How does Microsoft conquer China?

China is the largest market in the world, but it is also where software companies are afraid because piracy is uncontrollably rampant. In recent years, Microsoft Corporation has not only overcome that evil but also very successful. What secrets does Mr. Bill Gates have?

Fortune magazine journalist David Kirkpatrick went with Bill Gates to China in April to find out how Microsoft has turned into a win in this huge market. According to David, every day in China is a victory day for Bill Gates. He was warmly welcomed, invited to be an honorary administrator of Peking University, awarded an honorary doctorate from Tsinghua University - the 13th honorary doctor in 82 years of the school's history. Best list in China. In four short days, Bill met four Politburo members of the Chinese Communist Party. It is said, Bill Gates is the brightest star than every movie superstar.

No longer is Microsoft?

Last spring, Chinese President Hu Jintao visited Microsoft headquarters and dined at Bill Gates' home in the United States. Hu Jintao told Bill: ' You are a friend of the Chinese people, and I am a friend of Microsoft; Every morning come to the office, I also use Microsoft software '.

Microsoft calculated very carefully before deciding to invest in China in 1992, but the next ten years was a disaster. Finally, Microsoft realized that, all the basic concepts that made Microsoft's success in the US and Europe mean nothing in China. In China, Microsoft is no longer Microsoft - they have to sell the product at the lowest price instead of collecting hundreds of dollars per Windows or Office suite; they have to give up the core of the policy used elsewhere to protect copyright at all costs; and they must work closely with the government instead of opposing the government as they do in the US - an attitude that makes human rights organizations not sorry for criticism.

Sigurd Leung, expert at market research firm Analysys International in Beijing, who followed Microsoft's every step, commented: ' Microsoft has spent ten years and billions of dollars in profits to learn how to do business in China. Quoc '. And Bill Gates confessed: ' We used to be a naive American company! But now we have a great position in China; I have seen tremendous growth in the next five years '.

Bill Gates believes China will be Microsoft's biggest market. It is expected that Microsoft's revenues this year in China will triple by 2004 and only lower than sales in California. (Although Microsoft did not disclose specifically, Fortune magazine estimates Microsoft's sales in China this year are approximately $ 700 million, equal to 1.5% of global sales.) Microsoft even built its own five-year plan in line with the Chinese government's five-year plan. Robert Hormats, a longtime Chinese expert with financial group Goldman Sachs, commented: ' Microsoft in China is a' turn around 'story that leaves many interesting lessons for other companies .'

Failure

The story began 15 years ago when Microsoft dispatched some business managers from Taiwan to China. Their mission is to sell software at a price Microsoft has collected elsewhere. Craig Mundie, Microsoft 's top administrator, who is running the company's strategy in China, thinks this is a classic business model but does not apply in China. The problem is not the brand because everyone is using Windows, pirated software is sold on the street for only a few dollars. Ya Qin Zhang, Microsoft's head of research and development (R&D) in China, added: ' Here, we have no problem with market share but how to turn market share into profit .'

Microsoft has fought hard to protect copyright. They sued a lot of companies that used their software illegally but the lawsuits failed. Microsoft executives, who disagree with this strategy, have also failed to implement their intellectual property protection strategy. Administrators have come and gone - in five years Microsoft has replaced five national managers in China. Two of the five directors later wrote books criticizing the company. Juliet Wu, China's best-selling author, " Up Against the Wind ," commented that Microsoft was indifferent when running sales at all costs, the company's anti-piracy policy was heavy. unnecessarily and her efforts to help employers in Redmond (the headquarters of Microsoft Corporation near Seattle, Washington, USA) have no knowledge of China .

Then there was another form of resistance. The Beijing capital government installed the Linux open source operating system on its employees' computers. The Chinese Academy of Sciences builds an open source operating system version called Red Flag Linux. Security officials are concerned that Chinese government and military activities rely too much on Microsoft software made in the United States; Is this technology aimed at tracking China?

Policy changes

In China, Bill Gates is considered the 'brightest star'.

In 1999, Bill Gates dispatched Mundie, Microsoft's chief public policy officer, to China to find out why the company had failed so miserably. Mundie's conclusion is that Microsoft has arranged too poor leaders and over-promoted sales goals. ' We fail because our business practice and our commitments do not reflect the importance of establishing a relationship with government .'

