26th International Association for Management of Technology Conference - IAMOT 2017

The strategy utilizing direct and indirect network effects has attracted attention. Direct network effects mean that the value of a good for the consumer is positively influenced by an increase in the number of users. Indirect network effects mean that the value of a good for the consumer is positively influenced by an attractive offer of complements. In markets with network effects, the first firm that establishes a large installed base of customers has a decided advantage (Besanko et al., 2013). Thus, once a firm successfully wins a large market share, it is difficult for other firms to capture the market share. However, although the Windows OS-based laptop retained a large market share for a long time in the laptop PC market, where the network effects are typically at work, the Apple Inc. has increased its market share rapidly in recent years. Around the same time, the markets of smartphone and tablet terminal have been expanded rapidly. Owing to an expansion in the range of devices, consumers today seem to be emphasizing on features for syncing and sharing data across tablet, smartphone and laptop, and network services (e.g. App Store, etc.) while making their laptop purchase decisions. Thus, it can be hypothesized that not only the traditional direct and indirect network effects but also network effects from other product markets (smartphone and tablet terminal markets) affect customers’ purchase decisions. In this paper, we attempted to reveal the reason behind Apple’s success in capturing the market share by analyzing the factors that influence customers’ decision to choose between Windows and Mac OS-based laptop. First, a questionnaire probing into the factors that influence the decisions of customers to choose between Windows and Mac OS-based laptop was administered to 800 men and women aged between 20s and 50s. Second, using the questionnaire data, a factor analysis was conducted and five factors regarding the evaluation of laptop (product performance, switching costs, direct network effects, indirect network effects, and network effects from other markets) were extracted. Finally, a logistic regression analysis was conducted to analyze the factors affecting customers’ purchasing decisions. As a result, it was demonstrated that direct network effects have a relatively small impact, while indirect network effects do not have an impact on the laptop market. On the other hand, network effects from other product markets have a large impact. These results suggest that Apple succeeded to make the direct and indirect networks, which were advantage of the Windows laptop, relatively weak by introducing iPhone and iPad and utilizing the network effects from these markets to laptop market. This study showed the reason of behind Apple’s success. Our findings provided important suggestions for market challengers to capture the market share in a market with network effects. In addition, we contributed to a further understanding of the network effects.