Strategic Marketing

Assignment 1: How Microsoft conquered China

Students are required to:

Mention and elaborate key take ways from this article in terms of strategic standpoint for
businesses while going on for a quest in international markets.

Microsoft was founded in 1975, with the mission to enable people and businesses throughout the
world to realize their full potential by creating technology that transforms the way people work,
play, and communicate. They develop software, services, and hardware devices that deliver new
opportunities, greater convenience, and enhanced value to people's lives. They do business
worldwide and have offices in more than 100 countries.

Microsoft generate revenue by developing, licensing, and supporting a wide range of software
products and services, by designing and selling hardware devices, and by delivering relevant
online advertising to a global customer audience. In addition to selling individual products and
services, they offer suites of products and services.

In 2007,Microsoft Chairman Bill Gates took a victory lap in China, and Fortune magazine's

David Kirkpatrick went along for the ride, writing an account of the trip and an excellent
synopsis of Microsoft's rocky path to success in China in a piece called "How Microsoft
conquered China".

Microsoft obviously subscribes to the latter. But its primary motivation seems to be that there's a
lot at stake in China and it must have a strategy to compete in China if it wants to continue to
lead the software market. As a result, Microsoft has taken an apolitical stance.

 As for the price of Microsoft software worldwide, Gates has admitted that the gap
between the price in China and the price for the rest of the world will naturally meet in
the middle over time. In other words, Gates wants to eventually charge China more and
realizes that Microsoft won't be able to keep charging everyone else so much. For
analysts who have said that Microsoft's best strategy for combating software piracy in
the U.S. is not with product activation but by simply charging less for the software, this
was great news and a little bit of vindication.
 Microsoft has done well out of software piracy: it helped products become widely used,
and as the market matures, people started to pay for their software. And this has been a
major factor in Windows beating Linux in China, as Bill Gates admits.
 Microsoft has expanded its business across the country under its strategy of long-term
investment and development. Today, our most complete subsidiary and largest R&D
center outside the United States is in China. Microsoft has been working closely with
customers and industry partners to realize innovation and both localize and land
Microsoft technologies and solutions in China. In early 2015, Microsoft was awarded
“The World’s Top 10 Most Innovative of 2015 Companies in China ” by Fast Company
 magazine due to its local product strategy and commitments to helping Chinese partners,
and was included as one of ” The Companies Remaking The Chinese Economy”.
 Microsoft is committed to Chinese customers and to enabling their success, supporting
customers at the enterprise, city, provincial and national levels. Microsoft also attaches
great importance to its social responsibilities and has been active in giving back to the
local communities in which it operates. This includes supporting education and training
initiatives, promoting innovation and local economic development and assisting in
building a secure and open computing environment.

Microsoft had to face various disaster while ongoing its business in China. Those doctrines that
led Microsoft to success in USA and Europe didn’t make sense in China as Microsoft had to lose
its maximum revenue to learn to do business in China.

Considering the above article, some of the strategic standpoint for businesses while going on for
a quest in international market is as follows:

1. Political Strategy: This environment includes the type of government and its laws, policies,
and regulations that prevail in an economy. While doing business in other countries, the
business owners consider the relationship of government with businesses and the political risk
that prevails in that country.

Microsoft, during its initial phase didn’t consider all those political values that led them to
increase market share but not market revenue. Understanding all those criteria, they focused on
closely partnering with government. Every multinational company faces challenges in making
itself welcome in China, but Microsoft's history and position in the world's IT industry has
created hurdles higher than most.

2. Establish social responsibilities: Microsoft was committed to Chinese customers and to

enabling their success, supporting customers at the enterprise, city, provincial and national
levels. Microsoft also attaches great importance to its social responsibilities and has been active
in giving back to the local communities in which it operates. This includes supporting education
and training initiatives, promoting innovation and local economic development and assisting in
building a secure and open computing environment. The company planned to redirect some of
its focus on products and customer service to promote its projects and investments in China.

