Microsoft Operating System for Personal Computers a Monopoly in the Markets Essay

Definitions and explanation of terms

Technology has evolved since the emergency of microprocessors. The sizes of computers have reduced rapidly over time due to innovations in technology. With the reduction of the sizes of the computers, software development has followed the same trend.

An operating system (OS) “is an integrated set of programs that is used to manage the various resources and overall operations of a computer system which is designed to support the activity of a computer” (Das 2010, p. 88). A team of programmers work together with microprocessor engineers to design a set of programs that work together to avail various resources of a computer.

In fact, the most important part of the computer is the operating system. While a typical boot process doesn’t call the operating system right away, it hands over to the operating system before any real work can be done (Watson 2008, p. 60). Despite the fact that a computer system constitutes of the hardware, live ware and software, the operating system is the most important software that the computer system must contain.

The operating systems have been developed from time to time. The major differences in the operating systems revolve around the interfaces each operating system use. There are three major types of interfaces namely: command driven, menu driven and graphical user interface based operating systems. In the market today, there are a number of operating system software developers.

The most common personal computer operating system software developers or operating systems are: Windows by Microsoft Corporation, Mac by Apple computers, Solaris by Oracle, Linux and others. Old operating systems like MS DOS were command driven types of operating systems which are not reliable because of the difficulty encountered in remembering the commands.

The menu driven operating systems were an improvement of the command driven operating systems. This led to the invention of the graphics interface based operating system. Operating systems have two modes namely, user mode and the Kernel mode. The user mode is what the human being interacts with while the Kernel mode is what interacts with the computer hardware.

Microsoft operating system has penetrated most of the markets and is considered to be the most popular of the operating systems in use today. The Microsoft Operating system (OS) has also been changing the look and feel of the graphical interface and addition of some functions. Microsoft Windows 95 gave way to Windows 97 and Windows 98, Windows Me, Windows 2003/ XP and Windows Vista. The latest versions of Microsoft windows are the windows 7 and anticipated windows 8. The following statistics illustrate the trend in market penetration of the operating systems.

Charts showing the market share of the operating systems

Source: Net Market Share

Source: W3Counter

Source: Stat-Owl

Rationale behind the monopoly

From the information above, Microsoft Windows has taken the largest market share in operating systems. Jain & Khanna (2010, p. 77) argue that, “… pure monopoly is a market structure in which a single firm is the sole producer of a product for which there are no close substitutes”. With this definition and the market share of the Microsoft Windows operating system (about 85% average), it is enough ground to state that ‘it has a monopolistic market share.’

Now the question in mind is how the corporation has managed to retain its market share for long. Most businesses engage in dubious means of maintaining their monopoly in the market, is it so with Microsoft? It is argued that, “Microsoft has engaged in a carefully designed and extremely successful campaign to protect and extend its monopolies.

Microsoft has repeatedly made market allocation proposals to its competitors and has used a broad range of other anticompetitive and unlawful tactics to eliminate potential rivals, including tying, predatory product design, and intentional deception” (Schestowitz 2009, p. 93). Most of these activities may sound lawful but they are not. Reports indicate that Microsoft makes about 77% profit every year from its two main monopolistic products namely: Windows Operating system and Microsoft Office suite.

Reasons why it is believed that Microsoft is using uncompetitive techniques

The reasons why Microsoft is using anticompetitive practices in order to have dominance in the market are quite elaborate. Microsoft tried their best to eliminate a number of applications that are used to accomplish day to day activities. The applications are: web browsers, office application packages, DOS and media players.

Microsoft also used other methods to discourage sale and development of other technologies. These allegations are explored below so as to support the fact that Microsoft uses anticompetitive practices to maintain a monopoly in the market share.

First, Microsoft worked hard to eliminate the Netscape browser with its Windows explorer. In 1996 Netscape’s group Chief Executive Officer said, “… Microsoft’s strategy for Windows and Internet Explorer involved nothing short of eliminating Netscape’s Navigator” (Pride & Ferrel 2006, 112).

Together with other CEOs from other firms they complained that Microsoft was anticompetitive and violated federal antitrust laws because it sold Windows with a reinstallation of Windows Explorer. The fact that everybody who bought and installed Microsoft Windows had no choice but to install Windows Explorer as well was a cause of alarm. The Windows Explorer is uninstall-able hence, the conclusion that Microsoft wanted to limit its users to its products only.

McKenzie & Lee (2006, p.18) indicates that, “In 1998, the Justice department took Microsoft to court for violation of antitrust laws. …the justice department maintained that Microsoft was a monopolist as evidenced by its dominance in the market share in the operating system and Microsoft was using ‘predatory’ pricing of its internet explorer”.

With the entire public outcry and the fact that Microsoft Windows Explorer was being sold as inbuilt software, was truly reason enough to conclude that Microsoft was using anticompetitive practices in order to sustain a large market share.

Secondly, Microsoft had to make sure that Word Perfect is eliminated by the introduction of Microsoft Office suite. It indicated that, “Microsoft launched an anticompetitive campaign to extinguish WordPerfect, an office productivity application owned by Novell and competing with Microsoft’s Office suite” (Fergusion, 2002).

