International Business Microsoft

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  • To define if Microsoft’s ventures into China and India were a success you first need to need define the way that success is measured
    If measured upon Share Price/Finance you would likely say that it wasn’t a success
    If measured upon portfolio and expansion and the serving of new markets with high potential, then it was a success
    If measured upon diversification of portfolio to develop a sort of ‘freemium service’ it was a success
  • To define if Microsoft’s ventures into China and India were a success you first need to need define the way that success is measured
    If measured upon Share Price/Finance you would say it is “yet”
    to be a “Significant” success (5% of global sales but 3 fold increase in the last 3 years)
    If measured upon Market Expansion/Global Diversification, then it was a success (China: “Best Large subsidiary”, India: “Best Emerging Subsidiary” in the Microsoft annual global sales meeting 2006)
    If measured upon Product Portfolio Diversification (development of a type of localised produts for china and India)
    Increase in favourable legislation (March 2006: 3 government agencies requiring all PCs to be pre-loaded with Windows
    In 2003 Microsoft GSP Government Security Programme to share source code of Windows products to 60 governments of the world to win the trust of them.
    Hu Jintao having a personal endorsement of Microsoft relationship and Indian Chief minister creating a PP presentation
  • 3 Research centres (IDC – Hyderabad, MSRI – Bangalore, MSRA – Beijing)
    RFID – from IDC, Fone+ from MSRA, Multipoint computer – from MSRI
    Different versions of MS Windows ($3 XP Starter with office etc)
    PAYG scheme for Indian PC users
    * Formed strategic partnerships with local IT companies to win local contracts for IT projects. e.g. won the Bank of China account for IT outsourcing.
  • Local Management
    Ignorance to Culture
    Government Support
    Global Knowledge
    Piracy
    Community Support
    Institutional Support
    Product Selection/Pricing
  • Lessons are not only applicable to other companies but to Microsoft too
    Recent Nokia acquisition possibly links in with further developments into African markets (Microsoft/Nokia with Safaricom)
    Microsofts approach and lessons could also be adopted to other developing (or not yet developed) markets
  • International Business Microsoft

