Free Essay

Os Comparision

In:

Submitted By y4yasin
Words 4770
Pages 20
The Economics of Open Source Software Development Jiirgen Bitzer and Philipp J. H. Srhroder (Editurs) O 2006 Published by Elsevier B.V.

Linux vs. Windows: A Comparison of Application and Platform Innovation Incentives for Open Source and Proprietary Software Platforms
Nicholas Economides and Evangelos Katsamakas

ABSTRACT
The chapter analyzes and compares the investment incentives of platform and application developers for Linux and Windows. We find that the level of investment in applications is larger when the operating system is open source rather than proprietary. The comparison of the levels of investment in the operating systems depends, among others, on reputation effects and the number of developers. The chapter also develops a short case study comparing Windows and Linux and identifies new directions for open source software research. Keywords: Open Source Software, operating systems, technology platforms, Linux, innovation incentives. JEL Classification: L 10, L86, L3 1.

10.1 INTRODUCTION
Open source software is an emerging type of software that may fundamentally affect the business and economic features of the software industry. Linux, an open source operating system, has been the prominent example of the potential of the open source movement, competing against Microsoft Windows, the incumbent operating system.

208

Nicholas Economides and Evangelos Katsamkas

This chapter analyzes the incentives to invest in application software and an operating system under two different software ecosystems: one based on an open source operating system, such as Linux, and the other based on a proprietary operating system, such as Microsoft Windows. We build a model extending Economides and Katsamakas (2005) to compare the innovation incentives of application developers and operating system developers for Linux and Windows. In our model, firms and developers invest to improve the quality of the platform or the application and expand the demand by users of these software products. When the operating system is proprietary, the platform provider and the application provider invest only in their own product to maximize their profit. When the operating system is open source, there is no platform provider firm, but the users invest in the platform to maximize their user surplus and their development reputation, which depends on the success of the platform measured by its adoption. This modeling approach is justified by other open source research that conceptualizes the users as developers (Franke and von Hippel 2003, von Hippel 2005). Another innovation of our model is that it considers the strategic interaction between the platform developers' investment incentives and the application developers' incentives. We show that this interaction is important and should not affected be ignored in public policy. The existing debate of how innovati0n.i~ by open vs. proprietary platforms (e.g. Lessig 2001) tends to focus only on the innovation incentives of application providers, ignoring the relationship of these incentives with the incentives of the platform provider. Beyond the analysis of investment incentives, we also present a short case study comparing Windows vs. Linux along three dimensions: the client-side, the server-side and the interaction between the client-side and the server-side. We emphasize that the comparison between Windows and Linux is an issue of comparing two competing software ecosystems, not just two products. The existing Windows ecosystem of the operating system, applications, application developers and service providers is competing against an emerging ecosystem centered on the Linux operating system. The short case study enables us to identify directions for future research on open source software. The main findings of our analysis are the following. First, the level of investment in the application is larger when the operating system is open source rather than proprietary, when the two operating systems are of equal quality. Second, the level of investment in the operating system depends on a number of factors such as the strength of the reputation effects for the developers of the open source operating system, the ratio of developers within the total user population of the open source operating system, the level of investment in the applications within each ecosystem and the cost of adopting the open source operating system. An increase in one the first two factors leads to a relative increase in the investment

Linux vs. Windows

209

in the open source operating system, while an increase in the fourth factor leads to a relative increase in the investment in the proprietary operating system. The chapter has the following structure. Section 10.2 reviews the related literature. Section 10.3 discusses the case study of Windows vs. Linux and identifies some new research directions. Section 10.4 develops the model and analyzes the innovation incentives in the two alternative software ecosystems, the open source and the proprietary one. Section 10.5 concludes the chapter.

10.2 RELATED LITERATURE
The literature on economics of open source focuses mainly on the individual incentives to participate in open source projects, the incentives of firms to adopt open source initiatives, the business models of firms operating within the open source landscape and the competitive implications of open source software (Lerner and Tirole 2004, Chapter 2 of this book).' Johnson (2002) models the contribution to an open source project as a problem of private provision of a public good and analyzes the effect of increasing the number of developers. Lerner and Tirole (2001, 2002) discuss the incentives of individual programmers and software firms to participate in open source projects. They argue that programmers are motivated by "peer recognition" and delayed career benefits such as being hired by a software firm, or getting access to funding for future software ventures. Mustonen (2003) proposes a model in which the participation of programmers in open source projects is endogenous and shows that a low implementation cost of an open source application is crucial for its survival when it competes with a proprietary application. Casadesus-Masanell and Ghemawat (2003) study a dynamic setting of competition between Windows and Linux. Bitzer (2004) analyzes why some software firms support Linux depending on the heterogeneity between Linux and the firms' commercial products. Economides and Katsamakas (2005) analyze the strategic differences between a proprietary and an open source technology platform and their competition. Mustonen (2005) analyzes when a proprietary software firm may support the development of substitute open source software. Comino and Manenti (2005) assume informed and uninformed users about the existence of open source applications, and study the welfare implications of public policies supporting open source software. Perhaps the closest paper to this one is that of Bitzer and Schroder (2003), which also analyzes the innovation performance of open source and proprietary

DiBonna and Ockman (1999). Raymond (2001) and Fink (2003) provide good practitioner overviews of open source software.

