Netscape, which once controlled more than 80 percent of the market share in Web browsers, lost its dominant position when customers migrated to Internet Explorer, Microsoft's Web browser. Internet Explorer was easy to install and had no significant differences in terms of usability. This example serves to illustrate that:
A) fast-following smaller firms are always ready with newer and possibly superior products.
B) customers of technology companies are becoming increasingly savvy and more demanding.
C) the open source nature of technology ensures that no firm can expect to monopolize a market.
D) firms need to employ increasingly stringent intellectual property norms to guard against infringements from smaller, competitive rivals.
E) firms with low switching costs can be easily and rapidly overtaken by strong rivals.

Question

Quizplus · Accepted Answer

Netscape's loss of dominant market position to Internet Explorer highlights the importance of low switching costs for customers. When a strong rival enters the market, customers can easily switch to their products if the costs of doing so are low. This makes it important for firms to focus on retaining their customers by offering superior products and services.

Netscape, Which Once Controlled More Than 80 Percent of the Market