    1. 1. Presenters 8606323 – Stephen Baines 8613592 – Christopher Reed 8370215 – Sherveen Shamsedeen 8623962 – Nina Khade 7457289 – Kayode Adams Workshop Assignment Workshop Date: 6th September 2013 Microsoft
    2. 2. Question 1. What were the main risks faced by Microsoft in both China and India? How did these affect Microsoft’s performance?
    3. 3. Risks and Impact Risk Political Economic Commercial Operational Lack of Government Preparedness deal to with business problems Uncertainty and lack of transparency in Government regulations and policies Security concerns of the Chinese Government (Request for open source code and free software) Multiparty coalitions in India Instability in Government regimes Piracy (98% piracy rate in China and 70% in India) Product Localization (Chinese Character range between 7000 to 13000 and 18 Languages in India) Complicated process to sell software in China (SOE and Government ministries) Retention rate of Software engineers Protection of Intellectual property ( issues with localization exercise) Technology gap Pricing (Cost sensitive customers) Alignment with local firms (OEMs) in terms of partnership Cost of doing business Forms of Country Risk (Study Guide, 2012)
    4. 4. Risk Impact on Microsoft performance Lack of Government Preparedness deal to with business problems Business System Alignment (Government) Uncertainty and lack of transparency in Government regulations and policies Business System Alignment (Government) Security concerns of the Chinese Government (Request for open source code and free software) Business System Alignment (Government and cooperate governance) Multi-party coalitions in India Business System Alignment (Government) Instability in Government regimes Business System Alignment (Government) Piracy (98% piracy rate in China and 70% in India) Reputation and Business system (Culture) Product Localization (Chinese Character range between 7000 to 13000 and 18 Languages in India) Business System Alignment (Employee Stakeholders) Complicated process to sell software in China (SOE and Government ministries) Business System Alignment (Cooperate governance, financial system) Retention rate of Software engineers Business System Alignment (Employee Stakeholders and firm) Protection of Intellectual property ( issues with localization exercise) Business System Alignment (Firm) Technology gap Business system Alignment (Education system and Public reseacrh institute) Pricing (Cost sensitive customers) Business system Alignment (Firm) Alignment with local firms (OEMs) in terms of partnership Business system Alignment (Firm) Cost of doing business Business system Alignment (Firm) Risks and Impact
    5. 5. Question 2. How – and for what reasons – did Microsoft adapt its usual business model to China and India?
    6. 6. Microsoft’s Business Model Developed Economies (U.S / Europe) Emergent Economies (China / India) Corporate Governance Collaborative – based on long term strategy Fragmented – based on short term strategy Government Strong relationship with the government is not needed. Standard Microsoft Policy's China’s weak IP enforcement law (Piracy). Free open source Linux system Employee Stakeholders Global focus Engagement - locals who act globally Education System Established Local Educational Practices Public Research Institutes Internal Collaborative – tapping into local knowledge. Level: •Macro: How Microsoft China/India fits in with the wider Global business system (Global best practice adaption) •Micro: How Microsoft China/India fits in with the local business system (investment in talent, businesses etc)
    7. 7. Inter-Firm Relations Why should Microsoft adapt? Government Management and Culture Talent Value Proposition Key Uncertainties
    8. 8. How Microsoft Adapted? Appointment of Chen in China & Venkatesen in India Major restructuring exercise of China and India organisations across the world Partnering close with the government instead of fighting it Investment in Research and Development ‘Good, Better, Best’ product positioning
    9. 9. Firms in Less Developed Economies Business System Applied Lessons Taylorist Paternalist Artisanal Patriarchal Task Fragmentation High Limited Low Limited Work discretion and involvement Low Considerable High Low Manager control of work organisation High High Shared High Separation of management from workers High Medium Low High Organisational careers Limited to Managers Include skilled workers Limited Negligible Rewards tied to Standard jobs Individual performance and commitment Skills and Personal Evaluation Personal Evaluation
    10. 10. Question 3. How successful in China and India were these adaptations for Microsoft?
    11. 11. Measuring success in China and India It Depends how you measure it… If Share Price/Finance, you would say it is “yet” to be a “Significant” success If Market Expansion/Global Diversification, then it was a success based on realization of market potential If Product Portfolio Diversification, it was a success. New products for China & India If Government relationships (favorable legislation enacted) it was a success based on expanded relations
    12. 12. China/India: Microsoft’s Approach (MBS CIB Study Guide, 2013) pp. 106
    13. 13. China/India: Microsoft’s Approach (MBS CIB Study Guide, 2013)
    14. 14. Adaptations for China / India Multipoint Computer Windows Starter RFID Adaptor Fone +
    15. 15. Question 4. What lessons can other companies learn from Microsoft’s experiences in these two emerging economies?
    16. 16. China/India: Lessons Learned Piracy‘Global’ Knowledge Local Management Ignorance to Culture Government Support Community Support Institutional Support Product Selection/Pricing
    17. 17. China/India: Lessons Learned • Local Management is highly important to instil local knowledge (Image 4) • Timothy Chen (China) and Ravi Venkatesan (India) • Instil a local culture to the company, do not ignore it • “Our natural instincts did not transfer over well to the different environments in China and India” - Mundie • Cannot ignore the importance of the Government(Image 1) • “We now need the whole (of Microsoft) cabinet to pull it through!“ - Mundie Local Management Ignorance to Culture Government Support Global Knowledge
    18. 18. China/India: Lessons Learned • Some risks should also be treated as opportunities and not just threats • Support of Universities and other Institutions would create future opportunities and enhance the community support (Image 3) • Coordination with institutions would develop future talent • Localised R&D would implant local knowledge/experience into product development • Brand is key. Microsoft needed to embed themselves in the community • Developing/Selling/Marketing the right products to the right people Piracy Institutional Support Community Support Product Selection/Pricing
    19. 19. China/India: Lessons Learned "Our natural instincts did not transfer over well to the different environments in China and India, so we had to learn quickly. My role was to be the executive who thought of things outside of the ordinary. But from now on, having the secretary of state (of Microsoft) rally behind the plan for China and India will no longer be good enough. We now need the whole (of Microsoft) cabinet to pull it through!“ - Mundie Original Approach Adapted Approach Parent- Country HQ/ Operations China India
    20. 20. Questions?

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