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Charging China

Made in China: Tanya, Catherine, Fabian and Ådne

Company facts• Founded in Albuquerque,

New Mexico 1975, by Bill Gates and Paul Allen

• Headquarters in Redmond, Washington

• 2012: 94. 000 employees worldwide and a turnover of USD 74.3 billion

• Three branches:– Computer software– Online services– Video games

Company facts

• Microsoft Windows came on the market in 1984• Initial public offering in 1986• The rise in the stock value was estimated to

make around 4 billionaires and 12 thousand millionaires from the Microsoft employees

• Introduced Microsoft Office in 1990 and Explorer in 1995

China: The Early Years• Founded in Beijing, 1992• Close to market monopoly due to

piracy • Original market strategy: The

same as in the West #failing• Suing companies that were using

counterfeited products #losing• Government used Windows, but

changed to Linux when Microsoft wanted to earn revenue

• Realized that a new approach was needed…

Rebooting

Culture and Business

“The mountains are high and the emperor is far away”

– Traditional Chinese saying

“If the U.S. parent company is twelve time zones away, the executives need to get on the ground in China to engage local support of the enterprise and bridge the often vast cultural differences.

– Rose Lee Askin, Senior VP at RBS Solutions.

The New Approach (2001) • New approach:

– Lower prices to gain market share from the Windows counterfeits – Gave the Microsoft managers an introductory tour of China– Hired Henry Kissinger to open doors and advise on Chinese business

culture– Wanted to develop an own Chinese software industry, opened the

Research center in Beijing 1998 – Turning point and windfall for the Microsoft image

• Chinese government afraid of US gathering intelligence through Windows– Windows went to extreme lengths and gave the source code to

governments using Windows– Hu Jintao’s laptop and missile guided systems

Changing Image

• Microsoft’s China investing:– Inviting officials to help decide in which local software

and outsourcing companies it should invest– So far Microsoft has spent around USD 500 million

• Cooperation with the Ministry of Education– Financing 100 rural computer-classrooms

• Made Shanghai global center for costumer services

• “We start changing the perception that Microsoft is the company coming just to do antipiracy and sue people. We changed the company's image. (…) If a foreign company's strategy matches with the government's development agenda, the government will support you, even if they don't like you.”

– Tim Chen, China Microsoft revolutionary

• “You are a friend to the Chinese people, and I am a friend of Microsoft”

• “Every morning I go to my office and use your software”– Hu Jintao, Microsoft HQ, 2006

• Tolerating piracy turned out to be Microsoft's best long-term strategy

• Windows was used on an estimated 90% of China's 120 million PCs in 2007 (CNNMoney July 2007)

• Microsoft's prices have dropped so low it now sells a $3 package of Windows and Office to students – the same as the pirated price

Smartphone market

• China is predicted to be the largest smartphone market in the world by the end of 2012 (IDC).

• Starting exclusive work with Nokia

Future predictions

Smartphone OS

2012 2016 CAGR 12’-16’

Android 68.3% 63.8% 18.8%iOS 18.8% 19.1% 18.8%

BlackBerry OS 4.7% 4.1% 14.6%Windows Phone 2.6% 11.4% 71.3%

Linux 2.0% 1.5% 10.5%Others 3.6% 0.1% - 100%Total 100% 100% 18.3%

Source: IDC

"We were a naive American company”

• It took Microsoft 15 years and billions of dollars of lost revenue to learn how to do business in China

• “You've got to just keep trying and trying and trying. (…) now we have a wonderful position in China, and we're going to see great growth every year for the next five years.”

– Bill Gates

– Bill Gates

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