3. Value-added product Strategy: Pricing based on value is effective when thought out and
planned. Microsoft committed to conduct customer research regularly as customers values will
change over time. The one thing Microsoft do is to make sure that their business model and
mission really help customers achieve what they are trying to achieve with technology. Microsoft
played very important role to deliver its product and services in China with high risk and return.
4. Technical Strategy: This environment relates to technical up gradation and advancement in
adopting new technology and methods for manufacture or production. The level of success of a
business depends upon the level of acceptance and usage of technological innovation in different
countries. Technical advancement helps the business to gain competitive advantages and firms
these days, even transfer the technology globally to be competitive in global terms.
For Microsoft, Mundie decided to help China develop its own software industry as well as
improving the protection of its intellectual property.

5. Global pricing Strategy: Microsoft strived for consistency in its global pricing, but there were
various factors that affect the final price of a product. Smart entrepreneurs know that the price
of a product should match the size of the customer's budget rather than the cost of the item's
production. For instance, there may be no difference in selling an online service in the UK
versus selling the same service in Kenya - what matters is the vast differences between customers
who are purchasing that same service across both countries. While introducing the products,
Microsoft charged the same price in China as they charge in the U.S and Europe but the
Chinese market was filled with counterfeit copies of Windows operating systems and Office
applications which were sold on the streets for a few dollars. The huge gap between hundreds of
dollars and few dollars made Microsoft's sales fail in no time.

6. Broad Differentiation: Broad differentiation involves unique products sold to a wide variety of
customers. In this case, Microsoft’s products are unique in terms of features, such as software
products specifically designed for business organizations. Also, this generic competitive strategy
is broad in the sense that the company sells its products to various market segments. For
example, individuals, households and organizations buy Microsoft’s software and hardware
products. Through the broad differentiation generic strategy, the companies build its competitive
advantage to attract a large population of customers globally. This generic strategy also aligns
with Microsoft’s mission and vision, which emphasize capturing a global market.

7. Product Development Strategy: This intensive strategy facilitates growth based on the
development and sale of new products. Microsoft continually developed new software products
to generate higher revenues. Through new products that address market needs, the company
supports its generic strategy, which requires product uniqueness as a competitive advantage.
This intensive strategy points to the strategic objective of enabling Microsoft’s growth through
product innovation.

8. Strategic and operational leadership: Various senior executives are responsible for the
strategic and operational leadership covering all of Microsoft’s product, service and support
offerings across China and continuing the company’s transformation into the leading
productivity and Platform Company. Various experienced officers were being involved to
Evaluate, define, and proactively monitor key metrics for long term trends and changes.

 It helped Microsoft to make China understand that they are helping them to develop its
own software industry, an urgent government priority. 

   It also helped in improving the protection of intellectual property.

Moreover, some more strategies that are being followed by Microsoft can also be listed below
as:

 Defensive Strategy: To hold onto position as the market leader, fighting off competitors
who try to take away market share.

 Porter’s Competitive Strategies:

• Differentiation Strategy

– Offers products and services that are uniquely different from the competition.

• Focused Differentiation Strategy

– offers a unique product.

• Cost Leadership Strategy

– Seeks to operate at lower costs than competitors.

• Focused Cost Leadership Strategy

– uses cost leadership and target needs of a special market.

 Multiple product sales target along with software.

 Sustainability for long term

Therefore, the success of multinational firms operating in new markets depends on several
factors and one of the areas that need focus is the institution-based view. According to this view,
institutional forces contribute to significant differences in the performance of the firm at the
global level. The focus of institution-based view is on the effect of the government policies as
well as economic reforms on how the firm performs. Firms are therefore expected to take care of
the formal and informal influences of the local industry within which it operates. For instance,
one of the formal rules included the open behavior of the government to promote Linux
operations .The open promotion made it difficult for the Microsoft to gain entry into the Chinese
market. On the other hand, there is the informal rule, which is the preference of the Chinese
customers to relatively cheaper software such as Linux instead of the legal copy given by the
Microsoft.