Buyer-Supplier Relationship

Microsoft and PC-Makers

Group-3
XLRI-LSCM
1. Case Facts Briefly

 This is case of anti-trust violation by one of global software superpower-Microsoft in

the year 2000 in US
 Microsoft enjoyed market share of above 90% for its products like Word, Excel,
Windows, Internet Explorer (IE) in the year around 2000.
 The U.S Department of Justice and 19 states plus district of Columbia filed anti-trust case against Microsoft
relating to Windows and competition with Netscape in Web browsing in May 1998
 In April 2000 Judge Jackson rules that Microsoft unlawfully maintained monopoly in Windows and unlawfully
tied its Internet Explorer browser to Windows by
1. Contractually and technologically binding IE’s presence in every windows users’ PC
2. Limiting freedom of OEM’s to reconfigure or modify windows
3. Incentivizing and threatening OEM’s for favoring IE as their preferred browser
4. Increasing cost of installing and using Navigator on PC’s running windows
 1. Case Facts Briefly….contd..

 Some other examples of Microsoft in violating anti-trust law

1. Microsoft deters companies from using competitors browsers Netscape
Navigator through licence agreement and technical integration.
2. Microsoft also forced IBM-big customer and competitor to pay USD 31
million for back royalty and persuded against installing other software
produced by competitor i.e Lotus. Microsoft also pressurised IBM to reduce
support to competitor’s software.
3. Microsoft repeatedly & unsuccessfully tried to get Apple to drop project of
developing software QuickTime
4. Microsoft protested to Compaq for shipping PCs without screen icons of IE &
MSN
2. Groups Reflection on the B-S relationship

 This is clear case of anti-competition mindset, where supplier like Microsoft

dictating terms to its customers.
 Microsoft used every trick in the books with its customers to achieve sole
objective of maintaining its market leadership and market share
 Monopolistic behavior by Microsoft stifles innovation and hampers economic growth of the OEM’s
while only financially benefitting Microsoft
 It is WIN-LOSE situation, where one part (Microsoft-supplier in this case) is
always has an upper hand over other part (Customers).
 The behaviour forces consumers to pay exorbitant prices for MS products and
also may face delays in after-sales services due to monopoly.
 The outcome of the case has led to the development of much more efficient and innovative web
browsing platforms such as mozilla and chrome.
3. Pros and Cons
Pros
 Being a common product, it can
facilitates standardisation hence can
reduce cost in long term.
 Easy to operate and user friendly due
to commonly available OS/software.
 Easy to learn, teach and improve skills
of the people working on the
commonly available software.
 Easy to write different software for
common operating system.
 Reduction in complexities in the
market with a single operating system
Cons
 With a monopolistic approach,
customers will not have much options,
thus limiting their creativity.
 Customer or users need to agree
forcibly for terms and conditions of
monopolistic supplier.
 Cost of acquisition and cost of
maintenance may increase.
 After-sales service cost may also go on
higher side.
 It may create limitations for usage in
different fields.
4. Latest Updates

 On 2nd Nov 2001 Dept of Justice reached an agreement with MS to settle the case.
 As per proposed settlement MS required to share its application programming
interfaces with 3rd party companies and appoint panel of three people who have full
access to MS’s systems, records and source code for 5 years.
 On 1st Nov 2002, Judge Kollar-Kotelly given judgement accepting most of the
proposed settlement.
 On 30th June 2004 U.S. appeals court unanimously approved settlement rejecting
objections of nine states and districts of Columbia.
 MS obligation under settlement expired on 12th Nov 2007 and agreed to consent to a
two year extension.
 Now we have many other operating systems in the market apart from MS-Windows
such as from Apple, Google and Lotus etc.
4. Latest Updates…contd..

As of the latest earnings release for FY2019 / Q1 Microsoft operates under 3 business segments as follows,

 Productivity & Business Processes - This segment consists of MS Office including Office 365, Exchange, Sharepoint, Skype for
business etc.

 Intelligent Cloud – This segment consists of server products and cloud services including MS SQL Server, Windows server, Visual
Studio, MS Azure, GitHub etc.

 More Personal Computing – This segment includes Windows, including windows OEM licensing, MS Surface, PC accessories,
Gaming including Xbox hardware and Xbox software and services, search etc.
5. Take Away Points

 Even though relationship between Buyer-Supplier is driven by gap between

demand and supply, but any attempt to make this as WIN-LOSE may fail in
long term.
 A WIN-WIN relation between Buyer-Supplier will always give long term
success by achieving economic sustainability
 It is not fair to take undue advantage of other negotiating party which doesn’t
give fair deal. Instead It’s more effective to work collaboratively with the
suppliers to serve the ultimate customer
 Sometimes absence of any competitor or competition to our product or
service may make us less innovative and may push us deep in comfort zone.
 Maintaining dominance in the market with monopolistic products may not be
allowed in many countries and it is treated as against spirit of competition and
fair deal for consumers.
6. Information of Such Examples

 We do not have any example to share.