Microsoft Case Study Vista

1049 words - 5 pages

Over six billion dollars spent producing one of the worlds’ largest technological projects in history; Windows Vista. In 2007, Microsoft finally launched their new operating system years behind their proposed schedule and billions over budget. This essay will cover aspects over Microsofts arrangements with the development and sale of Windows vista in a monopolist market and the effects it would have if it was in a competitive market, discuss why PC’s are in a more competitive market compared to operating systems and diminishing profit of the ogolisitic market computer chip giants; AMD and Intel created.

Being a monopoly, Microsoft is turning over a huge profit from retailers buying Windows Vista for a wholesale cost and marking the price up to make a profit, even though the time producing the newest software wasn’t managed efficiently, as it was years overdue. Microsoft created a monopolist market which is when “a firm is a sole seller of a product without close subsitutes” (Principles of Economics, Joshua Gans, Steven King, Robin Stonecash, N. Gregory Mankiw, 2012) and created a highly efficient arrangement for the sale of their software, as shown by the 20 million Vista licences sold within the first month of sale ( Windows Vista Debuts with Strong Global Sales, Microsoft, 2007). Although, by selling their product to a large number of firms, from small businesses, to major franchises. This means that there is a perfectly competitive market trying to sell the most copies. By allowing more firms to resell Vista, Microsoft will set itself up for higher short term profits, but less long term profits, due to firms competing with each other, lowering the price they are selling the software for. As more firms are selling this product, customers have more buying power on where to buy from, eventually slowing the rate at which firms buy Vista from Microsoft itself, as the individual firms are selling less, for a lower price, thus diminishing profits. If the market Microsoft created turned into a competitive market via the addition of a firm, Microsoft would not have spent as much money and time developing the software in order to keep retail price low to stay competitive in the market, especially to firms that develop PC’s to sell to retailers.

The PC market is extremely competitive. A competitive market, describes markets “in which there are enough buyers and sellers so that each has no impact on market prices” (Principles of Economics, Joshua Gans, Steven King, Robin Stonecash, N. Gregory Mankiw, 2012). Firms in the PC industry compete against each other to develop computers for multiple uses in varying price ranges, according to the specifications of the products, thus creating a market in which there are no over-ruling market powers. This market largely depends on Microsoft’s operating systems due to being a monopoly in the operating system market. With the introduction of Windows Vista on these new PC’s being developed, “Analysts are...

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