jeudi 20 novembre 2008

Microsoft: Strengths and weaknesses of individual distribution

III – Strengths and weaknesses of individual distribution

As I said previously selling individually this product has a very low demand because the operating system is always sold with the computer and will maybe cover the whole life of the hardware. The problem is that Microsoft has to provide this solution anyway to its customers. A small market but divided a bit everywhere means a lot of money to allocate to a marketing campaign and of course a strong repercussion on the final price of the product.
If price is high then(and moreover in the software industry) people will look for substitute products which means in some cases: Piracy.
The best example we can find on the Internet is the one of the introduction of Windows Vista in China.
Two weeks after his introduction in China only 244 copies have been sold whereas Microsoft spent millions and millions of dollars in advertisement.
The reasons of this small amount of those copies sold are in fact two:
- The first one is the price of the software. Microsoft sold it initially to 201$ but then discounted until 66$ and this for two reasons: Chinese people cannot afford a such price and in Chinese culture Chinese people are ready to pay a high price for the hardware but not for the software(notion of service is different);
- The second one is the Chinese copy culture, a recurrent economic problem.
In most of the streets you can find a copy of the operating system.

As Microsoft's chairman says “let them pirate software developed by Microsoft -that increases the overall number of Microsoft software users and some of them may eventually convert into paying customers.”
It is even profitable to Microsoft in one way because “Indeed, in China's back alleys, Linux often costs more than Windows because it requires more disks.” so Piracy is in one hand giving less profit to Microsoft Windows but on the other hand is making rid off one of his main competitor.

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