Microsoft in China   Term Paper ID:27276 Click to get this paper

Essay Subject: Examines some of the economic variables confronting Microsoft in exporting software to China. Variables discussed include growth rate of China, stability of global economy, growth in the computer industry, & cost of piracy & tariffs.... More...

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Paper Abstract: Examines some of the economic variables confronting Microsoft in exporting software to China. Variables discussed include growth rate of China, stability of global economy, growth in the computer industry, & cost of piracy & tariffs. Paper Introduction: ECONOMIC VARIABLES There are a number of economic variables Microsoft must consider in assessing the viability of importing software into China. These variables include the growth rate of the Chinese economy, the stability of the world economy, growth in the computer industry specifically, and the cost of such problems as piracy and tariffs. ECONOMIC FORECAST The year 1996 in China was the "Year of the Rat," a particularly auspicious sign in traditional Chinese culture. It was also the year when China launched its next FiveYear Plan aimed at modernizing the infrastructure. American companies are involved in this process in the construction of power plants, Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. or Europe or Japan (Schlender, 1997, 214).Indeed, the developing economies of Latin America, Eastern Europe, Africa,and Asia now account for nearly 1 percent of Microsoft's overseas salesand are by far the company's fastest-expanding markets. If theoverall China economy keeps growing--a 12 percent jump in gross domesticproduct is forecasted for 1997--disposable income will rise as well(Robertson, 1996, 2). (1996, January 11). The huge population is one reason why this remains an important targetmarket for all hardware and software companies that can try to make inroadsin the Chinese system. If these companies are encountering problems, the risks are evengreater for a software company like Microsoft given the ease with whichsoftware can be copied and pirated. ECONOMIC VARIABLES There are a number of economic variables Microsoft must consider inassessing the viability of importing software into China. He makes a point ofvisiting China at least once a year, and he states about countries onlybeginning to use PCs: That's where we'll get a lot of our growth in the coming years. McDonald's isbeing evicted from its prime site in Beijing in spite of having 17 yearsleft on a 2 -year lease, and Lehman Brothers is suing two statecorporations for failing to pay nearly $1 million of losses in foreign-exchange trading. Distribution systems are a problem in many developingregions, as are transportation and telecommunications infrastructures. the risks are rising in China." Fortune,p. To make this work,Gates hires mostly local managers to run operations. From 1993 to 1995, U.S.corporations poured nearly $4.3 billion into China, and what might slowthis flow of investment are the prominence of the companies running intotrouble, the size of their potential losses, and growingawareness of just how deeply rooted China's problems are. ECONOMIC FORECAST The year 1996 in China was the "Year of the Rat," a particularlyauspicious sign in traditional Chinese culture. In this way, the foreign staff canbe kept small but effective--each overseas employee generates more than $1million of revenue (for the entire company, the figure is about $5 , per employee). North America still accounts for thesingle largest portion of Microsoft's sales, but global markets arecatching up thanks to explosive growth. Among the other risks are galloping inflation at 21 percent or soper year, erratic policy shifts, rampant corruption, a penchant fortreating contracts as disposable, or the imminent prospect of the evengreater turmoil that might ensue following the demise of 9 -year-oldsupreme leader Deng Xiaoping. Among the reasons why Microsoft is able to do this is the fact thatsoftware products are so easy to manufacture and ship, so no factories needto be built. Still, the percentage of people in China who can affordPCs is much lower than in major industrial countries, but even a smallshare of a population of 1.2 billion still is a major market. The strongest competition faced by U.S. The growth is relativelysmall in terms of numbers given the fact that China had virtually no PCs afew years ago, but if the market continues to grow at 5 percent a year,Chinese sales will soon make significant contributions to the bottom lineof U.S. The most extreme example is in China as Microsoft's staffof 7 works with hundreds of budding software companies and a legion