Micronopoly Essay

1162 words - 5 pages

Micronopoly?Although by strict definition software giant Microsoft Corporation cannot be described as a monopoly, there has been much talk and controversy over this particular subject matter. There have been various complaints that Microsoft has used unfair business tactics to build an illegal monopoly and consequently has become the fifth largest company in the United States of America with a net revenue figure for the last financial year of around 26 billion dollars. Microsoft Corporation has been subject to extensive litigation for some years now, and to this very date is still battling in court to try and maintain their current procedures and operation of business which have been so profitable for them. The question; is the criticism of Microsoft well-founded?First and foremost, monopoly must be defined. A firm can be classified as a monopoly if it is the sole seller of a particular product which does not have close substitutes. A monopolistic situation arises due to an effect known as 'barriers to entry'. These 'barriers' ensure that other firms cannot enter the market in question as they are simply incapable of competing with the already established firm. The three known barriers to entry are as follows:A key resource is owned by a single firmThe government gives certain exclusive rights to a single firmCosts of production make a single producer more efficient than several producersIn the case of Microsoft, a key resource isn't necessarily controlled by the firm, they do not have exclusive rights to produce software and, although they are more efficient in production than much of their meager opposition, they are still not the sole producer of software products. However, Microsoft does have control over intellectual property, they possess the exclusive rights to produce and sell the Microsoft Windows operating system and in terms of operating systems and related products; Microsoft has a stranglehold on the market and is lacking any serious competition. So after analysis of the specific situation, Microsoft can fundamentally be seen as having a monopoly (on PC operating systems).So, having determined that a monopoly does indeed exist, it must then be determined what if any action needs to be taken. Public Policy regarding monopolies can vary from trying to alter the market situation to doing nothing at all. A government must determine whether or not the monopoly is illegal or 'harmful'. For the monopoly to be classified 'harmful' it must have an alternative that is able to provide greater benefits to the consumers. Many policy makers will almost always argue (to varying degrees) that a competitive market situation is much healthier and more beneficial for the average consumer and will therefore seek to alter the current situation. The DOJ (Department of Justice) in America has been trying to regulate Microsoft Corporation for many years now with (to date) little effect. Their goal is to try and remedy what they believe to be the...

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