1.(20 points) Microsoft has enjoyed a sustained competitive advantage with Microsoft Office - an office suite of desktop applications for Microsoft Windows (and OS X) operating systems. Microsoft Office includes applications such as Word, Excel, Power Point, and Outlook.

a.Usenetwork externality theoryto explain why Microsoft Office dominates the market of desktop applications.

b.Assessnetwork intensityin this market (1. strong, 2. medium or 3. Low). Based exclusively onnetwork intensity, do you expect competitors such as Apple (iWork) and Google (Docs) to erode Microsoft Office's competitive advantage?

c.Explain how the control-openness tradeoff might impact Microsoft's competitive advantage.