Windows Phone, Doomed or Pushed to fail? A comprehensive analysis of smartphone market with respect to operating systems and scenario analysis for Microsoft to investigate the possibility of better future.

The whole definition of communication has been changed since the time smartphones introduced to the world. Now these small devices play crucial roles in daily life of people around the world and lots of interactions are happening through them. This means there is a huge opportunity for smartphone manufacturers and operating system developers. Since 2000 until now this market has evolved a lot, operating systems that used to be leaders in the market totally lost their edges and left the market while others join. Microsoft was one of the first entrant in this market and was able to maintain in a good position for a short period of time. This was predictable since Microsoft has a great success and reputation in providing OS for personal computers. Windows Phone had a very good start and a position in the market from 2003-2006 but after that its market share started to decrease and today it’s below 1%. In this thesis we explore reasons behind Windows Phone’s failure. In order to be successful, first we focus on the smartphone market and make a comprehensive model of this market without any biases toward Windows Phone. Later we focus on the weak points of Windows Phone according to the model and apply scenario analysis to find out in what circumstances Windows Phone could end up in a better position. Many endogenous dynamics are happening in this market through factors such as bandwagon effects, network diversity, complementary goods effects and brand loyalty effects. These factors help operating systems to build up their market, meanwhile the OS owners have important decisions to make. Strategic decisions such the license fee of the OS and the level of authority they give to maufacturers to customize the OS based on their needs. These are two very important decisions and have significant impacts on the market share of the OS. Microsoft’s business model in smartphone market is a traditional software business, and as the main source of revenue, Microsoft license Windows Phone to any smartphone manufacturers [1]. Therefore from the beginning they charged manufacturers, further Windows Phone is a closed-source operating system and manufacturers has no authority in customizations. These factors together with the endogenous dynamics are main reasons behind Windows phone’s failure. We implement scenario analysis to investigate results of this competition for Windows Phone under different circumstances and various combination of appropriability and flexibility strategies. Our findings show that by changing appropriability strategy and providing Windows Phone free of charge for device manufacturers, Windows Phone could end up in a better position. But android was still a very powerful rival, because it is also an open-source operating system and it is a very important factor in attracting manufacturers. Further we prove that by changing this strategy at this moment, Windows phone maybe able to increase its market share from 1% to 5% but this is still a very small portion of the market and Microsoft needs an extensive plan and policies in this market if they intend to win