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Strategies Used by Microsoft to Leverage its Monopoly Position in Operating Systems to Internet Browser Markets Case Summary Microsoft is the world's largest supplier of computer software. It has dominant market share of PC operating systems with its Windows system. High barriers to entry prevent significant competition in the operating systems market. The primary barrier is that a large number of software programs must be able to interface with any operating system to make it attractive to end users. It would be extremely difficult for any competitor to create a new operating system and create or encourage the creation of completely new software to compete with Windows. However, the development of Internet Browser programs, specifically Netscape, threatened this barrier, by allowing software developers to create software that could run using the browser software as a platform for the program. Therefore, software could be created that could still be used with Microsoft Windows, but would not have to be. Microsoft recognized this development as a threat to its operating system monopoly. Initially Microsoft attempted to divide the market with Netscape, but Netscape refused. To defend its operating system, it set about to overtake Netscape with its own intemet browser, Internet Explorer. To defeat Netscape, Microsoft leveraged its operating system monopoly to gain market share in the internet browser market. Microsoft forced computer manufacturers to include Internet Explorer and strongly discouraged them from including competing browsers with the bundled software. It also leveraged its operating system power to encourage Online Service Providers (AOL, etc.), Intemet Content Providers, and Intemet Service Providers to use Internet Explorer and discourage them from making competing browsers available. The actions by Microsoft were effective in taking market share away from Netscape and protecting the Windows Operating System. Discussion Questions 1. What is the primary barrier to entry in the operating systems market? How does Netscape's product threaten to remove this banier? 2. What is Microsoft's pricing and distribution strategy for Internet Explorer? How does this compare to Netscape? Why would Microsoft pursue this pricing strategy? 3. Is the internet browser software market a separate relevant product market from the operating system market