The Portuguese Open Source Business Association (ESOP) has published a white paper which aims to explain the problems laptop manufacturers are facing when trying to introduce systems preloaded with Linux to the market. The report, which is titled “Laptop retail oligopoly: the unnoticed digital divide“, analyses the current laptop market with the help of game theory and concludes that it is “bound to a configuration which is not efficient” and does not benefit consumers.
In another publication from January, the organisation had detailed the sales failure experienced by an open source software bundle, which included Linux, that was pre-installed on laptops locally built and marketed in Portugal. The failure of Portuguese retailers to supply these laptops led to the second study analysing that behaviour by the market.
According to ESOP, the configuration of the retail channel for laptop computers imposes a firewall that is very hard to breach for new companies trying to sell innovative products. This is due to “a disproportionate importance of branding and marketing among retailers, which may prevent suppliers from delivering the best products at the lowest price.” The white paper states that in a different market, Linux, which according to ESOP is well suited for desktop deployment and which has an obvious price advantage, would be a natural choice for suppliers to use when building their products. However, this is negated by the small number of established players in both the retail and supply field and the fact that established branding prevents newer products from gaining entry.
ESOP’s analysis reaches the conclusion that while there is no collusion or straightforward anti-competitive behaviour noticeable in the market, the established forces tend have nearly the same effect when it comes to barring innovative products from reaching the consumer. The market configuration seems to impede suppliers who are interested to introduce these products as they tend to be smaller companies that can not compete with the brand recognition of established players. Since this is not in the consumer’s best interest as it prevents them from having a full range of choice in the market, ESOP proposes to evaluate the current European legal framework and change it accordingly as “from the standpoint of consumers and suppliers, the behavior of a small number of dominant retail chains is not significantly different from that of a single retailer.”
The white paper also makes a point to compare these findings in the laptop market with the mobile computing segment. The Linux-based Android operating system has grown to be the most dominant product in this area, but ESOP says this is due to the fact that the smartphone and tablet market is effectively a new market segment and that older markets are more likely to exhibit the aforementioned oligopoly symptoms.
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