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Microsoft in China

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Nicolas Dittgen

on 24 November 2014

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Transcript of Microsoft in China

in China

Verena Fisel, Nicolas Dittgen, Verena Moll, Nurali Abdukhalilov
Case Summary
History of Microsoft
Industry-based view: Why does Microsoft feel threatened by Linux?
In China
Buyer's bargaining power:
MS fought against pirated versions: this led to a declining image
Microsoft is a US company: Suspicions of spy ware; government supports Linux
globally, almost every PC which is sold includes Windows as OS - with nearly no higher costs
Industry Competitors
Porter's Five Forces
low threat of substitutes
only Apple's OS is a real substitute on the global market but the hardware is on average more expensive
people cannot justify higher costs
Linux is for free, but very technical, however, popular in China
Potential Entrants
development of alternative software industry: more local, low cost rivals
globally relatively low threat of new entrants
new competitors would have high financial costs; lack of knowledge; suspicions of new consumers and lack of trust
What are the global consequences?
"Given the size of the country, changing the China strategy would inevitably lead to changing the global strategy."
(Peng 2013, p.28)
Resource-based view: What valuable resources and capabilities does MS have?
Chinese People
cost advantage: $3
R&D investment
- attract talented employees
"That famous picture that provides indisputable proof that your average computer geek from the late 1970s was not exactly on the cutting edge of fashion."

(Bill Gates)
24th November 2014
founded by Bill Gates and Paul Allen in 1957

release of Word in 1983

first Windows version in 1985

Microsoft Office in 1989

market share of over 90% in personal computers; Apple OS 5%; Linux 1 %

New Market : game consoles with their Xbox and acquisition of Nokia's smartphone business

October 2014: first preview of Windows 10
Institution-based view: What are the major lessons from MS's strategic changes?
Why is it hard to change a strategy?
How are strategic changes made?
Ethics: MS's answer to free speech and human rights
Conclusion: main lessons learned
you cannot have a "one-size-fits-all" strategy: flexibility
adaptation to social structure and respect of local culture and values
interpersonal relationships are important when doing business
long term commitment:patience
strategy is the company's identity
persuasion of employees is needed
risk of losing customer's loyalty
cost and time intensive
managers don't want to acknowledge their failure
new strategy might fail

final review
affair of
Chinese government
withdrawal of Chinese
market leads to
loss of jobs
benefits for Chinese people
due to R&D investment:
R&D centers etc.
http://www.blogjoy.de/tag/microsoft/page/2 (last retrieved 16.11.2014)
good relationship with the government: matching 5-year-plan
political censorship: manipulate search engine
know your strengths and weaknesses
respect of cultures and flexible attitude: consideration of ethical aspects
think globally, act locally
watch your competitors

1995: difficult development of MS in China: pirated versions
2007: "You are a friend of the Chinese people and I am a friend of MS." (Hu Jintao)


MS changes pricing and partners with government, builds research centers, trains professionals
2003: MS accepts pirated versions
Case Study: Peng, M. W. 2013. Global Strategic Management. 3rd International Student Edition, pp. 27-29
South China Morning Post (pictures)
YouTube: MS in China
(all last retrieved 16.11.2014)
http://www.scmp.com/news/china/article/1561233/microsoft-china-placed-under-probe?page=all (last retrieved 16.11.2014)
http://4.bp.blogspot.com/-mxQs9SP-tRk/UDeFHZkzOnI/AAAAAAAAAMQ/ALSjtts1jwQ/s1600/ms-logos-changes.jpg (last retrieved 16.11.2014)
http://www.forbes.com/ (last retrieved 16.11.2014)
http://blog.jonahkessel.com/tag/free-speech/ (last retrieved 16.11.2014)
case summary
history of MS
why does MS feel threatened by Linux?
MS's resources and capabilities
major lessons from MS's strategic changes
why is it hard to change a strategy?
free speech & human rights
short discussion
single-party-state governed by the communist party

1949 - 1978: soviet-style planned economy

1978: economic reforms to a mixed and market-orientated economy

China is one of the fastest growing economy in the world

today there is a market economy based on private property ownership

low threat
all resources are offered by different suppliers
vice versa: the suppliers are not dependent on Microsoft
"The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."

Skript "The Concept of Global Strategy", p.10
hard to imitate
effectively organized

laws regulations rules

norms culture ethics
What do you think about the fact that Microsoft allows political censorship within its software?

Do you think Microsoft needs the Chinese market?
Full transcript