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. Question 1.
What were the main risks faced by
Microsoft in both China and India? How
did these affect
Microsoft’s performance?
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. 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. Question 2.
How – and for what reasons – did
Microsoft adapt its usual business
model to China and
India?
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. Inter-Firm Relations
Why should Microsoft adapt?
Government
Management and
Culture
Talent
Value Proposition
Key Uncertainties
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. 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
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
14. Adaptations for China / India
Multipoint Computer
Windows Starter
RFID Adaptor
Fone +
15. Question 4.
What lessons can other companies
learn from Microsoft’s experiences in
these two emerging economies?
16. China/India: Lessons Learned
Piracy‘Global’ Knowledge
Local Management
Ignorance to Culture
Government Support
Community Support
Institutional Support
Product Selection/Pricing
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. 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. 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
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
