Sunday, February 17, 2008

Microsoft Operates in a Hypercompetitive Industry

Microsoft Operates in a Hypercompetitive firm operating in a hypercompetitive industry. It has used its dominance in operating systems ( DOS and Windows) to move into a very strong position in application programs like word processing and spreadsheets (Word and Excel). Even though Microsoft held 90% of the market for personal operating system in 1992, it still invested millions in developing the next generation—Windows 95 and Windows NT. Instead of trying to protect its advantage in the profitable DOS operating system, Microsoft actively sought to replace DOS with various versions of Windows. Before hypercompetitive, most experts argued against cannibalizations of a company's own product line because it destroys a very profitable product instead of harvesting it like a “ cash cow. According to this line of thought, a company would be better off defending its older products. New products introduced only if if could be proven that they would not take sales away from current products. Microsoft was one of the first companies to disprove this argument against cannibalization.

Bill Gates Cofounder. Chairman and CEO, realized that if his company didn't replace its own DOS product line with a better product, someone else would ( such as IBM with OS/2 Warp). He knew that success in the software industry depends not so much on company size but on moving aggressively to the nest competitive advantage before a competitor does. “ This is a hypercompetitive market” explained Gates. “ Scale is not all positive in this business. Cleverness is the position in this business.” By 2000, Microsoft still controlled over 90% of operating system software and had achieved a dominant position in application software as well.

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