Complements and Substitutes

Nitin Goyal writes about “five recent (and past) developments from the lens of complements and substitutes.” Among them:

Microsoft vs. Netscape, and now Google
All of us know how Microsoft waged, and won a war against Netscape. PC hardware was the major complement to Microsoft’s software, and Microsoft was in control of this situation with hardware vendors competing against each other, while Microsoft enjoyed its monopoly. Enter Internet and Netscape browser. Suddenly here was a complement which monopolized the browser, and MS had no control over it. No wonder MS made IE free (commoditized the web browser) in order to protect itself.

The situation is the same with Google today. Google search is a product complementary to MS Windows and Office. Had there been no major player controlling the search market, it was fine for MS. Google enjoying monopoly in this complementary market is a threat to MS, as is Microsoft’s monopoly in PC Operating System threat to hardware manufacturers’ profitability. No wonder DEC was swallowed by Compaq, Compaq by HP, and IBM sold off PC business to Levono. No one was able to sustain profits in a market where a major complement was fully monopolized.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.