1. In a monopolistic market one single company detains market control, being the single seller, hence having the benefit of setting the prices, while in a perfect competition there are more companies activating on that market, selling their products, without any control over the market (Tisdell & Hartley, 2008). Considering this aspect, Microsoft Vista operating system is the most efficient arrangement possible for Microsoft. The companies that are integrating Vista as the operating system in the computers that they produce (such as Hawlett Packard or Dell, as they appear in Allison and Nuttall’s (2007) article) are controlled by Microsoft, as there is no other company that can compete with it in providing Vista. In fact, Microsoft’s strategy is to pursue monopolistic entries and by developing Vista the company assured that the money were well spent, as all the Vista clients must pay to Microsoft and to no one else for benefiting of this operating system. If Microsoft did not hold a patent for Vista and any other company could have reproduce and sold copies of the program, probably the company’s vision on business would not consider investing all the time, effort and money into this complex service, considering that other could benefit of it.
2. Monopolistic markets satisfy the monopolistic company, which is the single player on the market that it runs, while the retail market for PCs allows for various players to place their offers, with various performances and qualitative elements included, for various prices, so that they address various types of customers. The fact that companies activating on PC market can set their own prices, maintaining a quality – price balance, this is what makes the retail market for PCs more competitive than a monopoly, driving customers to retail stores for comparing the products and services in terms of quality, innovation, performance and value for money and this determines the players from the retail stores to approach various strategies for selling their products, and to set competitive prices. This sometimes results in thin profit margins, as retailers in Allison and Nuttal (2007) complain to have registered, and the introduction of a monopolistic service as Vista in the computers reduces even more the profit margin, considering the fact that the price for Vista is fix, as settled by a single player that owns the patent for this operating system. How retail stores survive in the current context is totally depending on the strategies that they adopt, considering the fact that in general, the level of profit is similar among the retail stores, but the PC retail market is still the place to go to compare offers of various manufacturers and where there are customers, there are also offers, therefore, one can expect for other firms to enter the retail market.
3. In deciding to choose between AMD and Intel as their computer chips, customers select what would best fit their needs from two substitutes (two products with similar characteristics that serve the same purpose, satisfying the same need (Hirschey, 2009)). Therefore, the decision will be based on what they have to offer and the prices that the manufacturers set for what they offer and this determine Intel and AMD to follow each other’s offers and set competitive prices. As such, for instance, if the price of Intel chips grows there will be registered an increase in demand for its substitute, AMD and vice versa. On the other hand, the operating system market represents a complement for the processors’ companies, meaning that they should be used together, combined (Hirschey, 2009). The demand for computer operating system increases or decreases when their complement product (computer chips in this case) increases or decreases. The competition is bigger for computer chips than for operating system, because while computer chips companies activate on a (although not perfect) competitive market, the operating system (Vista operating system as mentioned in the article) activate on a monopolistic market.
As the article of Allison and Nuttal (2007) indicate, AMD and Intel are facing a commercial rivalry because they provide the same service, but they are both expecting to embrace Vista operating system, which will complement their business and which they believe it will increase their sells, but the competition among them will still be high.
4. Differentiating the product is actually a strategy for achieving more market – share, considering the fact that it leads to the market segmentation, which makes a product available to different categories of buyers with different needs (Wong, 2011). Therefore, it makes sense for Microsoft to differentiate its Vista computer operating system into basic and ultimate, as there can be satisfied the demand of more users, which can be attracted towards this service, on various market segments. Most likely, the beneficiaries of the basic Vista edition would be the home users, who require good quality but not very high complexity for their home computers, used for activities such as watching movies, reading press or playing games, while the ultimate edition would fit the interests of organizations that require more sophisticated characteristics from their operating system for their business purposes. As the article indicated at that time, analysts considered that organizations would not jump directly into changing their operating system with Vista and the proof to this provision is the fact that Windows Vista detains 4.11% of the market share of desktop operating system, while Windows 7 still dominates this market, with a market share of 45,63% (“Desktop Operating System Market Share”, 2013).
Figure 1 - “Desktop Operating System Market Share”, 2013, NetMarketShare
References
Tisdell, A. & Hartley, K. (2008) Microeconomic policy: a new perspective. Cheltenham, Edward Elgar Publishing Limited.
Hirschey, M. (2009) Fundamentals of managerial economics. Mason: South Western Cengage Learning.
Wong, K., (2011) Crm in action: Maximizing value through market segmentation, product & customer retention. Bloomington, iUniverse.
Desktop operating system market share. (2013) NetMarketShare. Retrieved from http://www.netmarketshare.com/.
