SYBMS: INDIAN ECONOMIC SYSTEM

BHAVYA KOTHARI
ROLL NO. 246
ELECTIVE: MARKETING
A study of the entry of MNCs in India in the 1990's
Microsoft Corporation
Microsoft Corporation is a global technology corporation based in Redmond, Washington,
that makes computer software, consumer devices, computers, and associated services.
Microsoft provides intelligent cloud and intelligent edge digital transformation. Its purpose is
to enable every individual and organisation on the earth to achieve greater success.

In 1975, two childhood friends from Seattle, Bill Gates and Paul G. Allen, adapted BASIC, a
famous mainframe computer programming language, for use on the Altair, an early personal
computer (PC). Gates and Allen launched Microsoft not long after, naming it after the
phrases microcomputer and software. They polished BASIC and created new programming
languages over the following few years.
In 1990, the firm opened a small office in Hyderabad, India. It was initially heavily backed
by Microsoft's Redmond headquarters until Microsoft India began to work closely with the
Indian government and business entities in India. Microsoft delivers its worldwide cloud
services from local data centres in India to help Indian start-ups, enterprises, and government
agencies speed their digital transformation.
Microsoft was a key player in India's digital development. Cloud was at the heart of their
vision for India's development. They collaborated with governments, as well as commercial
and public organisations, to build cloud-based technology solutions that enabled India's
whole economy become more digitally transformed. They assisted companies in reimagining
how they combine people, data, and processes together to create value for consumers and
sustain a competitive edge in a digital-first world. They supported businesses in changing into
digital businesses by establishing new capabilities to better interact with consumers, empower
workers, improve processes, and transform products

HOW DID MICROSOFT ENTER INDIA?

Bill Gates picked Hyderabad, the capital of the south Indian state of Andhra Pradesh, as the
location for Microsoft's second software development centre outside the United States (the
first being in Israel). Many people were startled by this because computer businesses
generally set up shop in Bangalore, which is 500 kilometres south of Hyderabad. Hyderabad,
the erstwhile capital of Indian rulers, was a backwater in contrast. Andhra Pradesh was one of
India's poorest states, with more than 70% of its 73 million people living in rural
communities.

Still, Bill Gates stuck to his decision to enter India’s market by setting up a store in
Hyderabad. This is because Bangalore was bursting at the seams, cars clogged the roads and
power regularly failed. Real estate prices in Bangalore were sky rocketing. Companies often
had to pay stock options to keep valued employees, but even then, retaining workers was a
huge problem. Hyderabad, on the other hand, was just beginning to take off at the time.
There were fewer traffic jams and one could rent a house in a good neighbourhood at half the
price than one would in Bangalore. Newly minted software engineers typically worked for
$3,500 a year, which was 15% below Bangalore scale. According to a survey by Nasscom, a
software industry association, about one in four Indian software engineers was a native of
Andhra Pradesh. 

Andhra Pradesh even had a very ambitious chief minister, Nara Chandrababu Naidu.
Recognizing that Microsoft would attract more technology companies to Hyderabad, Naidu
lobbied Gates hard when the multibillionaire visited India. He promised that Microsoft
would receive favourable tax treatment, continuous power supply and 8 hectares of land
reserved for their centre and, they kept their promises. 

Three main objectives of Microsoft when it came to India: 

 To become an integral partner with the Indian government and the local
corporate houses. 
 To support the local IT scenario with customised solutions.
 To provide support to different aspects of society such as promoting IT
education, youth innovation, women empowerment etc. 

It did not take long for Microsoft to expand its operations into different sectors of the Indian
economy after it was taken up by the Indian government for its internal IT related
operations. Many of the corporate houses also started depending on customised solutions
provided by Microsoft, which included office automation, security services, cloud, and
software development. Constant support from the Indian government and corporate housing
aided Microsoft’s growth in the Indian market, and they soon became the go-to computer
company in India. 
INITIAL PROBLEMS MICROSOFT FACED IN INDIA 

Microsoft did not face too many problems in the initial years since it had full support from
the Indian government and corporate houses.

1. Employee Challenges:
Part of the challenge for Microsoft India’s senior management was to squeeze time
from business commitments for their employees. Employees that left believed that
size hurt Microsoft in many ways. As the company grew, the bureaucracy increased
and internal politics started playing an important part in regular proceedings. It no
longer had the flexibility of a start-up and it was becoming very difficult to push
decisions through the system. Microsoft India executives believed that the challenge
for the company was to make it an interesting place to work in, beyond their specified
job routine. The company started bleeding when they realised that other computer
companies, especially in Bangalore, were paying higher salaries and giving a lot more
benefits.

2. Consumer Market of India:

Back in 1990, Microsoft approached the market in a different way with their
traditional products. This obviously did not appeal to the Indian customers as the
products did not meet their specific demands. Microsoft was struggling with Windows
3.0 when the operations started in India. Poor PC penetration, pricey software, limited
access to IT and low Internet connectivity hobbled its initial steps.

3. Security Issues:
The biggest hurdle in making inroads into the market wasn't the popularity of the
product, but piracy. Microsoft software started facing a lot of cyber security issues. IT
dealers say piracy of popular Microsoft products could be as much as 85-90 per cent.
This caused harm to the system and database of corporate housing using the software.

