In 1976, Steven jobs, then 20 years old, dropped out of college and, with a friend, developed a prototype desktop
computer. With financing from an independent investor, the Apple
Computer Company was born, revolutionizing the computer industry. Sales
of Apple computers jumped from $3 million in 1977 to more than $1.9
billion in 1986, with profits of more than $150 million. The immense
success of Apple was not lost on potential competitors, and by 1984,
more than 75 companies had jumped into the market. Even IBM,
which had originally chosen not to enter the market, soon put all its
weight and muscle behind the development of its own version of the
personal computer, the IBM PC. Similarly, Michael Dell first built and sold personal computers from his dorm room at the University of Texas in 1984 at the age of 19. Dell Computer Company was initially started from $1000. 4 years later, shares of Dell stock were sold for $8.50 and the IPO raised $30 million. Dell’s name rings from the desktop
to the data center. It is the world’s #3rd supplier of PCs that
provides a broad range of technology products for the consumer,
education, enterprise, and government sectors. Dell was ranked #33 in
Business Week’s Top 100 Brands, #34 on the 2008 Fortune 500 list, and
was received 400 product awards in 2007. Another name in the computer
industry is of Microsoft Corporation, an American multinational software
corporation, founded by Bill Gates and Paul Allen, on April 4, 1975. It
deals with the development, manufacturing, licensing and supporting of a
wide range of computer related products and services. It is the world’s
largest software maker company in terms of revenues and also included
among the world’s most valuable companies. Microsoft announced in June
2012, that it would be entering the PC vendor market for the first time
with the launch of the Microsoft Surface tablet computer. As of year
2013, it is the market dominant company in both the PC operating
system and Microsoft Office. The company also produces a wide range of
other Softwares
for desktops and servers. Standard and Poor’s and
Moody’s have both given AAA rating to Microsoft.
Requirement:
Carefully
read the cases of world’s three major computer industries, Apple, Dell
and Microsoft and point out which theory of profit perfectly fits on
this case and why? What are the factors that cause these companies to
earn above normal profits? Highlight those factors in the light of all
theories of profit that you have studied in your managerial
economics course.
