Microsoft in the People Republic of China
Situation:
Microsoft (MS) is losing money in PRC, partly because of the lack of intellectual
property protection in that market and partly because its product (Windows 3.1) can not meet
local customers" needs due to low level of localization.
Since localization of Window 3.1 seems indispensable for MS to succeed in the
promising PRC market, the question for MS is choosing the best localization solution from
the available three choices. These choices are either leaving the market open for Software
Vendors (SV) to localize the product, doing all of the localization by MS itself in Taiwan
(headquarter of Greater China), or adopting an intermediate solution such as localizing in
PRC.
Suggestion:
In addressing this question, I used several criteria as listed in Exhibit 1 to evaluate
these alternatives (Exhibit 1 also listed detailed analyses of each criterion used). My
conclusion, therefore, is that localizing in PRC will be the best choice for MS among all
alternatives as it helps build good government relationships that in turn benefit sales and
competitiveness. Meanwhile, Microsoft can acquire the best product quality by localization in
PRC due to familiarity with the market and convenient technical support. (Exhibit 2)
Among all the criteria used, the political issue, i.e. relationship with the Chinese
government plays the most crucial role, as it has the biggest impact on other factors.
Specifically, a good relationship with the government could: 1) Get the power from PRC
government to build a better legal environment, as piracy software is rampant in PRC market
and it seriously affects MS"s profit. 2) Increase sales, as SOEs and government organizations
account for a big percentage in MS"s total sales. 3) Help MS standardize the software
industry to guarantee its long-term profits. 4) Be decisive in securing Microsoft a competitive
2
advantage, as PRC is still not a totally free market in terms of degrees of government
intervention.
Microsoft (MS) is losing money in PRC, partly because of the lack of intellectual
property protection in that market and partly because its product (Windows 3.1) can not meet
local customers" needs due to low level of localization.
Since localization of Window 3.1 seems indispensable for MS to succeed in the
promising PRC market, the question for MS is choosing the best localization solution from
the available three choices. These choices are either leaving the market open for Software
Vendors (SV) to localize the product, doing all of the localization by MS itself in Taiwan
(headquarter of Greater China), or adopting an intermediate solution such as localizing in
PRC.
Suggestion:
In addressing this question, I used several criteria as listed in Exhibit 1 to evaluate
these alternatives (Exhibit 1 also listed detailed analyses of each criterion used). My
conclusion, therefore, is that localizing in PRC will be the best choice for MS among all
alternatives as it helps build good government relationships that in turn benefit sales and
competitiveness. Meanwhile, Microsoft can acquire the best product quality by localization in
PRC due to familiarity with the market and convenient technical support. (Exhibit 2)
Among all the criteria used, the political issue, i.e. relationship with the Chinese
government plays the most crucial role, as it has the biggest impact on other factors.
Specifically, a good relationship with the government could: 1) Get the power from PRC
government to build a better legal environment, as piracy software is rampant in PRC market
and it seriously affects MS"s profit. 2) Increase sales, as SOEs and government organizations
account for a big percentage in MS"s total sales. 3) Help MS standardize the software
industry to guarantee its long-term profits. 4) Be decisive in securing Microsoft a competitive
2
advantage, as PRC is still not a totally free market in terms of degrees of government
intervention.