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 sometimes be rapidly overtaken by strong rivals with additional competitive advantages.

Question

Quizplus · Accepted Answer

The example shows that despite having a dominant position, Netscape lost its customers to Internet Explorer because customers found it easy to switch to the latter and there were no significant differences in usability. This demonstrates that firms with low switching costs can sometimes be rapidly overtaken by strong rivals with additional competitive advantages.

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