of15, certified resellers (companies), a number that could double thisyear (Schlender, 1997, 214). References Kraar, L. These managers areknowledgeable about their home markets and create partnerships with smallcompanies that sell Microsoft products. Also, PCs are cheap and easy to set up,unlike mainframes andminicomputers, and businesses and governments in even thepoorest and most backward nations can afford them (Schlender, 1997, 215). Martin, C.M. In 1996, it was stated that sales were expected togrow 5 percent for a second year in a row and that the United States hasan overwhelming lead in selling PCs in that country. Microsoft faces other challenges--thecompany must adapt its products to support dozens of different languagesand writing schemes, a task it is increasingly farming out to localcontractors. MARKET DEMAND The computer market in China has been increasing at a tremendous rate. It was also the year whenChina launched its next Five-Year Plan aimed at modernizing theinfrastructure. (1996, October 14). "China's PC bonanza." ElectronicBuyer News, p. American companies are involved in this process in theconstruction of power plants, telecommunications systems, ports, railroads,airports, and light rail transit, with the support of the U.S. Schlender, B. and Canada | || | ||REVENUES $7.89 billion [2] | || | ||[FAR EAST] |15.2% || | ||[INTERCONTINENTAL] |32.3% || | ||[EUROPE] |9.4% || | ||[NORTH AMERICA] |15.2% || | ||Fast-growing markets | || | ||LATIN AMERICA |5 % || | ||AFRICA/MIDDLE EAST/MEDITERRANEAN |55% || | ||EASTERN EUROPE |4 % || | ||INDIA |65% || | ||SOUTHEAST ASIA |55% || | ||CHINA |1 % |[1] Fiscal year ends June 3 .[2] Does not include $3.47 billion of software sold directly to computermanufacturers. companies. (August 18, 1997). Some Japanesecompanies have been making progress in challenging American PC dominance inother parts of the world, they have made little progress in computing inChina. These countries are only just getting started buying PCs in big numbers. 2. These variablesinclude the growth rate of the Chinese economy, the stability of the worldeconomy, growth in the computer industry specifically, and the cost of suchproblems as piracy and tariffs. Government.In 1995 on the occasion of Secretary Ronald Brown's visit, the U.S.-ChinaJoint Commission on Commerce and Trade (JCCT) established a Steering Groupwhose job is to identify viable infrastructure projects in which U.S.exporters can participate (Martin, 1996, 11). Robertson, J. 179. And because they usually don't have lots of legacy systems already in place--you know, mainframes and minicomputers--we have a chance to have an even bigger share of the overall computer business than we do in the U.S. Inaddition, software, like computers, faces stiff tariffs in many developingcountries. INTERNATIONAL RISK Doing business in China entails a risk for any international company,as with the flagrant piracy committed by the Chinese, seen as the latestevidence "of the growing and increasingly visible risks confronting Westernand Asian companies doing business in the People's Republic" (Kraar, 1995,179). 214-215. companies. The view of the economy held by Microsoft is of assured growth, andthey have the figures to prove it. (1995, March 6). (Kraar, 1995, 179-18 ). The nature of the growth can be ascertainedfrom the following chart showing growth for the company:| | ||GROWTH BY REGION |Increase in Revenues || |1996-97[1] || | ||FAR EAST |33% ||Japan, South Korea, China, Hong Kong, and Taiwan | || | ||INTERCONTINENTAL |32% ||Latin America, Southeast Asia, India, Australia | ||and New Zealand, the Middle East, Greece, and | ||Turkey | || | ||EUROPE |28% ||Including the former Soviet Bloc | || | ||NORTH AMERICA |26% ||U.S. companies still comes fromsmugglers of PCs made by the legions of small assemblers in Southeast Asiaand, to a lesser extent, by U.S. Instead, Microsoft contracts out to others to duplicate andpackage much of its software. The biggest problem is still piracy, and in Eastern Europe,China, and much of the rest of Asia, more than 9 percent of the copies ofsoftware in use are pirated (Schlender, 1997, 214). Some individual countries, likeChina, are expanding by 1 %. Bill Gates has been preparing for an assault on China for some time,along with an assault on the rest of the world. "For many American companies, 1996will be 'The Year of the major project' in China." Business America, pp11. Yet, these are not seen as undercutting thelong-term logic driving businesses to stake a claim in what could within 15years become the world's largest market. "smart managing: Microsoft: FirstAmerica, now the world." Fortune, pp. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.