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Microsoft in the People's Republic of China
Term Paper ID:27488
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Essay Subject:
Analyzes the prospects for business success in the People's Republic of China by Microsoft. Focuses on the difficult issues of standardization in the PRC.... More...
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6 Pages / 1350 Words
2 sources, 14 Citations,
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Paper Abstract:
Analyzes the prospects for business success in the People's Republic of China by Microsoft. Focuses on the difficult issues of standardization in the PRC.
Paper Introduction:
Microsoft in the People's Republic of China
Introduction: Making a Buck in the PRC
The PRC is in the throes of making the transition from a command economy to an economy more driven by consumer needs. In the meantime the tendency for government ministries to make managerial and marketing decisions rather than letting private industry make these decisions continues (Khannna, 1995, 3 4).
In order for Microsoft to make a profit in this situation, they must strip their marketing and service aspects to the bare bones. Within Porter's Five Forces Model the entry point for a competitive market is the perceived customer base, followed closely by the suppliers. In the PRC there is a continued tendency for governmental bodies, like the Ministry of Machines and Electronics
Text of the Paper:
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At present Microsoft retains its presence as so provides competitionfor Lotus in the PRC. Philosophically speaking, the PRC sees knowledge asbelonging to everyone. Microsoft is trying to address the best course inmanagerial decisions in order to survive competition in a potentially hugemarket. 864 4). These standard sets also varybetween Taiwan and Hong Kong. Getting the PRC to crack down on pirated softwarehas been a problem. In the PRCthere is a continued tendency for governmental bodies, like the Ministry ofMachines and Electronics Industry (MEI), to act somewhat as quasi-privatesuppliers (Khannna, 1995, 3-4). Gaining some autonomy in the early 8 s, the SOEs and provincialgovernments were able to create some independent business enterprises andthus spurred the entry of multinationals and the need for computers andrequisite software. Either a software layer or "shell" has to be written as aninterface between the initial program and the user or an entirely newinternal representation system has to be written to accommodate the greaternumber of Chinese characters (Khannna, 1995, 2-5). This ties in with the problem of a written language, which isnot so standardized in China as in Western Countries. There is no control of products,supplies, or rivalries in the traditional capitalistic sense (Khannna,1995, 9-1 ).Standardization: Possible Methods of Resolution Microsoft and other multinationals are not in a position to affect theway in which the PRC does business. Hendryx, S.R. Bibliography Khanna, T. Perhaps with the return of Hong Kingto the Chinese fold, a more 'flexible' method of doing business willevolve. Within the PRC there is a real confusion as to therole of industry, government ministries and outside manufacturers insupplying consumer goods. As far as localization goes, Microsoft or any other suppliers ofsoftware must accede to one of two possibilities in order to sell theirproduct. But selling software is still complicated. In order for Microsoft to make a profit in this situation, they muststrip their marketing and service aspects to the bare bones. Simply to put out a lesscomplex and less complete product and let the consumer adapt to the marketat a lower level. Competition within local industry (pirated and legal) had created morethan 1 different shells and 2 different input methods, with no clearstandard emerging (Khannna, 1995, 8).Microsoft's Approach Letting competition do some of their R&D work, Microsoft adapted anoverlay or shell for Windows 3.1 called Chinese Star. Management decidedthat promoting a standardized version of DOS was far easier and cheaperthan providing support for multiple DOS versions and ensuring that futuresystems software releases were backwards compatible with multipleincompatible releases of older localized software. Microsoft in the People's Republic of ChinaIntroduction: Making a Buck in the PRC The PRC is in the throes of making the transition from a commandeconomy to an economy more driven by consumer needs. In doing this, Lotus has allowed the market to come toit, rather than spending money trying to capture the entire market. To some degree rivalry helps drive the process of industrialefficiency and the emergence of consumer driven products. SOEs also have littleautonomy in the command