Mundie visited China four or five times a year. He hired former US Secretary of State Henry Kissinger to advise him and implement the open-door policy. He told Chinese leaders that Microsoft wanted to help them develop the software industry, an area that the government prioritized. Even in 2001 Microsoft hired a consulting firm, McKinsey, to conduct a study for Chinese officials, which recommended that they improve the protection of intellectual property rights. Mundie must also convince Chinese security officials that Microsoft's software is not a secret tool for the US government. In 2003, Microsoft gave China, along with 59 countries, access to the basic source code of the Windows operating system and allowed them to replace some parts of Windows with Chinese software - a previous affair. Microsoft has never accepted. Now when China uses Windows programs in the office of President Hu Jintao or in missile systems, they can set up their own codes.

The bigger change is Microsoft building a research center in Beijing. Bill Gates said: ' We started here thinking that Chinese people are good at research '. This center is considered as an opportunity to build Microsoft image. The center has accumulated a record number of scientific publications, helping to attract returning Chinese scientists and contributing essential parts to products consumed globally such as the new Windows Vista operating system. born. According to a poll, the center has quickly become the most ideal workplace for Chinese IT professionals.

Before 2001, Microsoft executives thought that it was the weakness of China's intellectual property legal system that broke the price strategy that the company applied everywhere. Today, Bill Gates openly confirms: ' Tolerating piracy turns out to be Microsoft's best long-term strategy .' This explains why up to 90% of the 120 million computers in China use Windows. ' Pirated software makes it easier for us to compete with Linux than without piracy, ' said Bill Gates. Indeed, in narrow streets in China, Linux prices are higher than Windows simply because Linux consumes more disks. And the price of Microsoft software is no longer so high: students can buy both Windows and Office packages with just three dollars!

Change image

In 2003, Mundie and Bill Gates made an unexpected decision to hire Tim Chen, who runs a Motorola branch in China, to work for Microsoft. Chen has a close relationship with officials and has extensive knowledge of how Western businesses can succeed in China. He has implemented a series of initiatives.

First Microsoft builds in Shanghai an e-mail answering center of customers around the world. This center conducts special training programs for teachers and software businesses. The Center cooperates with the Ministry of Education of China to fund more than 100 model computer classrooms in rural areas. ' By doing these things, we change the notion that Microsoft comes here only to prevent piracy and litigation of others. We changed the company image, showing the Chinese that Microsoft is a visionary enterprise. If a foreign company's strategy fits into the government's development program, the government will support that company even if it doesn't like it , 'Chen said.

Microsoft has invested in this direction; they even invite participating officials to decide which local software companies or processing companies should be invested. So far Microsoft has invested nearly $ 65 million, and recently pledged to spend another $ 100 million on local software companies. Chen commented: ' There is a convergence between China's demand for domestic software capabilities and our needs, we need a community of businesses using technology and platforms. Microsoft '.

Then, the Chinese government thought it was similar to Microsoft: they forced the central, local, and business agencies to use copyrighted software. At the end of last year, the capital of Beijing completed part of a software change project, even paying for software that its employees had previously illegally copied. One more step in favor of Microsoft when the Chinese government last year asked the PC makers to install legitimate software into their products. Lenovo, the market leader, has sold at least 10% of its computers with legally installed software while US computer companies in China still sell 'bare' machines (not yet installed). operating system). Another government directive requires gradual legalization of millions of computers in state-owned companies. Bill Gates said that the number of computers with licensed software sold is increasing from 20% to more than 40% in the last 18 months.

The secret

Although the close relationship between Microsoft and the Chinese government has raised many critical opinions in the United States, especially after Microsoft closed a personal blog (weblog) of a Chinese dissident. The idea was on Microsoft's MSN Space server in 2005, or when Microsoft joined a state-owned company to set up MSN service in China, but no one denied that Microsoft profited a lot from the relationship. This system.

Many multinational companies are eager to follow in the footsteps of Microsoft in the Chinese market. Carl Bass, CEO of Autodesk, an automation design firm with annual revenues of more than two billion dollars, said, ' Wanting to do business in China, you must have a close relationship. with government '. Sean Malonev, Intel's marketing manager, thinks the same way: ' You can't invest in China without government support .'

Microsoft's strategy in China is clearly fruitful. This year China will consume more than 24 million computers, plus 120 million machines in operation. Although in China, Microsoft earns only about seven dollars from each operating computer, which is very low compared to 100-200 dollars in developed countries, but according to Bill Gates, these numbers last same point to a point. ' This is the result of the relationship between the two institutions. We really found a way to work together on a win-win basis, a way to help Microsoft continue to grow in the next decade. I don't know if any company in the IT industry can do this better than Microsoft . '

Huynh Hoa - My Hanh