Question

Think about the industry in which you work or an industry with which you are familiar. Describe the barriers to entry in the industry. Give examples of steps/policies /strategies the industry has used to increase market power.

Answer 1

Microsoft is a kind of monopoly in its industry and uses some barriers to entry into the market which prevents competition and help it increase market power. So, the first barrier to the entry is,

- Always present competition in the market, since Microsoft was the first company to launch an operating system in the market, so, it has been always present in the market as a big competition for the new entrants. This will deter their entry into the market because of the time Microsoft is present in the market it has developed apps and programs which are used by people but which operate only on its operating system.
- Economies of scale, due to long presence in the industry, Microsoft is experiencing economies of scale as whenever it has to launch some new software, it has to improve the older version rather than beginning from the scratch which the new entrant might have to do increasing its cost. Thus, this deters entry also.

The policy used by Microsoft to increase market power is the exclusivity of its app i.e. if a person has to use a particular app of Microsoft's then he/she has to use a Microsoft OS only and because each person will want easy flow of data from one person to another, so, they will prefer os that is most used, giving some market power to Microsoft here also.

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