jeudi 20 novembre 2008

Microsoft: Strengths and weaknesses of grouped distribution

III – Strengths and weaknesses of grouped distribution

This distribution channel burst for Microsoft last year because of the introduction of low cost new products such as netbooks and mobile devices(such as some cell phones which require an OS in order to work) which brought new competitors. The problem of these new products for Microsoft is that it makes cross the telecommunication software providers with the software computer providers. The most recent serious competitor Microsoft has to face with on the mobile market is Google which comes into the market with his Operating System called Android. Google speaks about getting a market share of 4% on cell phones with this technology in the US market before the end of year 2008.
Another weakness for Microsoft is the introduction of these low cost products(netbooks) which based their marketing policy on low cost(less than 300€). If Microsoft wants to enter in this market it has to cut his price of Operating System if not the price of the netbook comes to be the same as the first prices laptop.
Microsoft is looking too much about profit. Recently it lost a very huge market share in Africa regarding the one laptop per child project which consists in selling computers to African children at the cost of 100$. Microsoft did not see the interest to go for this market so his competitor Linux took it. So sometimes you have to go for market shares rather than profit.
The major weakness of Microsoft Windows is that the way it is distributing himself is totally illegal. In English it is called “Bundled Sale” and consist in selling in an all pack including only one price, several products without giving the possibility to sell them separately. The legislation forbid the “bundled sale” is most of the countries with however some different interpretations of the word product and a laxity regarding the application of the law. In France several consumers went to court in order to complain and won the process. Each computer or laptop sold in the world with Microsoft windows includes in fact two products. The normal price of any laptop in the market is in fact from 150€ to 210€ below. So Microsoft is then theoretically under the risk of an incredible process for illegal distributions and partnerships.

Microsoft is currently almost unmovable regarding the distribution of his operating system through computers.
The last example in mind is the market of netbooks.
Those computers came out in 2007 and was a total new market based on low cost. Microsoft thought that this market was not profitable and did not get into it and let his main competitor Linux entered in the market.
However it seems that people were sending back most of the netbook after seeing that Linux did not fit with their requirements
finally Windows is taking back more and more the market shares that it was losing at the beginning on this market.
So I would say that one of their main strength is that they are almost unmovable because people are so dependent some customers even do not know that a computer cannot be sold without Windows.
A computer is very often sold with Microsoft Windows even in countries such as China. As an example you can give a check at Fujitsu website in China, even if everything is written in Chinese the name of Windows Vista appear in the characteristics of the computer. This information has been confirmed by local Chinese people that I know who told me that they never saw a computer sold without an Operating System. They even thought that it was a gift...and actually they are not the only ones. So Microsoft is losing profit regarding the individual pieces of Windows sold in China but actually has “real market shares” because on his main distribution channel everyone is buying it at the price fixed by Microsoft.
Even if a hypothetical trial can make Microsoft goes bankruptcy can we imagine the consequences that it will have on all Microsoft users(90% of the world computers and all companies are based on computers data process), a such scenario is economically unthinkable.

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