economy, where the state tends to dictate theprices of raw materials, finished products, and the quantities that a SOEhas to produce (Khannna, 1995, 6). Although traditionally in Europe, the America's, and westernized Japanthese principles have come to be almost expected, the PRC is not yetoperating this arena. In Porter's Five Forces Model, competition is fueled by consumerinterest, an adequate supply side sector, and interested new entrants intothe market. Microsoft has estimated that overallLotus has spent about 6 % less on localization efforts than Microsoft(Khannna, 1995, 13). In order to accommodate these more complexcharacter sets, creative ways of interfacing the operating system with theuser had to be developed. In order for Microsoft toprofit in the PRC, they must follow the example of Lotus, which has wastedlittle time trying to accommodate the PRC service sector. Luckily, some of this work had already beenengineered in the development of Japanese software (Khannna, 1995, 2-5). At the top of each sector of economic activity in the PRC there istypically a state owned enterprise (SOE) answerable to the nationalgovernment. The China trade. This creates a roadblock in presentingproduct options to manufacturers and end users. Differentdepartments in a Chinese company might have more allegiance to theircounterparts in the government bureaucracy than they have to departmentsin their own company (Khannna, 1995, 7). As long as the PRC clings to their hybridizedversion of market driven government control, confusion will persist(Hendryx, 1995). Thisis a step Microsoft probably could not have recognized. WithinPorter's Five Forces Model the entry point for a competitive market is theperceived customer base, followed closely by the suppliers. The second issue of standardization deals with suppliers, new entrantsand industry rivalry. What recommendation does this prompt? Inthis regard, Microsoft has used the technique of localization in order togreatly improve the chances that their software will be used.Unfortunately, standardization of Chinese character sets varies between7, and 3, commonly used characters. Accidentally or on purpose, the relative success of Lotus in Japan andChina as compared to Microsoft proves this. Harvard Business Review(Reprint No. A third issue of standardization deals with intellectual property andcopyright laws. The largest difficulty for Microsoft to overcome in the PRC, washow to address not one, but two rather large standardization issues. But efforts to stem piracy have not helpedMicrosoft. (1995). (1995) Harvard Business Review. Where product and services come together at thebottom of Porter's model, a significant rift exists in the way business iscurrently carried out in China. The first issue deals with Chinese language and culture, not generallyhaving been part of the word-processing usage common in the West. Lotus has reliedon the ability of the Chinese to adapt their product (Khannna, 1995, 12-13).Specific Issue: Standardization Within an industry, bench marking or standardization of processes andprocedures are necessary for competition and therefore for profit to bederived. It is difficult for Microsoft orparticipating Chinese partners to maintain interest in a product from whichthey cannot profit (Khannna, 1995, 9).Recommendation Microsoft's difficulties in finding greater success in the PRC dealmore with overestimating the importance of the service sector than anythingelse. A survey in early 1993 showed that Microsoft's FoxPro programaccounted for 65% of its class of programs in the PRC, Microsoft had notsold a single legal copy of FoxPro. This is entirely aservice related problem. Microsoft signed aleasing agreement in November of 1992 with Beijing based China Great Wallcompany which it believed would allow it to spread legitimate copies of MS-DOS (Khannna, 1995, 12). Lotus has spent significantlyless on product development in these countries and has continued to competeor beat Microsoft's market share. pp 1-15. SOEs, like MEI, have a societal mandate, including theprovision of education, housing, and health care. This hascreated difficulty in adapting software (information entry and retrieval)to applications traditionally done in a more laborious style (Khannna,1995, 2-4). In order to capture a significant segment of the growing softwaremarket in the PRC, Microsoft has seen fit to spend considerable time andmoney trying to capture the Products/Services aspect of Porter's Model. Pirating of software practically invalidates two-thirds of Porter's Five Forces Model. In the meantime thetendency for government ministries to make managerial and marketingdecisions rather than letting private industry make these decisionscontinues (Khannna, 1995, 3-4).
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