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Microsoft In India & China

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Zahir Uddin

on 29 May 2014

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Transcript of Microsoft In India & China

Microsoft In India & China
Overview
Biggest player in Silicon Valley among its major rivals Apple, Google and Sony

Highly Popular with it’s Operating System

Line of Businesses
Size of business & Workforce
4th largest company in US, trade able share of $250.77 billion

3 Segments, service, entertainment and devices employ
approx. 101,914 people

Operating System generated revenue in 2011-12 was around $73.72 billion.

International Context
Established its subsidiaries in many parts of the world

Approaching emerging markets namely in India & China (BRIC)

Expenditure and operating cost will be significantly low compared to European and American region

Ideal geographic position in Asian and Pacific region

Cultural difference between India and China
Part of High power distance culture (Hoftsede’s)
Low uncertainty nations
Indirect communication in Chinese culture
Making products for the local markets for greater accessibility

Tackling piracy, negotiating with local companies
Investment in infrastructure and human welfare
Forming joint ventures, helps with integration
Reaching an agreement with the host countries governments (India & China)

Entry Mode, Strategies and Key challenges
in INDIA AND CHINA

Entry Mode
In china – Formal Entry by Microsoft
High Local Responsiveness- to adapt to the market
Problems with Piracy of 98%
Thought of using the same technique as Japan ( Public Relation Program )
Working Behind Enemy Lines


Challenges
Piracy of 98%
Product Localization
Though salaries were lower in China, cost of infrastructure and travel was much higher than in the U.S
Language Difficulties ( Trying to accommodate Chinese characters in Windows)
Used many Regulatory controls, Raids and Licensing agreement (MOU) with China Great Wall company.
Competition increased with government supported Open software Linux

Strategies
Thought of Partnering with Chinese local partner to localize software development
They would require hand holding, and were cost competitive and may not be committed to foreign company
Microsoft also made plans to invest over $62 million in local Chinese companies.
The alternative was to use established software development facility in Taiwan to create localized products for the PRC.
Microsoft Needed to work with government as closely as possible

India Challenges and Strategies
Used Off shore modeling
Piracy rate of 70%
India was renting its IQ and not creating IP [intellectual property].
Economy that was growing very rapidly
a large population,
a Fast GDP growth rate amongst emerging economies,
Price-sensitive customers

The country lacked depth and perception in its domestic IT infrastructure
Functioning of the central and the state governments was different.
India were governed by multiparty unions, with the governments changing quite often.
The need for software and applications written in local Indian languages.
Competitors such as IBM, Google, and Yahoo, were investing aggressively in China and India.

Internal Organization
Important changes were made to both the field organizations and to the corporate teams involved with China and India
New Chairman was appointed, Timothy Chen ( Former President of Motorola China)
Microsoft China went through a major restructuring exercise
Microsoft committed to sharing the source code of its Windows line of products with 60 governments worldwide for security of the operating system.
In 2006 Microsoft announced multiple initiatives—contract manufacturing, outsourcing, and investments in training and education—worth around $800 million each year for the next five years

Strategies
In both China and India, investment in R&D was turning out to be a major success story for Microsoft
Moved low-end work to India to cut costs
In June 2005, in a breakthrough deal, Microsoft China and the Indian IT services leader Tata Consultancy Services Ltd. set up a software joint-venture company for IT outsourcing services and solutions.
Microsoft also started joint R&D programs with several Indian IT majors like Infosys

Reasons to enter the GCC
Fast growing economic power house
Economy heavily backed by natural resources like oil and gas
Sustainable business sector like tourism taking praise
Becoming highly globalized at an accelerated rate
GCC practices similar business conduct like the westerners
Not heavily taxed like the western countries, which in turn gives western MNCs the incentive to invest in the GCC
Availability of labor and land for plants

Microsoft in the GCC
It has been in the GCC market for some time now
Dubai branch mainly deals with product orientation and taking marketing feedback
It also manages the coordination with fellow GCC divisions to unite the market
These branches usually support Microsoft in tweaking their available products to suit the region

Choosing UAE for GCC operations
Most globalized and demographically diverse market in GCC
Lenient in accepting FDI
Provides easy access to the big markets in GCC
Minimal corruption
Safe place to work, for both workers and companies
Low political risk
Free zones provide good business locations with low to none tax rate
The UAE Dirham is powerful currency, so no fear of currency devaluation
Strict legal system that prevents software piracy will be an asset to Microsoft


Strategy
Global strategy is suitable since it’s cost effective and depends mostly on production, distribution, and marketing.
Keeping eye on the economy, competition, political stability, technology, demographics, and consumer data helps management in decision making.
During the strategy process, the MNC has to consider a few things: access to market, proximity to competitors, availability of transport and power, desirability of outside workers coming to work
The MNC should also have through marketing strategy, the 4 P’s, namely: Product, Price, Place, Promotion.
A well thought strategy will flourish the business in the region.

Structure
Being based in USA, Microsoft could opt Global Area Division structure, where the global operations are organized on global basis.
Advantages are: it shares international and domestic operations at the same level, designated managers for each subdivision, highly accepted by companies that doesn’t have a big catalogue of products.

Entry Mode Choices
Microsoft in UAE could be a wholly owned subsidiary, controlled and run by the main headquarter in USA.
By doing this Microsoft controls all the operations, which in turn gives better efficiency without the hassle of an outside partner.

HR Practices
Human Resource is very important for any business sector, employees are what runs a company, therefore treating them right is beneficial.
UAE is demographically diverse and it comes as a challenge to manage these different cultured people.
Microsoft has to have a training program for its employees and check for adaptability.
Giving compensation and allowances influences the way an employee works.

Conclusion
International business is not an easy task and it takes more than money and willpower to succeed outside the border.
Going international opens doors to profitability, but sometimes there are hardships and obstacles in the way of success.
Political, cultural, and economical issues are of major concern to MNCs.
This course tells us about doing business internationally for the greater good.
Yes, that path is not easy, but only who can look at the bigger picture can succeed in a business venture like this, and there are many.
We’ve learned about how some of the biggest MNCs really became a MNC, case studies gave us a brief tour into the management decisions that have been made to succeed internationally.

Thank you all for listening
Full transcript