Microsoft Expansion

All businesses go through an expansion period, and recently, technology giant Microsoft has begun to expand again. On May 10, 2011, Microsoft bought Skype for $8.5 billion. This expansion allows for many more consumers to get the benefits that Microsoft has to offer. Skype had over 170 million users at the time of the purchase. This influx of consumers for Microsoft will surely increase demand for other Microsoft items. For example, Microsoft is thinking about offering Skype on the Xbox Live Marketplace. While it’s a stretch, this may provoke people to buy the Xbox game system if they were originally a PS3 person. However, many of the other gaming systems don’t offer this level of social networking, which is a major factor these days in purchasing game systems. This will create an increase in demand, which in turn will drive prices to equilibrium. Since an increase in demand is an outward shift of the demand curve, equilibrium would drive prices higher for Microsoft products, thus providing the opportunity to gain more profit, which is the goal of all businesses and firms. Skype is also going to be offered on Windows phones. So not only is Microsoft’s purchase going to show up in the gaming community, but it’s also going to show up in the general community. This is going to increase demand for Windows phones. And if equilibrium is reached, then prices for Windows phones will go up, maximizing Microsoft’s profit.

-Mark E.