 10 which only operates on other Microsoft products and not on the ones produced by the competitors. The pricing strategy of Microsoft will attract many business operators hence increasing the dominance of the company in the business of its customers. Such a move may have some side effects on other competitors who also have vast interests in marketing their products to the business firms. Since there exits many customers with various business needs, the electronic companies may find it easy to approach such business firms and help them use personal computers, Smartphone, and tablets to advance their business opportunities. Therefore, the move to target small business operators may attract other competitors from doing the same since there exist fewer barriers in such a market segment.
Microsoft represents the undisputed pioneer in the market when it comes to the production of workable operating systems that meet the current market needs. (Sheremata, 1997)As a matter of fact, the organization has alreadydelivered most of the operating systems that work in almost everypersonal computer.They likewise have delivered the main spreadsheet and word processors for both Windows and Macintosh. Microsoft claims 85% of the market, with their office programming Word, Excel, PowerPoint, Microsoft Exchange, and Microsoft Access. However, the company has not fully monopolized the production of such products. Other companies like Apple struggle to come up with their unique items that almost have the same functionality. However, the competition firms seem to struggle with their production tactics hence making Microsoft to enjoy a sense of monopolistic competition in the industry.
Criteria Four: Goal
Apparently, Microsoft has three major corporate goals: create more personal computers, establish a safe cloud environment, and reinvent productivity and business operations. The recommendations will help the organization to achieve at least two of the mentioned goals. For example, to acquire a wide customer base, the company has to improve on its sales and produce products that will attract as many customers as possible. Indeed, by targeting the end-market customers, the organization will have a new set of customers with different need and demands. The situation will help the organization to put less focus on the low-end market sector and fulfill the needs of the high-end usermarket sectors. In this case, the organization may have to establish more computergadgets that fulfill the needs and demands of such customers.
The recommendation for Microsoft to target more small business operators will enable Microsoft to achieve its objective to reinvent productivity and business operations. Indeed, many businesses may realize an improved production rate whenever they use Microsoft gadgets like tablets, Smartphone, and personal computers among others. As a matter of fact, the computer systems will help small business firms to enhance accuracy, and advance convenience.As a matter of fact, if the creation of products for the small businesses the company may attain an improved organizational profile to both the local and international community. Many small business firms may want to integrate the gadgets produced by Microsoft. So, Microsoft should come to the aid of small businessfirms to enhance more productivity in the business environment.
Criteria Five: Implications
Apparently, if the organization failsto implement the recommendations raised by the report, it may fail to meet its fundamental goals. For example, many companies will take advantage of any opportunities that may arise, especially in a monopolistic market structure. Seemingly, in a monopolistic market environment, any decision made by a single firm may affect the operations of other firms in the industry. The company should take an initiative to explore the high-end market segment and enhance stiff competition with the other companies like Apple incorporation and Samsung Computers. If the companyfails to implement such a strategy, it may not establish a customer base in the high-end market. Similarly, the company may not achieve its goal of producing more electronic products like personal computers, tables, and Smartphone.
IfMicrosoft fails to target the small businesses, the organization may find it hard to reinvent productivity and business opportunities. Many small businesses need advanced technological gadgets to sustain their business activities, other electronic companies may identify such market needs and strive to fulfill them. The business firms may seem attracted to other companies which respond to their needs and help them achieve high levels of productivity. The existence of many buyers makes the consumer electronics companies to use all the available opportunities in satisfying the needs of their customers. Therefore, Microsoft may lose its customer base to other competitors and run out of business in the long-run. As a matter of fact, Microsoft may most likely fail to achieve its goals and hence lose its organizational image in both the local and international market.
Conclusion
In conclusion, Microsoft will continue to develop browsers which will direct consumers to ensure its dominance in the computer industry. By directing the consumer to more of the products that they produce will enhance the revenue streams that they create throughout their different businesses categories. By instilling the coordination with users to make specific correlations with the different software will create that ease of use, which consumers demand. That will help to create dominance in many areas of the industry that they control. It doesn’t matter if Microsoft dominates the browser industry, the focus should be market penetration through the different operating systems. Making the platforms easy to understand with computer, tablet and smartphone users will be the key regardless of the different platforms. Microsoft doesn’t need to reinvent the wheel using the concepts from creating demand will continue to make them successful. Implementing cloud technology will also help to maintain dominance and continue to maintain market penetration.
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