Market Patterns
One industry that has shifted in the past few years in terms of its structure is the smartphone operating system market. A few years ago, most of the early smartphones were based around proprietary operating systems. Palm and Blackberry dominated the market. Apple joined the industry with the introduction of the iPhone, but more recently other firms have entered the market as well, including Google (Android), Windows, Symbian and other systems. The market has moved from a stable oligopoly of four firms basically between two firms into a market that is much closer to monopolistic competition. However, there is the risk that as operating systems shake out, the market could return to an oligopoly of just three operating systems (West & Mace, 2007).
In the short-run, firms in this industry will seek to gain market share through differentiation. The products are slightly differentiated from each other -- they perform the same functions, more or less, but there are differences with respect to the usability, the look and the number of applications that are available for each. Another difference is that some market players, such as Apple and Blackberry, are vertically integrated with respect to their handsets and their operating systems, whereas other players like Microsoft and Android license their operating systems to multiple manufacturers. This behavior is consistent with firms in a state of monopolistic competition, as they seek to use this differentiation to gain advantage in the marketplace (Seppala, no date). As long as firms in the industry are making a profit, there remains incentive for new firms to enter the market. That is the case, with other firms set to enter the market in the next year or two.
In the long-run, however, the industry should enter into a state of equilibrium. Firms will be unable to make a profit, as the margin cost of production...
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