'

210

Nicholas Economides and Evangelos Katsarnakas

software development, see also Chapter 12. It shows that competition between open source and proprietary products leads to an increase in the level of technology of both products, as a result of increased investment. The focus of Bitzer and Schroder (2003) is on the effect of competition on innovation, while the focus of our chapter is on a direct comparison of the innovation in the two alternative software ecosystems, which consist of application and operating system developers.

10.3 CASE STUDY: 1,INIJX VS. WINDOWS
This case study of Linux vs. Windows distinguishes between the operating systems market for end users - of a desktop operating system (client) - and the market for server operating systems (server). The most interesting battle today is at the server-side.

Some studies suggest that the market-share of Linux at the client-side is around 3% and some expect it to reach 7% by 2007.' This slow growth can be attributed to lack of ease of use, small variety of applications and problems with drivers that enable users to connect other devices to their computing systems. Linux has been mostly an operating system for power-users who have Unix-like skills, but this may change since the open source community is developing several friendly user interfaces such as KDE. Switching costs from the dominant Windows operating system make it difficult for the Linux market-share to grow fast. Much depends on the relative availability of applications for Windows vs. Linux and the switching costs from the Windows ecosystem to the Linux ecosystem. There are many open source applications under development, and the open source community has recognized the strategic importance of making their applications similar to the Windows applications to lower user switching costs. Many open source applications (such as Openoffice, the Mozilla Firefox browser etc.) are also compatible with Windows. Although these applications increase the recognition of the open source community, they strengthen the Windows ecosystem and therefore may hurt Linux in its competition with Windows in the short term. However, the existence of these open source applications may reduce the switching cost to Linux in the long term. At the same time, there are many proprietary applications that are offered over the Linux operating system. Therefore, we do not see a pure open source ecosystem competing with a pure

' See http://www.idc.corn.

Linux vs. Windows

211

proprietary ecosystem, but two ecosystems both based on a mix of open source and proprietary applications. Understanding the strategic implications of these mixed ecosystems is an interesting question for future research.

At the server-side, IDC predicts double-digit growth of Linux adoption3 and that Linux server shipments will reach 25.7% of total shipments in 2008. Linux is "becoming mainstream" and the Linux-based packaged software market is expected to exceed $14 million by 2008.4 The total cost of ownership (TCO) of Linux may be higher pre~ently.~ The migration from Windows environments to Linux is more costly than the migration from Unix to Linux, since Linux is a Unix-like operating system. 'Therefore a significant switching cost is protecting Windows. Both Windows and Linux are gaining market share at the expense of proprietary Unix systems (including the Sun versions of Unix), which tend to be closed and expensive running on expensive hardware. The Linux ecosystem is developing fast in terms of number, variety and quality of applications and availability of support and other complementary services. However, it is expected that firms that offer competing proprietary solutions will respond in a variety of ways, including the reduction of prices and higher investment in their products. For example, Microsoft seems committed to reduce the security issues faced by Windows. Uncertainty about potential litigation risks due to unclear property rights and confusing open source licenses also hurts Linux. Sponsoring of Linux by big IT companies such as IBM and HP is affecting positively Linux because it affects the expectations of customers about the prospects of the platform. These firms are sponsoring Linux by developing or porting their enterprise applications to Linux (such as IBM Websphere), participating actively in open source projects and initiatives and sometimes leading open source projects, announcing publicly their support and their positive expectations about Linux. Sponsoring of Linux by European and Asian governments also strengthens Linux. Security problems and risks are hurting Windows. An independent study has shown that Linux kernel has 0.17 security flaws per 1,000 lines of code, compared to average 10-20 flaws of proprietary oftw ware.^

' '

eWeek reports "IDC sees double digit growth continuing for Linux", 8 December 2004 at http://www.eweek.com/article2/0,1759,1737068,00.asp. See http://www.idc.com. See "Yankee independently pits Windows TCO vs. Linux T C O , Microsoft Watch. 24 March 2004, http://www.microsoft-watch.comIarticle2/0,1995,1553620,00.asp. See "Linux kernel review shows far fewer flaws", eWeek, 14 December 2004, at http://www.eweek.comI article2/0.1759,1741077,00.asp.

' '

212

Nicholas Ecotzornides and Evangelos Katsamakas

Firms have the option to compile their own for free Linux distribution, by bundling the free Linux kernel with select utilities, but there are several com. peting commercial Linux distributions (such as Red Hat, SuSe e t ~ . ) Therefore there is competition within the Linux platform itself, besides the competition between Linux and Windows. There is a need for more research to analyze that competition and understand the strategies of competing Linux distributors. There is an ongoing process of standardization7 across the different distributions, ensuring that a Linux application can run on all distributions. However, it is uncertain how successful this process will be in the future and whether the risk of "forking" to incompatible distributions will materialize. The risk of "forlung" is affecting negatively the expectations of potential adopters and the costs of application developers for Linux, who may need to develop different versions of their applications for different Linux distributions. The existing literature tends to focus on the development side and not on the demand side. It is unclear how and where firms choose to adopt Linux and open source applications. This may depend on the existing IT infrastructure, capabilities and employee IT skills of a firm, the size and the industry of the firm. Only firms with substantial IT capabilities and resources may switch early. Most firms are likely to have a mix of Linux and Windows infrastructure evolving over time. For example, Linux tends to become dominant in Web serving applications, combined with Apache, the dominant Web server application that is open s ~ u r c e . ~ Prominent Internet companies such as Google and Amazon rely heavily on Linux. There is a need for both empirical and analytical work on the conditions under which firms adopt Linux and open source, and how this adoption behavior affects the competition between the two ecosystems.