4. Language Barrier:
Microsoft's vision was to appeal to the masses. Even though English was vastly
spoken in India, it was not the language of the masses. Many Indian residents,
especially the ones living in the rural areas, did not understand the complex language
of the system and thus the products did not appeal to them.

HOW DID MICROSOFT TACKLE THESE PROBLEMS?

1. Employee Retention:
In the race to keep the best talent in the industry, Microsoft India decided to focus on
providing its employees across sales and marketing, BPO, software development and
research, the opportunity to work across a variety of roles. The company also broke
the mould and appointed young managers to positions of responsibility. Mentoring
became a key role of all the senior managers. Microsoft India made the work
 environment more open and invigorating for its employees, with some employees
given the opportunities to work across business units and geographies. The company
also started to customise their benefits for each employee, and provided them health
care, tuition reimbursements and childcare facilities based on individual needs.

2. Innovation:
Microsoft developed different products or business models to suit the Indian market.
As soon as Windows 98 came out, the scenario changed and most of the DOS based
computer programs went graphical user based with Microsoft employees actively and
quickly creating custom programs for the Indian government and corporate houses.
With Windows XP, Microsoft captured almost all of India where almost all computer
users switched to XP and some are even using it today much after the expiry of
support to the outdated operating system.

3. Cyber Security:
Microsoft set up a Cyber Security Engagement Centre in Delhi to prevent public and
private sector organisations from facing any piracy issues. Microsoft’s approach to
cybersecurity in today’s cloud-centric world rests on three core functional areas:
protect, detect, and respond. To support a comprehensive, cross-company and cross-
industry approach to cybersecurity, Microsoft invests more than a billion dollars a
year in security research, innovation, and development.

4. Local Language Computing:

For India to become truly digital, Microsoft needed to make technology accessible
and productive for all, irrespective of the language they may speak or read. To break
the language barrier, they started working with Indian languages and launched
Project Bhasha in 1998 to accelerate computing in Indian languages. They now
support text input in all 22 constitutionally recognized Indian languages across their
products, and Windows interface-support in 12 languages.

HOW DID MICROSOFT ATTRACT CUSTOMERS?

Microsoft started catering to the needs of the Indian customers and introduced products that
catered to their specific demands. They focused more on the government and the small
business segment to grow its India revenues. Bill Gates dreamed of having Microsoft PCs on
every desktop in India.

MARKETING STRATEGY
Due to having a wide product & service portfolio Microsoft used a mix of differentiated &
undifferentiated targeting strategy. In office and Windows or overall, in operating systems,
the population is homogenous and the target was every Indian having access to computers.
They started rebranding its products & service to cater to the Indian market. The company
underwent a turnaround to reposition itself as a value-based company meaning to enrich the
life of the individuals. Microsoft often used a Market-oriented pricing strategy, Freemium
pricing strategy, and Buy Only What You Use pricing strategy. Microsoft’s operating
systems and several software were on top of the mind positioned in the market. Because of
the brand value of Microsoft, any product it launched got a good positioning.
ADVERTISING
Microsoft’s main aim for advertising in India was to spread the awareness of technology.
People didn’t know how to use the latest technology and also did not believe in the do-it-
yourself method. People running small businesses were either unaware of the existence of
online services, or they simply didn't see how Microsoft could help them. One of the ways
this issue was tackled was the set-up of an actual, big, blue bus from the capital city of Delhi
to various parts of the country, to reach out to people and demonstrate how to solve their
common problems. Other than this, they used mediums such as televisions, newspapers,
banners, etc. to spread the word. Recently, with the rise of the digital world, they use Search
Engine Marketing and Social Media Marketing for advertisement.
COMPETITORS
Microsoft Corporation’s primary competitors include some of the most prominent technology
companies in the industry. The list includes well-known brands such as Apple, Google, IBM
and Oracle, among others. Microsoft is also an important player in the hardware field. Its
products include tablets designed to compete with similar devices made by other companies,
such as Apple. The company makes a variety of computer accessories as well, which brings it
in direct competition with several firms that specialise in this area, such as Logitech.
Microsoft faces competitive pressures in all areas of its operations. The pressure comes from
a diverse mix of technology companies, both large and small.
CURRENT SITUATION
Microsoft, just as any other company was impacted by the Coronavirus pandemic in 2020.
But they have successfully been able to recover in the Indian market. From recovering from
the impact of the pandemic to leveraging digital capabilities to respond to new market
challenges, Microsoft’s businesses in India are reimagining ways to remain resilient in the
new normal. For example, organisations have embraced digital tools to empower their people
to continue collaborating and connecting. Microsoft CEO Satya Nadella said during the FY21
Q1 earnings call, that the next decade of economic performance for business in the Indian
market, as well as the global market will be defined by the speed of their digital
transformation.
CONCLUSION
Microsoft India has played a major role in the digital transformation of India. They have been
persistent in the Indian market for over 30 years. Microsoft catered to the needs of the Indian
consumers and innovated their products to meet the market’s demands, which largely
contributed to their success in India. Their brilliant systems and policies catered to the needs
of Indians and made them feel valued, which increased the good will of the company and
now it become household name in India.
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