The risks that Microsoft has faced in operating in China and dealing with the Chinese government
While operating in China, Microsoft has faced risks at the different levels. The first most evident challenge for the company was the practices of software piracy and the lack of legislative power to protect the original products. On the local level, Microsoft initiated partnerships with sub-national governments in order to stand against the policy of procurement.
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However, the alliances with the government were risky nonetheless because they try to pressure the company into entering the joint ventures with the local software producers. The macro risk for the Microsoft was the fact that the software piracy and lack of means to protect intellectual property rights were combined with the Chinese nationalism (Buderi and Huang par.7). The potential consumers might not be interested in the world reputation of the company and would prefer to buy unlicensed software products from the local suppliers.
Currently, the risks are diminishing since there are now more international companies operating in China. Despite the controversies about Microsoft supporting the censorship in China, the company indeed managed to succeed in smoothening relationship with both national and local governments (Taubman 257). Whether or not, the same risks could apply to other developing countries, it depends on the level of nationalistic tendencies, legislative base, and the procurement predispositions in governmental policy.
Risks of supporting, financing, and transferring technology to local firms
There are considerable risks that Microsoft takes by financing and transferring software technology to Chinese firms. However, we cannot say that Microsoft is not aware of those risks since major companies, including another software producer Linux, have had difficulties dealing with intellectual property right issues in China (Shen 190).
The procurement policy that exists on the macro level of the state provides the local software firms with advantages over the international companies. The government defines the development of the software technologies sector as the top priority. One of the government’s objectives was to increase the amount of Chinese export of technologies to 10 billion dollars by 2010. That is why the Chinese government itself contributes a great amount of financing into the local software firms (Yang, Ghauri, and Sonmez 70). However, aside from that, the international enterprises are constantly under the pressure of creating the joint ventures together with the local firms, and therefore, share the technology with them.
One of the ways to manage those risks is to try influencing the policy. Microsoft achieves that by making the alliances with the major companies, such as Petro China (Blanchard 69). Another way of avoiding risks is concentrating on importing hardware, which is also a significant source of Microsoft’s revenues. However, the reasonable cooperation with local firms, including Lenovo and TLC Group, is helpful because consumers from the Chinese region often prefer the local companies.
Internet censorship in China
Traditional media in China are censored by the government in many aspects, whereas the Internet media could have the opportunity to present information in an unbiased manner (Qiu 23). The attempt to challenge the censorship in China would be a bold but strategically unjustified move for Microsoft. Unlike Google, the company has firmly established its place in the Chinese market by promoting preinstalled Windows software in many Chinese gadgets. The advantage of not challenging the censorship policy is in the support of the establishment. However, the disadvantage is that, in such a way, the company restricts its own means of using media. Therefore, for now, the restrained policy on censorship is justified, but it may change over time.
Blanchard, Jean-Marc F. “China, Multinational Corporations, and Globalization: Beijing and Microsoft Battle over the Opening of China’s Gates.” Asian Perspective (2007): 67-102. Print.
Buderi, Robert, and Gregory T. Huang. Guanxi (the art of relationships): Microsoft, China, and Bill Gates’s plan to win the road ahead, New York, NY: Simon and Schuster, 2007. Print.
Qiu, Jack Linchuan. “Virtual censorship in China: Keeping the gate between the cyberspaces.” International Journal of Communications Law and Policy4.Winter (1999): 1-25. Print.
Shen, Xiaobai. “A dilemma for developing countries in intellectual property strategy? Lessons from a case study of software piracy and Microsoft in China.” Science and Public Policy 32.3 (2005): 187-198. Print.
Taubman, Geoffry. “A not-so World Wide Web: The Internet, China, and the challenges to nondemocratic rule.” Political Communication 15.2 (1998): 255-272. Print.
Yang, Deli, Pervez Ghauri, and Mahmut Sonmez. “Competitive analysis of the software industry in China.” International Journal of Technology Management 29.1-2 (2005): 64-91. Print.