10.3.3 Interaction of Server-Side and Client-Side
There is also a significant relationship between the clientldesktop-side and the server-side within an enterprise IT infrastructure. Since Microsoft is expected to have dominance at the client operating systems market (and many applications) for a long time this may give it an advantage at the server market too. Alternatively, as Linux increases its presence at the server market, this may encourage its adoption at the client market as well. The European Union court decision, requiring Microsoft to publish some proprietary protocols that define the interaction of clients and servers, may make it easier to introduce Linux clients in networks that depend on Windows s e r ~ e r s . ~

' Linux Standards Base (LSB), see http://www.linuxbase.org.
Apache's market-share is larger than 68%. Microsoft's IIS market-share is around 20% and the difference between the two is increasing over time; see "Web server survey", Netcraft. January 2005, at http://news.

netcraft.com/archives/2005/01/01/jan~ary~2005~~eb~server~su~~ey.html See "Microsoft's secret codes", Wall Street Journal, 22 December 2004.

Linux vs. Windows

213

10.4 THE MODEL
This section provides a brief overview of the technology platforms model of Economides and Katsamakas (2005) and extends that model to analyze the investment incentives of different platforms. The model consists of two software ecosystems, the first based on a proprietary platform and the second based on an open source platform. The software ecosystem based on the proprietary platform consists of one platform firm selling the platform A, (operating system), and an independent application developer selling B, (application software). The platform firm sells the platform to the users at a price p,. The independent application provider sells the application to the users at a price p,. The application provider pays also an access fee s to the platform firm. The fee s is set by the platform firm and it can be negative when effectively the operating system firm subsidizes the application developer. The demand function of the platform A, is q, = a, - bopo- dp,, and the demand of the application B, is 9, = a , - b l p l - dp,, where parameter d measures the complementarity between the platform and the application. We assume that b,, bo > d, i.e. the own-price effect of each product dominates the cross-price effect. The profit function of the platform firm is .rro= poqo s q l , equal to the platform profit from users plus the platform profit from the application access fees. The profit function of the application provider is .rrl = (p, - s)g,. The marginal cost of production is zero for both the platform and the application, because both are software products easy to reproduce. The firms set prices in a two-stage game. In stage one, the platform sets the access fee s paid by the application provider. In stage two, the platform and the application provider set the user prices p , , p, simultaneously. The software ecosystem based on an open source platform consists of usersdevelopers that help develop the open source platform A which is adopted by , : users for free, and an independent application provider firm that develops and sells the application at price pY. The demand for the platform A is q = : : a - b,e, - dpy, and the demand for the application By is qp = a? - blp? - dc,. : Under open source, the profit function of the operating system is zero and the profit function of the application provider is .rrp = PpqF We also assume that open source platform users may face an additional exogenous adoption cost c,.1° At equilibrium, when the operating system is proprietary, the operating system and application profits excluding investment costs are

+

BY

As noted in the case study (Section 10.3), there is evidence that the TCO of Linux is possibly higher than the TCO of Windows, at least for now.

"'

214

Nicholas Economides and Evangelos Katsamakas

respectively. Alternatively, when the operating system is open source, equilibrium profits are

and the combined consumer surplus from the operating systems and applications markets is

The following section extends this basic framework by introducing new modeling features and assumptions that enable us to analyze and compare the innovation incentives in the two ecosystems.

10.4.1 Innovation Incentives
Before the operating systems and the applications are offered to users as defined above, the software firms and individual developers may invest in increasing a, (effectively increasing the quality of the software product), expanding the demand of the operating system and the applications. We show that the incentives to invest differ across operating systems, and we characterize the relative strength of these incentives. When the operating system is proprietary, we assume that (a) each firm invests in its product to maximize its profit; and (b) neither the users nor the application providers invest in the platform because the platform is closed. For example, the quality of Microsoft Windows depends almost exclusively on Microsoft's investment in this operating system. When the operating system is open source, we assume that there are D users that are developers, and define the proportion of such users as 6 = < 1. The 40 developers invest in the open source platform so that that they maximize the user/consumer surplus CSO from the open source platform plus their reputation value R (q:), where R(.) is an increasing function of the adoption of the open source platform. The intuition is that a high adoption of the open platform is a signal of success and all the developers that participated expect some future benefits from that (e.g., future job opportunities). Indeed the development of Linux depends crucially on investment of time and effort of individual developers who also use Linux as an operating system to run the applications they use (Raymond 2001). We assume that the application provider invests in the application, and they may invest on the platform too.

