Question

Question-2:

Playing Monopoly: Microsoft

The success of Bill Gates together with his company Microsoft and the most favors Windows computer operating systems that are still dominating the PC operating system market has always been an excellent example stimulating the youths in the It industry to follow. But the business success and seemingly amazing technology innovation should not be very strong reasons why the ethical issues related to Microsoft and its co-founder Bill Gates could be rationalized and tolerated. Since the company’s first operating system, MS-DOS (the prototype of which was brought from Gate’s friend without notifying his friend about the later usage of the system), the company been involved in a number of issues from which some of the business practices and some decisions are criticized in term of breaking the moral rules and create unfairness in the industry. For example, after the release of the first Windows

system, many Macintosh (an Apple personal computer) users complained Microsoft had “stolen” the look and feel of the and Apple by developing a similar operating system following Apple in term of similar pull-down menus and icons and usage of mouse. And similar victims also include the famous browser developer, Netscape and the Sun Microsystems, the Java language developer.

In the year 1981, Bill Gates purchased an operating system written by his friend for $60,000. But he sold it to IBM without informing his friend. After that IBM licensed it as MS-DOS. Though the deal became profitable but Gates failed if ethical values of him are evaluated. Microsoft at that time was owned by him and his friend, so any decision taken by either of them before implementation should be well acknowledged by both of them. Gates didn’t think of it and without informing his friend about the meeting offered that operating system to IBM.

In the year 1984, Apple launched a new operating system for its computers which have advanced graphics aiding users to select icons and pull down menus on the screen with mouse. This operating system outperformed MS-DOS which uses characters to issue commands to the computers to perform the task but now commands can be issued by selecting icons. Then in 1987, Microsoft released a new operating system with IBM machine which copied the advanced graphics idea of Apple and named it Windows. On ethical terms, this was totally wrong on part of Microsoft copying the concept of Operating System of Apple which was all copyrighted.

In 1990, Netscape emerged as a new competitor for Microsoft in network market and launched in Dec, 1994, a new advanced web browser called Navigator. People started feeling lack of importance of Operating System and in their eyes browser became dominant. Netscape sales increased creating a threat to Microsoft. With response to the same Microsoft introduced its web browser called Internet Explorer by copying all the features of Netscape’s web browser. Internet Explore was also first licensed by Spyglass Inc. to Microsoft. The chairman gave taunting comments

on Microsoft that this company can build itself the software you have developed and have licensed to them and then issue it in its OS and is put to use. Ethically again, copying features of Netscape was not a step to be taken.

In the year 1995, Microsoft saw the threat arising from navigator; a web browser by Netscape and Java by Sun Microsystems and therefore arranged a meeting with Netscape executives and proposed them to serve its browser to the users not using windows only i.e. 10 percent of the computers that run on Apple’s OS/2, remaining using Windows will be served by Microsoft’s Internet Explorer and later after refusal by Netscape on this deal, Microsoft refused to even share the codes of Windows 95. By 1995, Microsoft had built Internet Explorer so as to compete with Navigator and the monopoly they thought was incorporating Internet Explorer in Windows. Windows incorporated a copy of Internet Explorer with its operating system which was the default browser for the computer and users were unable to remove its icon. Thus ethically Microsoft didn’t think about the consumers. Consumers now were bounded to use Internet Explorer only as Windows didn’t allow any other browser to get installed. Moreover Windows also incorporated a copy of digital media player with its operating system. Windows 98 also contained some codes for Internet Explorer but was made slow in functioning by the company so that user couldn’t even think of removing embedded software within Windows as it now became risky and slow.

In early 1998, Microsoft polluted the Java’s market by introducing Microsoft’s Java which was basically the property of SUN. It has removed Java’s platform independent feature and made it by default available with its operating system. Microsoft entered into an agreement with Sun Microsystems for giving it right to license and to distribute Java with Windows. Later Microsoft changed Java and embedded it with Windows and was called Microsoft’s java.

It is very much clear about incidences that Microsoft has been unethical in its approaches. Rather that applying their own thoughts, most of the products they

have released by copying ideas unethically from other competitor’s products. Rather than having the fair competition in the market Gates always tried to monopolize the market. Though all the monopoly has brought him profit but ethically Microsoft didn’t’

Answer Both Questions:

A. What characteristics of the market of systems do you think created monopoly market that Microsoft’s operating system enjoyed? (500 words)

B. With reference to the case suggest how the Microsoft might differ if this had been a (monopolistic) competitive environment. (500 words)

Answer 1

Answer:
A.
Some of the characteristics of the market that created monopoly market that Microsoft’s operating system enjoyed are as follows:

Incorporation of various Microsoft applications like Windows Digital Media Player and Internet Explorer in 1995 with its operating system gave an advantage to the company as this monopoly worked out for them. Users using Windows didn’t want themselves to get into trouble of purchasing a different browser and different Media Payer. Users were also not ready to pay extra money for buying other companies’ applications, as all those applications were readily available with Microsoft’s operating system.
Every company was releasing their applications and operating systems in the market and every time Microsoft was able to know their programs. Using those programs Microsoft created monopoly in the market by releasing advanced version of competitors’ products. As when Navigator came in 1994, Microsoft launched Internet Explorer which was borrowed from Spyglass Inc. and made it similar to Navigator. It incorporated Internet Explorer with Windows. Media player was also incorporated in Windows. Sun Microsystems’s Java was also licensed to Microsoft first and then Microsoft built its own Microsoft java permitting Windows Users to be compatible with it.
In the software industry users did not want to shift to new products or applications until proper training and workshops are organized. Microsoft’s used good strategies for training users. With the Installation disk, a proper tour of Windows is provided to facilitate user.

Restricted entry in the market leads to monopoly conditions for the Microsoft. Also non Restricted e of the markets had challenged the products of Microsoft which led to monopoly for the company.

B.
In monopolistic competitive environment, there is no restriction on entry and exit of the firm which leads to fair market conditions in the market. Also, product differentiation exist and in this case one firm cannot copy the product of others in the market. This leads to lack of unethical practices by the firms.
The Microsoft monopoly is self-evident, if the Justice Department’s lawyers are to be believed. In the complaint filed against Microsoft in the U.S. District Court of the District of Columbia on May 18, 1998, the Justice Department declares unequivocally that “Microsoft possesses (and for several years has possessed) monopoly power in the market for personal computer operating systems.The Justice Department’s lawsuit merely reaffirms the position U.S. Attorney General Janet Reno had previously staked out: “Microsoft is unlawfully taking advantage of its Windows monopoly to protect and extend that monopoly.” Hence, it seems beyond dispute that the Justice Department’s antitrust assault on Microsoft will, if successful, produce benefits for the American public. “We took action today [in the courts],” Reno announced earlier this year, “to ensure that consumers will have the ability to choose among competing software products”