Strategic Behaviour in Network Industries

Strategic Behaviour in Network Industries

A Multidisciplinary Approach

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

This in-depth book explains how institutional changes such as the privatization and liberalization of network industries, for example transport, energy or telecommunications, can frequently be disappointing. The expected benefits such as lower prices, innovation and better services fail to materialize, often because the number of competitors is low. The authors demonstrate how strategic actor behaviour of one or more of the firms involved can help explain these disappointing results.

Chapter 9: Microsoft

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

Subjects: business and management, organisational behaviour, economics and finance, game theory, institutional economics, public sector economics


BACKGROUND: MICROSOFT IN EUROPE Microsoft was founded by Bill Gates in Redmond, Washington, in 1975. Over time, Microsoft has managed to build up a very dominant position in the computer software market, worldwide as well as in the European Union. In August 1995, Microsoft introduced the Windows operating system (Microsoft, 1 August 2007). Currently, over 90 per cent of all personal computers run on Windows (CFI,1 2007, para 31). As we will see in this chapter, Windows’ dominant market position plays a key role in the legal struggle fought in recent years between Microsoft and the European Commission, which is the subject of this chapter. Before entering into the course of this legal struggle, we will discuss a number of terms from the computer world that are needed to fathom the ins and outs of this sector. As said, Microsoft is a producer of computer software. Software should be distinguished from the hardware of a computer. The hardware is the physical part of the computer, such as the processor, the printer and the screen. Companies that produce hardware are, for example, Compaq and IBM. Within the software, a distinction should be made between the operating system and the applications. Operating systems, such as Windows and Linux, are responsible for dividing the tasks that the computer has to perform and for allocating memory. In fact, the operating system coordinates activities between the hardware and the applications. Applications include, for example, graphics programs, word processing programs or Internet browsers (Tanenbaum, 2001,...

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