4

Liizux vs. Windows

215

The game now has an investment stage that precedes the two pricing stages described at the beginning of Section 10.4. We assume that the investment has a fixed cost reflecting the high fixed cost and low variable cost structure of software development. We assume that by investing in a product (operating system or application), the sponsor is able to push outwards (increase) the demand for the product, here measured by the parameter a,. The firm incurs a fixed'cost indicated by the increasing and convex investment function C(a,). Assuming concavity of the profit functions, optimal choice of investment for profit maximization when the operating system is proprietary requires
Operating System: aa, duo
+

-- -

air, - aC(a,)

aob, - a,d -- dC(a,) 2 (bob,- d 2 ) aao '

(10.1)

Application :

The conditions for developer utility maximization and application firm profit maximization when the operating system is open source are
Operating System:

Application: ac(a?) day - day a1 n
+

= ac(ap)

2b1

aa?

'

We can now prove the following proposition comparing investment incentives in operating systems and applications in the two ecosystems, as described by Equations (10.1)-(10.4).
Proposition 1 Provided that the cost function for software development is the

same for open source and proprietary developers and that the open source operating system is offered for free, investment in the application is higher when the operating system is open source, i.e. a , < a?. Investment in the open source operating system is larger than investment in the proprietary operating system if there are strong reputation effects from participation in open source development, and/or a significant part of the open source users are developers and the difference in application investments, a? - a,, is not large. Conversely, investment in a proprietary operating system is smaller when there are weak reputation effects from participation in open source development, andor only

216

Nicholas Economides and Evangelos Katsamakas

a small part of the open source users are developers and the diflerence in application investment levels, a? - a , , is large.

Proof: First, compare the maximization conditions of the applications, Equations 2al (2hOhl+d2)2 (10.2) and (10.4). Since < ? for all a,, and the cost function is b, (8bobl +d2)' Lhl convex in a , , it follows that a , < a?. Now compare the maximization conditions of the operating systems. Because the cost function is convex, the investment in the open source operating system is larger if and only if

First, assume that the marginal value of reputation is zero for the open source developers. Then if S 5 and Sap >_ ?, since b,b, - d2 > 0, it follows that Equation (10.5) is false, therefore a: < a,. If 8 > and a? - a , is not large, i.e. if Sap i then Equation (10.5) is true, and therefore a, < a:. Alternatively, since the marginal value of reputation is positive, a strong enough reputation effect such that aobl ( S - + d (9 Sap) i (bobl- d 2 ) aR is sufficient to 6 fulfill Equation (10.5) and result in a, < a:.

i)

The proposition suggests that the investment in the application is stronger when the operating system is open source. However, the comparison of investment levels in the operating system is ambiguous. When there are strong reputation effects from participation in the development of the open source operating system, or a significant proportion of the users have also development skills, then the investment in the open source operating system is also larger than the investment of a firm controlling a proprietary operating system. The proposition captures both the reputation benefits and the usage benefits of participants in widely adopted open source projects. The application provider for the open source operating system invests more than the application provider for the proprietary operating system because the first has a larger marginal profit for all levels of investment. This is because the open source operating system is adopted by users for free, enabling the application provider to set a larger price and capture a larger profit than the application provider for the proprietary operating system. The level of investment in the applications affects the level of investment in the operating system because of the complementarity between the application and the operating system. In particular, when the level of investment in the application increases, the marginal benefit of investing in the operating system decreases, as shown in Equations (10.1) and (10.3). Exogenous factors that reduce the adoption of the open source operating system, such as a large adoption cost c,, decrease the incentives of individual

Linux vs. Windows

217

developers to invest in the open source operating system. Therefore, an independent application provider may subsidize the adoption of the open source platform not only to increase the sales of its application, but also to increase the incentives of developers to invest in the operating system.

10.5 CONCLUSION
We developed a model to compare the incentives to invest in the operating system and its applications both under open source and proprietary operating systems. We found that the comparison of the levels of investment in the operating systems is ambiguous, but the investment in applications is stronger when the operating system is open source. These results were developed under the assumption that the productivity of investment is the same for a proprietary and an open source system. This is an issue where there is significant disagreement, and both sides (for profit software companies and open source developers) claim that their productivity is higher. This clearly is an open research issue, but the purposes of this chapter - a change of the assumption of the equal productivity of investment in both environments will tend to change our result in favor of the ecosystem that is assumed to have higher productivity. For example, if it is assumed that the productivity. of the open source development is larger than the productivity of proprietary software development, then -< iiC(ao) for all a, and, everything else being equal, duo the relative investment in the open source operating system increases; if it is assumed that productivity of proprietary software development is higher, the relative investment in the proprietary operating system increases. An interesting extension of the current model would be the analysis of the innovation incentives in a competitive setting and the dynamics of innovation. We also developed a short case study of Linux vs. Windows. The discussion distinguished between issues that affect the competition at the client-side, the server-side and the interaction between the client-side and the sever-side. Besides the competition between Linux and Windows, there is a need for more research to analyze and understand the strategies of competing Linux distributors. Also more research is needed in understanding the switching costs and the open source adoption strategies of enterprises. Another important area is the interaction between client-side and server-side software products and how this interaction affects the competition in the software industry and the success of open source.

