Rochelle Ruffer and Don E. Waldman
In July 1975, Bill Gates and Paul Allen started a company, known as Micro-Soft (the hyphen was later removed). The market for personal computers was in its infancy but Gates and Allen believed personal computers would play a great role in the future. This ability to forecast the future has been a continuing theme in Microsoft's growth. There were many key moments in Microsoft's history when Bill Gates anticipated the future and took the path towards innovation and success. Only time will tell whether Microsoft will remain a dominant firm, but certainly if the first twenty years are any indication, Microsoft will be a dominant player in the operating systems and software markets and many newly emerging markets for some time to come.
This chapter begins with a brief introduction to Bill Gates's life and how his early experience with computers helped to make him a successful entrepreneur. We then examine the issues behind Microsoft's rise to power, and in particular the emergence of the MS-DOS and Windows operating systems. We will see that a vision for the future, luck, hard work, the use of various marketing and business strategies, and network externalities all played a role in Microsoft's rise to power. Microsoft's maintenance of power is then analyzed. Microsoft's continued success can be attributed to its aggressive management style and various strategic behaviors in the announcement, licensing, and pricing of products. Finally, the outcome of the government antitrust action against Microsoft is considered and assessed.