In fact Bill Gates (Microsoft Founder and group CEO) stated that, “I have decided that we should not publish these [Windows 95 user interface] extensions. We should wait until we have a way to do a high level of integration that will be harder for likes of Notes, WordPerfect to achieve, and which will give Office a real advantage…. We can’t compete with Lotus and WordPerfect/Novell without this”, (Schezowitz, 2011).

With this campaign Word perfect gained popularity but in retaliatory, Microsoft came up with measures to suppress it. For instance, Microsoft required that Novel must improve their technology in order to avoid incompatibility. Microsoft also narrowed the marketing opportunities of Novel by use of OEM licensing. As time went by, Microsoft office gained ground and Word perfect virtually disappeared from the market.

Thirdly, Microsoft introduced a Per Processor license fees. Original Equipment manufacturers (OEMs) are manufacturers of computers with preinstalled operating systems. Since these companies bought the operating systems from Microsoft and others, Microsoft required that each computer shipped has a license for the operating systems.

This was uncompetitive to other operating systems. In fact, it later emerged that, “In 1994, the U.S. Department of Justice (“DOJ”) filed an antitrust suit against Microsoft challenging this conduct, resulting in a consent decree under which Microsoft agreed to stop using per processor license fees” (). Clearly at this point Microsoft admitted that it was using an uncompetitive technique and withdrew from some of its activities.

Microsoft went on to eliminate other commonly used software. Microsoft’s introduction of the Windows media player was a way of trying to avoid exposing their API. Media players are middleware products that expose APIs to software developers which were the worry of Microsoft.

The fact that, “middle ware could reduce the application barrier to entry by serving as an applications, taking over some of the platform functions provided by Microsoft and thereby weakening the applications’ barrier of entry”, (Shelaniski 2003 p. 223). This was a major concern for Microsoft.

This was the big reason why they had to introduce as many middleware in their operating systems so as to avoid the risk of exposing their code. The best way it combated this was by tying its media player with the operating system which gave users no reason to look for other media players. This was also an anticompetitive idea that Microsoft used to protect its operating system.

The server systems were no spared as well. According to Mowery (1996, p. 9), “a server is a software program, or the computer on which that program runs, that provides a specific kind of service to client software running on the same computer or other computers on a network.” With this definition, it is clear to note that an operating system on a personal computer on a network needs to send a request to the server computer.

Again, the request sent must be understood by the server operating system. In this regard, Microsoft decided to ‘punish’ other server software developers by making their operating system incompatible. This clearly is not a good practice to software development because it slowed down the development of other server software.

This seems to have worked well for Microsoft since it is the most popular server operating system to date. However, the desire to make it only compatible to Microsoft products was reduced drastically. This has enabled development and slow growth of other server software.

An operating system works with an underlying microprocessor; that is why there is a strong relationship between Microsoft and Intel and AMD. Since Intel was the most acceptable microprocessor during the inception of Microsoft systems, there was enough reason for Intel to cooperate with Microsoft. With this in mind and the aggressiveness of Microsoft to protect its market, it organized collective boycott against Intel.

One of Intel’s main goals was to develop a Native Signal Processing System (NSP) that would enable the customers enjoy, “… robust multimedia systems at lower prices because NSP in many cases would eliminate redundant expensive multimedia add-in cards”, (InfoWorld Jun 5, 1995). This did not go down well with Microsoft and they decided to define their own development environment that would thwart the plans of Intel, which is sabotage.

In conclusion, Microsoft has managed to keep its market share at an extremely high value of 85% average. Its browser Internet Explorer and Microsoft Office suite are leading in market share as well. The means it uses are dubious but somehow Microsoft is cleverer to maintain that they are within the specifications of law.

However, it has also failed in applications it has developed. The Windows version Vista is considered to have failed because it did not reach the market as anticipated. This was witnessed by users sticking to using Windows XP rather than the new and fancier version Vista. Microsoft also developed and Antivirus that could only be used on computers running its operating systems but they did not get the popularity they expected.

The behavior of Microsoft for the last two decades has illustrated its willingness to participate in unlawful conducts that extend its dominance in the market. As a result of this practice, consumers in the market are bound to use the same products with little room for innovation if the same was to be in a competitive market.

If authorities were to closely monitor the trends of Microsoft’s monopoly from the beginning, they would stop them from manipulating the market. The latest measures taken by European Commission to curb Microsoft misbehavior is seen by many people as the start of stopping Microsoft participating in anticompetitive behaviors for the long term.

Reference List

Das, S., 2010. A Complete Guide to Computer Fundamentals. New Delhi: University Science Press.

Jain, T. & Khanna, O., 2010. Managerial Economics. New Delhi: Vimla Kumari Jain.

McKenzie, R. & Lee, D., 2006. Microeconomics for MBAs: The economic way of thinking for Managers. Cambridge: Cambridge University press.

Mowery, D., 1996. The International Computer Software Industry: A Comparative Study of Industry Evolution and Structure. New York: Oxford University Press.

Pride, W. & Ferrell, C., 2006. Marketing: Concepts and Strategies. Boston, MA: Congage Learning, Inc

Schestowitz, 2009. “20 Years of Microsoft Anticompetitive Behavior”.

Watson, J., 2008. A History of Computer Operating Systems. Ann Arbor, MI: Nimble Books LLC.