-

ACKNOWLEDGMENTS
We thank the editors Jiirgen Bitzer and Philipp J.H. Schroder for useful comments and suggestions.

Nicholas Economides and Evangelos Katsamakas

REFERENCES
Bitzer, J., 2004. Commercial vs. open source software: The role of product heterogeneity in competition. Economic Systems, 28(4), 369-381. Bitzer, J. and P. J. H. Schroder, 2003. Competition and Innovation in a Technology Setting Software Duopoly. DIW Discussion Paper No. 363. Casadesus-Masanell, R. and P. Ghemawat, 2003. Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows. Harvard Business School Working Paper 04-012. Comino S. and F. Manenti, 2005. Government policies supporting open source software for the mass market. Review of Industrial Organizaiion, 26(2), 217-240. DiBonna, C. and S. Ockman, 1999. Open Sources: Voices front the Open Source Rei~olution. O'Reilly & Associates, Sebastopol, USA. Economides, N. and E. Katsamakas, 2006. Two-sided competition of proprietary vs. open-source technology platforms. Management Science, forthcoming. Fink, M., 2003. The Business and Economics of Linux and Open Source. Prentice Hall, Upper Saddle River, USA. Franke, N. and E. von Hippel, 2003. Satisfying heterogeneous user needs via innovation toolkits: The case of Apache security software. Research Policy, 32(7), 1199-1215. Johnson, J. P., 2002. Open source software: Private provision of a public good. Journal of Economics & Management Strategy, 1l(4). 637-662. Lemer, J. and J. Tirole, 2001. The open source movement: Key research questions. European Economic Review, 45(4-6), 819-826. Lemer, J. and J. Tirole, 2002. Some simple economics of open source. Journal of Industrial Economics, 50(2), 197-234. Lerner, J. and J. Tirole, 2004. The Economics of Technology Sharing: Open Source and Beyond. NBER Working Paper No. 10956. Lessig, L., 2001. The Future of Ideas. Random House, New York, USA. Mustonen, M., 2003. Copyleft - the economics of Linux and other open source software. Informulion Economics and Policy, 15(1), 99-121. Mustonen, M., 2005. When does a firm support substitute open source programming. Journal qf Econontics and Munugm~entStrategy, 14(1), 121-139. Raymond, E. S., 2001. The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary. O'Reilly & Associates, Sebastopol. USA. von Hippel, E., 2005. Denlocratizing Innovation. MIT Press, Cambridge, USA.

Similar Documents

Premium Essay

Swot Analysis Ms and Nokia

...Nokia microsoft Steve ballamer = chief executive of microsoft. Microsoft bought Nokia phone business for a total amount of 5.4 billions Nokia licences patens and mapping services to microsoft. Nokia share jump 35% . microsoft fell by 5%. Ballamer : microsoft known for software pcs to a company that focuses on mobile devices. Aim to turn a software comany into a devices and services business- Microsoft struggles as consumeres replaced traditional pc ‘s for tablets and smartphones. Critics say microsoft has been to slow to respond to the booming market mobile devices. It is a necessary gamble for microsoft to break into mobile, but given its complete reliance on nokia for windows phones devices and competitive position of apple and google with rival phone plattforms an understanable move… WTF ???? Background: nokia founded in 1871 1987 launches 1st phone. = mobira cityman 2000 stock market value: hits 186billion euros ( now worth 11) 2003 basic 1100 launched and become sthe most popular consumer electronic device. 2011: abandons symbian mobile phon operating system and switches to the windows platform instead. 2013 : launches Lumia 1020 boasting a 41 megapixel camera. Sold 53.7 million devices during the quarter ( which one ) and down to 27% down sales on last year. ( does not make sense) Microsoft signed a dela to 10 year licensing arrangement with nokia to use their brand on current mobile phone products. Microsoft deal= strategy...

Words: 579 - Pages: 3

Premium Essay

Palm Inc.

...and decision making of Palm Inc. Strengths 1. Years of experience For Palm, years of experience at software development, marketing and device development are really a great strength. Palm start in 1992, 18 years let Palm experienced a lot of technological change, also made Palm earn a lot of experience. They know many marketing skills, they can avoid mistakes from previous products. So experience is one of the most important strength a company should have. 2. Loyal customers Customer is God. Everyone knows this truth. If you grasp customers’ hearts, you win. Palm is a company of 18 years history, so Palm has many loyal customers. Like Apple, if you get used to the IOS system, you can not get out of it, so the same as Palm OS system. Palm still have this part of people. 3. Value A company’s value comes from two parts, one is intangible value, another is tangible value. After those years, Palm already had its value. Intangible value such as reputation can make public believe in Palm. 4. Controlled both hardware and software 5. Success in Treo product line Palm got a hug success in 2006, it’s a good signal for Palm. Treo smart phones let Palm earn 30 percent of market share in the United States and bring Palm back to life. Having this success experience, Palm can learn from it and come out more great ideas and make them come true. Weakness 1. Lack of innovation •...

