Posted: July 19th, 2023

Parliament Probes Technology Price Gouge Analysis

Age of globalization, we must ask ourselves if any companies truly have the need to segment the markets into tiny pieces as they did from 1960-1990? This is particularly true with software products — especially those that neither requires a printed manual (online access) or a hard box and CD for delivery. Movies, games, and other software are priced 50-60% higher in Australia than they are in the United States and Canada, and Australia’s parliament is launching an investigation because it simply does not believe that the costs are so much higher outside the U.S. Time will tell about the consequences, but certainly for Australians, Microsoft and Apple are not the most popular brands on the computer or entertainment center right now.

Introduction

It appears that two American multimillion dollar companies, Microsoft and Apple, are pricing their products at different rates for Australian customers than many other global clients — particularly regarding music and games. For instance, Microsoft’s Office Suite 2010 Professional costs American’s about $350, while Australians pay $849; with similar issues in Apples Services and games. Even with the exchange rate, it looks like these companies charge Australians about 60% more. Australians and consumer watch groups are incensed by this discrepancy. Microsoft and Apple say that the costs are justified because they must set up support centers in Australia, pay local taxes, duties, and support the products (Ngak 2012).

Analysis

The problem with these pricing issues has become so severe that the Australian Parliament is involved. Apple and Microsoft will be among several technology companies asked to explain their pricing behaviors directly to Parliament. Stephen Conroy, Minister for Communications, believes that just because these companies innovate in technology, does not mean they innovate in business models — and clearly, those presented in Australia are unethical and unfair (Peating & O’Rourke 2012).

What is most disturbing and puzzling is that both Microsoft and Apple are global companies with tremendous market share in Europe and Asia — why is Australia specifically targeted for these types of price issues? It costs no more from the bottom line to set up a technology center in Australia than it does anywhere in the world. Moreover, why do support centers need to be brick and mortar? In this age of technology, we know MS and Apple both have a number of support centers in India and other countries that simply accept toll free calls 24/7. The size of the Australian market is also not a viable excuse for price gouging. Australia has about 23 million people who are just as technologically wanting and savvy as Americans and Canadians. Even if we placed a conservative estimate of a market needing 10 million pieces of software, movies, or games, that is hardly a small market for either company — particularly when the materials do not need to be repackaged or retranslated into another language (Population Clock from the Australian Bureau of Statistics 2012).

All software is not created the same, however. For instance, organizations in Australia who want to subsribe to a corporate version of Office, Office 365, must do so through Microsoft or Telstra. Subsrctipions require 250 destops and a more full featured enterprise system. Given the exchange rate, and the technology needed to support these services, a price difference is reasonable (Strant 2012).

Conclusion

Under a capitalistic system, companies generally need to have the freedom to charge according to their own particular needs: ROI, support, staff, demand, etc. In this era of globalization, however, it is not realistic to see markets so separate: one for America, one for Mexico, one for Australia, etc. Instead, with the ease of shipping products, Internet delivery, and even systems that come pre-loaded, the marketplace has shrunk to a more level playing field. Governmental inquiry into pricing systems will continue if companies do not remain competitive and fair to consumers; in Australia this is most certainly not about capitalism or socialism — it is about the morality of price fixing, price gouging, and product availability.

Leadership

Globalization has had a tremendous impact on society at large. Organizations continue to expand geographically to attract and retain new customers. These customers, are unique in their culture, values, and aspirations. As such, what once worked in a developed nation such as America, may not necessarily work in an emerging nation such as India. Collective leadership is therefore needed by businesses around the world to navigate a dynamic market environment. Two aspects of collective leadership will be paramount for business growth. Relying on a team environment and the establishment of mechanisms to share power are integral to success. Gone are the days of power among a select few individuals. The business environment now demands more collaboration among all stakeholder groups in an organization.

Relying on a Team

One particular project, currently underway within the financial services industry, is process optimization. 2008 ushered in an overabundance of financial reform and regulation. Legislation such as Dodd-Frank, Basel III, and the Durbin Amendment now require financial institutions to rethink their operating strategy. Many firms have responded with restructuring projects aimed at reducing cost, while increasing compliance with large amounts of regulation. One such company I’m familiar with is that of Bank of America (Lewis, pg.110- 116).

Currently the company is engaged in a restructuring program designed to streamline the company and make operations more efficient. This project, in order to be successful will require a massive amount of collective leadership. Simply due to its sheer size, collaboration and reliance on teams is a necessity. As indicated in the text, a well performing team often creates synergies for the firm. Through the use of the 5 Stage Team Development Model, ideas notions and concepts that benefit the organization can be derived. Bank of America uses this development model to help provide solutions to many of its financial problems. For instance, the firm created a compliance committee designed to help the bank navigate through an onslaught of new regulation. As the text illustrates, this team has less than ten members, helping to create a high performance team. These members are assigned to compliance tasks full time, with a compelling objective. Since the group’s inception, the bank has one of the highest Tier 1 capital ratios (a measure of the ability to weather an economic downturn) out of its large bank peers. Through the use of teams, the organization can also gain experience and objectives it might not have otherwise obtained without them. Culture for instance, is particular important on a team, as different perspectives can enhance the overall decision making process. Different perspectives, particularly on efficient teams, can become a competitive advantage, as indicated by the compliance committee example above.

Establishment of Specific Mechanisms for Sharing Power

The second concept mentioned was that of shared leadership and power. A large organization such of Bank of America requires shared sacrifice and commitment. As the text states, teams need to keep each other informed, don’t let members vanish, and establish a code of conduct. Leaders, on all fronts are needed to properly address these issues. Bank of Amierica, for instance, utilizes team leaders, and cross functional teams. These teams are comprised of leaders from various departments, all required to work together to achieve a common objective. Through shared responsibilities of leadership and power, synergies are derived that ultimately benefit the organization. For example, leaders from the finance, compliance, accounting and marketing department all comprise a cross functional team. These teams are charged with creating a seamless and more enjoyable customer experience for retail customers. Each individual in the cross functional team has an expertise that is relevant to the overall objective. As such, collaboration and shared leadership is needed to help obtain the objective (Paul, pg 35- 42). According to a recent earnings presentation from Bank of America, through the use of cross functional teams, the company has eliminated risky businesses, innovated products such as prepaid debit cards, and enhanced online and mobile applications. All of these decisions through shared leadership help the company grow and development. The proof is in the stock price of the company, which has gained nearly 40% since its lows of 2013.

References:

1) Paul C. Dinsmore et al. (2005) The right projects done right! John Wiley and Sons, 2005. ISBN 0-7879-7113-8. p.35-42

2) Lewis R. Ireland (2006) Project Management. McGraw-Hill Professional, 2006. ISBN 0-07-147160-X p.110- 116

Ngak, C 2012, Apple, Microsoft probed for allegedly price gouging Australians, viewed May 2012, < http://www.cbsnews.com/8301-501465_162-57424370-501465/apple-microsoft-probed-for-allegedly-price-gouging-australians

Peating, S & O’Rourke, J 2012, ‘Parliament Probes Technology Price Gouge’, the Sydney Sun Hearld, 29 April 2012, p. 11, viewed May 2012.

Population Clock from the Australian Bureau of Statistics 2012, viewed May 2012, < http://www.abs.gov.au/ausstats/[email protected]/0/1647509ef7e25faaca2568a900154b63?opendocument

Strant, L 2012, Why Australians pay double for Office 365, viewed May 2012, <

http://www.boxfreeit.com.au/Blog/why-australians-pay-double-for-office-365.html

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