Thursday, April 06, 2006

Apple Computer, Inc. Redefines Competitiveness, but in a Good Way



We are used to hearing about anticompetitive practices when companies try to block rival ventures, but Apple Computer has decided to go the other direction. Apple recently announced that its latest line of computers will have software (called Bootcamp) that allows users to install rival Microsoft’s Windows XP operating system. What kind of strategy suggests helping your customers use a rival’s software?

An Apple spokesman said the company believes that Bootcamp will strengthen Apple computers’ appeal by offering Windows capabilities. However, users will have to pay the additional licensing fee if they wish to install and run Windows.

Traditional anticompetitive practices harm rivals’ ability to compete and usually generate losses for society. Instead, Apple’s strategy for dealing with competition isn’t malicious at all. Apple shows its competition a little love by giving Windows operating systems a wider audience. Rather than stifle the competition, Apple hopes to court more users by embracing its competitor's product.

With only 5% of the desktop computer market share, Apple is hoping computer users will appreciate the flexibility that multiple operating systems afford. Now the real question is how many people think that option is worth the additional licensing fee.

1. If a consumer is willing to buy an Apple Computer and buy the Windows license for $142, how much value must the consumer place on the ability to run both operating systems, and why?

2. Why would Apple want to offer users the ability to use a rival operating system? Who wins in this scenario and who loses?

3. Access Google Finance and discuss how the stock market reacted to this announcement. Pull up profiles for Apple Computer, Inc. (AAPL) and Microsoft Corporation (MSFT) and use the 5-day chart view. Scroll to look at the week beginning on Monday, April 3. What happened to the stock prices and what kind of trading volume occurred? How do prices react to new information?

Topics: Competition, Marginal analysis, Apple Computer, Microsoft Windows

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