Words: 1231 - Pages: 5

Premium Essay

Pestal

...PESTAL Analysis: Political | Economical | * Bad global relations, wars, and terrorism can affect the business of Apple as international sales accounted for 63% (Apple, 2011). * Apple manufactures most of its products & components outside the U.S. like Czech Republic, Korea, Ireland, Cork, and China. Recently, China is preparing for its leadership transition later this year that may influence the business of the Apple (Carnegie Endowment, 2012). | * Despite inflation rate being high, while the earning of the consumer’s has not significant changed; Apple in 2012 was able to end a fantastic fiscal year with record September quarter sales (Apple, 2012). * Apple uses financial instrument like foreign currency forward and option contracts, this is to safeguard it for making any losses if a particular currency devalues (Apple annual report, 2009). | Social | Technological | * Apple has created the largest virtual media store of digital music known as iTunes. The average age of world’s population is growing due to decline in fertility and a 20-year increase in during the second half of the 20thcentury. These factors will lead to an increase in the number of persons aged above 65 years during 2010-2030. However, Apple targets ages between 12-35 years. Therefore, creating a challenge for Apple as above 65 population is increasing in the recent years (Cdc gov, 2013). * The rising use of social networking sites like Facebook, Twitter, etc; has led to the increased...

Words: 562 - Pages: 3

Premium Essay

How Businesses Develop Brand Loyalty

...Virginia Walthall Business Communication Module 9 Major Report Dec. 13 2012 How Businesses Develop Brand Loyalty BRAND LOYALTY 1 Abstract Apple is a company that has very loyal customers. Even though their products can be a little more costly than other companies, the scope of their products make its worth it to a consumer who is brand loyal to Apple. The wonderful customer service, the ability to link up the products and the ease of use are just of few of the things that keep these customers so loyal. BRAND LOYALTY 2 Brand loyalty. When I hear these words the first thing that comes to mind is Apple. Once a person purchases their first Apple product it seems inevitable that their future electronic purchases will also be Apple. Apple makes sure to keep their customers coming back for more. DevineCaroline.com stated “it doesn’t...

Words: 936 - Pages: 4

Free Essay

Level of Product Differentiaition

...the strategy of the producer company Stanimir Andonov* The article discusses the differentiation among the product offers of companies working in the global markets, as well as the strategies which they use and could use in that respect. The main idea of the paper is that the principle “differentiate or die” (Jack Trout) has died. Today the global brands don’t strive to differ from their competitors in everything and at any cost. As an example, let’s have a global look at the business of mobile phones. In June 1998 Ericsson, Nokia, Motorola and Psion established their own International Strategic Alliance, a private independent company called “Symbian”. Symbian Ltd. is an independent, for-profit company whose mission is to establish Symbian OS as the world standard for mobile digital data systems, primarily for use in cellular telecoms. So, the three biggest mobile phone companies at that time and Psion, a mobile PC company, created a new way for competing and differentiating. Today Symbian Ltd. is owned by Ericsson, Nokia, Panasonic, Samsung, Siemens and Sony Ericsson. Figure 1 shows the percentage of shares of each shareholding company: Figure 1 Shareholding companies of Symbian and their percentage of shares Source: Symbian Ltd. – Company Ownership, http://www.symbian.com/about/ownership.html Levels of product differentiation Porter has suggested that most industries contain strategic groups of close competitors – groups of firms within an industry that follow the same...

Words: 5436 - Pages: 22

Free Essay

Biggest Challenges Today Are to Control the Network Security

...Biggest challenges today are to control the network security. Network security is having protection of networks and their services from unauthorized access, destruction, or disclosure. Malicious acts bring up the important topic of disaster recovery. Companies must have up to date copies of their important documents and software to prevent extended downtime. The saved information will let the company's employees continue to work while the IT department deals the damaged media. Hacking Into a Website Some being able to hack into a person’s web site is never going to be justifiable. A hacker is someone who illegally gets a hold to personal and private information in a computer system. This person then tampers with the information and start to cause problems. AT&T was a victim of someone hacking into their computer system and stealing the email addresses that Ipad buyers use when they were updating their information or activating there devices. There was a group called Goats Securite that uses different hacking ideas to get into AT&T website.   A total of 110,000 email addresses where obtained during this illegal entry into the website. During this attack on AT&T new technology that was only out for a month, they quickly shut the product down and website to deal with the problem that occurred. The problem was handled very quickly, AT&T was notified on Monday that there system was hacked into and peoples information was taken and compromised, the very next day the...

