COMPETITIVE ADVANTAGE 3
product cycle negotiation powers. However, this threat is ameliorated by the high product
switching costs and Microsoft’s high reputation in the provision of mission-critical services.
The firm also faces a threat from powerful suppliers who provide it with electronic
components during the assembly of mobile devices, gaming consoles, among other devices. This
threat is also conflated with the instability of commodity prices. However, due to the
corporation’s sheer economies of scale, brand equity, and value capture, Microsoft arguably
enjoys strong bargaining powers in negotiating supplying contracts. Also notable is the high
threat of substitutes from other market players. The threat from rivals is a constant menace to
Microsoft’s ecosystem of products. Competitors include the device manufacturers Apple or HTC
Corporation, console makers Sony and Nintendo, and enterprise player IBM. However, due to
customer lock-in, brand loyalty, high industry growth, and accumulated domain expertise, the
latter has built a relatively sustainable moat around its revenue-generating divisions.
Interestingly, since Microsoft is a multi-product company, it enjoys a lower threat of substitutes
in its enterprise software market.
Keeping from Becoming a Monopoly
Since monopolies earn sustained outsized profits, companies strive to achieve the sort of
market insulation that leads to their creation (Froeb, McCann, Ward & Shor, 2015). This superior
insulation is derived from the provision of non-substitutable products, absence of market rivals,
and unyielding barriers to entry. Although Microsoft has never entirely recovered from its anti-
trust prosecution in the late 1990s, it is no longer the dominating force that it was once. Several
factors prevent Microsoft from attaining the profit maximization inherent in monopolies.
Firstly, the firm’s products are no longer non-substitutable. An important market player
in the operating system and productivity software market is the open-source Linux system that
