Microsoft in the People Republic of China

Situation:

Microsoft (MS) is losing money in mainland China, 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 inescapably due to low level of localization.

Since localization of Window 3.1 seems critical 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 be either leaving the market open for Software

Vendors (SV) to localize the product, doing both 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 utilise 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 familys that in turn make sales and

competitiveness. Meanwhile, Microsoft can acquire the best product tone by localization in

PRC due to familiarity with the market and convenient good 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 transgress legal environment, as piracy software is rampant in PRC market

and it seriously affects MSs profit. 2) Increase sales, as SOEs and government organizations

account for a big percentage in MSs total sales. 3) Help MS standardize the software

industry to procure its long-term profits. 4) Be decisive in securing Microsoft a competitive

2

advantage, as PRC is still...

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