Words: 399 - Pages: 2

Premium Essay

Answer to Discussion

...Nowadays I cannot deny that smart phone is somehow important to my life. It plays crucial role to access to the information every time and everywhere I want to. Noticeably, smart phone market rapidly grow and very competitive. There are many brands in the market and each releases new model so quickly. There are varieties in price, quality to serve the demand of the customer in each level. I think smart phone become one of necessities for a living because of many reasons; the growth of social networks, the convenient to access to the promptly information, and the utilized ability of smart phone itself. Social network is the most significant for keeping in touch with friends and sharing what we want to say or what we think to the online world. There are many types of social networks such as instant messaging, online blogs, and social network web. They try to develop application in smart phone to offer the customer the quickly and instantly response to the world. The easiness to access and share information to friends is the enjoyable ways to have smart phone with those application installed. It is like there are friends around you all the times. Information is power. In the paper and pre-Internet age information was power and organizations had people who just had a piece of information and did not share it with others mostly out of oversight and sometimes out of the intent of holding on the "power." Today with Google, social media, wiki-leaks access to information is very easy...

Words: 342 - Pages: 2

Free Essay

Neha

...Overview Of Telecom Industry | | | Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers. | | Nokia's market share falls below 30 per cent Helsinki: Nokia Corp. reported better than expected first-quarter profits Thursday but its global market share dropped to below 30 per cent for the first time in over a decade as the world's top cellphone maker continued to lose ground to rivals. The Finnish company's net profit in January through March fell euro5 million to euro 344 million ($499 million) from a year earlier. Revenue grew 9 per cent to euro 10.40 billion. The company's share price climbed several per cent as markets had anticipated a greater fall in profits and lower sales, but closed almost unchanged at euro 5.96 ($8.65) on the Helsinki Stock Exchange. The Finnish company has faced stiff competition in recent years in the high-end sector, particularly from Apple Inc.'s iPhone, Android-based handsets and Research in Motion's Blackberry. Nokia sold 24 million smartphones...

Words: 3157 - Pages: 13

Free Essay

Memo

...Memorandum Hulu was founded in March 2007, it is an online video service that offers hit TV shows, movies, and clips at Hulu.com and other online destination sites. Hulu has a large selection of videos from over 200 leading content companies, including Fox, ABC, NBC Universal, etc. Users can choose from more than 1,700 current primetime TV hits such as LOST, Simpsons, 30 Rock, etc. Users like Hulu because it is free and legal, focused on quality and convenience, easy to use and share. However, the free Hulu typically offers just the latest five episodes of each program. On the side of Hulu, Hulu has to pay its bills and been under pressure from some television programmers, particularly the ones that don’t want to undermine the combination of advertising and subscription revenues they get from cable TV, to generate more dollars from viewers. Now, Hulu rolled out a subscription service, Hulu Plus with price of $9.99 a month. Features of Hulu Plus Hulu offers a handful of trailing episodes. Today, Hulu Plus offers episode from the current and past season. Hulu Plus users are able to watch every episode from the current season of shows from ABC, NBC and FOX. Users are also able to catch up the episode of the past season. There are over 120 seasons and 2000 episodes of rich library content. Users can watch TV shows whenever they want to on Hulu Plus. Hulu Plus subscribers can watch their TV shows through than just the bower on PC. Users who own select Samsung Internet-connected...

Words: 856 - Pages: 4

Premium Essay

Environmental Scanning

...Environmental Scanning/ Marketing Project 1 Ashley Jackson Marketing 314 2/18/10 Environmental Scan- IPAD Laptops are one of the most common sources of information. In today’s fast paced economy, where would we be without a laptop or computer? It would almost be like you were living in the dark ages. While laptops and computers are convenient to have, Apple has come out with a new and revolutionary product that changes everything. It’s called the iPad. Apple Inc. is a multinational corporation that creates consumer electronics, computer software, and commercial servers. Founders Steve Jobs and Steve Wozniak effectively created Apple Computer on April 1, 1976 and incorporated the company on January 3, 1977 in Cupertino, California (Bellis). The Apple iPad was announced on January 27, 2010 with retail availability commencing in April and systematically growing in markets throughout 2010. The iPad is twice the size of the iPhone with the same capabilities of any other laptop computer, but still smaller, making it more convenient to carry with you. For an iPad with Wi-Fi, it has a reasonable price of $499 for a 16GB, $599 for a 32GB, and $699 for a 64GB. If you want one with Wi-Fi and 3G, you can find one for $629 for a 16Gb, $720 for a 32Gb and $829 for a 64GB. In this environmental scan, I am going to break down the iPad into five different environments, social, economic, technological, competitive, and regulatory. The first environment is the social environment...

Words: 1274 - Pages: 6

Premium Essay

Marketing Assignment

...Marketing Course: BUMKT 5901 – Marketing Title: Marketing assessment – Apple Ipad For lecturer: Mohan Dass By student: Kiranjeet kaur disanj Word Length: 2000 words Due Date: 21st April 2011 Contents Introduction…………………………………………………………….3 Production Description…………………………………………………4 Product…………………………………………………………………..5 Price……………………………………………………………………...7 Place……………………………………………………………………...8 Promotion……………………………………………………………….10 Summary………………………………………………………………...13 Appendix A- Bibliography………………………………………..…….14 Introduction Apple ipad is a world’s first tablet computer launched by Apple Company on April 2010 all over the world. It is launched by Apple Company after a huge marketing campaign about its features. It is usually marketed for audio and video media ground for example audio books, games, movies etc. Company has manufactured an ipad using strong in-built applications. The gadget permits the individual to work in several locations and as a result the individual can experience what they didn’t on some other device. It is new and completely different device yet for browsing internet with additional unique features, applications and technology. It provides value not only to the company but also to the customers through a huge number of features which helps in saving time and energy. Ipad is comprehensively advertised on T.V., newspapers, magazine, radios and also on internet. It provides value by available at all the apple stores...

