Macroeconomics and IBM
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Microeconomics and the Computer Industry
There are many microeconomic theories that are applicable to the computer industry. There are competitive forces that drive the industry and lead to erosion of positive short run profits. The companies that were able to establish first mover advantages had an opportunity to make profits in the short run, but unless they were able to establish barriers to entry, they were not able to maintain market share and profits.
The personal computer industry was first dominated by Apple. However, Apple was not able to sell their product to businesses because their reputation was not as good as the established leader in the mainframe computer industry, IBM. IBM saw the profits that were possible in the personal computer industry and decided to enter the market in 1981. They were able to become the standard for the industry based on the reputation effect and brand loyalty. IBM used faulty strategy that in long run caused them not to be able to protect their first mover advantage position in the industry. IBM did not patent the key elements on their personal computer. IBM only really developed one part of the computer themselves...