Words: 1986 - Pages: 8

Premium Essay

Porter Analysis

...Threat of new Entrants – Low The Consumer Technology Industry sets difficulties for new entrants to the market; therefore it suffers relative low threat of new entrants on to compete with market share. This type of industry sets a hard entry barrier for new consumers to compete with existing and well established companies such as Apple Inc., Dell Computers and Sony, who operate with use economies of scale and product differentiation to compete between each other. The technology industry is a difficult industry to penetrate if one is looking to start a small business. It requires great amount of capital invested for manufacturing, research and development and high labor force to operate the machine in order to increase production, on a goal to matching production of bigger firms. Companies like Apple Inc., Dell and Sony take advantage of multinational resources and transfer production to other countries where they are able to achieve greater production amount, for a lower cost, and also where labor is relevantly lower than in the United States. The advantage of this is reaching a lower cost of goods once it hits the market, promoting competition and higher returns for these mega companies. In order to achieve economies of scale, a great amount of capital requirement in necessary. These large corporations run on great amount of self-operated and man-operated machinery that requires great investment to be built, operated, and serviced. Also to design the machinery a highly...

Words: 1728 - Pages: 7

Premium Essay

Business Analysis Part I

...Business Analysis Part I Pamela Lewis Management 521 October 10, 2011 Dr. Melanie Brown Business Analysis Part I The company tasked a mutual fund manager to evaluation Apple Incorporated to determine if this would be a sound investment for the company. The mutual funds manager will conduct a business analysis on Apple Incorporated and present the recommendations to the company. Apple Inc. is a company known for its vibrant line of products and the innovation it brings to those products. A business analysis is the practice of diagnosing the needs of a business and establishing solutions to business dilemmas. This business analysis is simply a collection of information that will aid in deciding if Apple Incorporated has the stability to sustain a profitable portfolio. This analysis will include a SWOTT analysis, an evaluation of the company stakeholders and their needs and wants, and an explanation of how the company is fulfilling those needs. SWOTT Analysis Chart Strengths (Internal) | Weaknesses (Internal) | * Strong brand image provides and edge over competitors * Robust financial performance strengthens investors’ confidence and provides capital for future avenues * Focused Research and Development driving innovation and consolidating its market position | * Patent infringement lawsuit may affect financial condition and operating results * Product recalls may harm Apple’s reputation and add significant warranty and other expenses | Opportunities...

Words: 1705 - Pages: 7

Premium Essay

Bargaining Power of Suppliers

...Porter’s Five Forces Bargaining Power of Suppliers. The ability of a firm to negotiate good terms is influenced by the number of firms a company relies on. Apple has a high bargaining power over their suppliers because they are able to outsource much of their manufacturing and they also have been able produce some of their own supplies, which has allowed Apple a great advantage in the competitive market. Bargaining power of buyers is the next force which a firm is reliant on customers. There is a very high demand currently for Apple products and what gives them a great advantage is that customers see them as a unique product, where the substitutes, for instance, Dell, HP, IBM, etc just do not compare. The iPod and iPhone Most iPods except for the “Classic,” rely on flash memory instead of a hard drive for storage. The benefits of flash memory are reliability, form factor, and energy consumption. Realizing the significant benefits of flash memory for portable media devices, Apple formed long-term relationships with Samsung, Intel, and Micron, and by mid-2007 commanded about 25% of worldwide flash production (Apple Inc., 2008, Harvard Business Case). As for the iPad and the tablet market, it turns out that Apple has secured about 60% of global touch panel capacity, with a focus on 10-inch displays. Some have speculated that this has forced some competitors to initially focus on devices with 7-inch screens, such as Samsung with its Galaxy Tab. The effect...

Words: 547 - Pages: 3

Premium Essay

Management Principles

...Introduction Nowadays, more and more companies pay attention to achieve social responsibility in order to increase their public image. One of the ways that is adopted by many companies to become more socially is green management which is referred to using various policies to reduce much of environmental problems when the managers woke up to and concerned for the impact of their organization on the natural environment. The environmental problems of various pollutions, global warming, solid waste, ozone layer depletion and so on arise and endanger sustainability of economic along with the rapid development of industries. Therefore, the practices of green management are needed as soon as possible. Green management practices can not only be done by large organizations, but even for small organizations since it can increase the public image of the companies and thus will affect people’s perspectives and the investors’ behavior. In short-term, going green means that the management assists in saving the natural environment, however in long-term, the costs will be reduced and thus the profits can be increased as well as they will try to achieve green management through waste minimization, and improving energy efficiency. That will make a “win-win” complexion. By contrast, those companies that always cause pollutions would be criticized as companies of social irresponsibility, their public image will be damaged, even affect sales amount of their products. To study the green management...

Words: 3884 - Pages: 16