The article, “Microsoft opens the gates: patent piracy and political challenges in China”, explores the difficulties that an American software firm has faced in its effort to establish a profitable market in China.
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The company has been trying to make progress in its relationship with the people and the government of China. China’s business environment becomes a difficult situation for Microsoft since the government and people are ideologically isolated. The government of China has been unwilling to support Microsoft’s dominance in the software market (Blanchard 2012, p.2).
Since its first entry into the Chinese market, Microsoft has always considered China to be an important country to its business. First, China is a large country and is already the most populous country in the world. Secondly, China features a high economic, technological and intellectual growth rate.
This fast economic growth has made Microsoft speculate that China is going to be a more important consumer of its software products in the near future. On the other hand, Microsoft has suffered drawbacks in its efforts to remain the dominant software firm in America.
Competition from other software firms such as Google has made Microsoft seriously consider China has a major market for software. Although Microsoft remains the biggest software firm in the world, it has lost several markets for software products particularly in the United States (Blanchard 2012, p.3).
Much of the adversity that Microsoft has faced in China takes the form of nationalism and localism of the people of China. The government has been unwilling to protect Microsoft and its products since the former has a major interest in promoting growth of local software industry. In addition, piracy of Microsoft’s products is rife throughout China.
Pirated products are usually much cheaper than the original genuine software. Due to the average income level of the population in China, people have accustomed themselves to using the pirated products. Furthermore, the country poorly regulates business practices in the software industry.
The people and the government of China have not welcomed Microsoft as the company had expected (Fernández & Underwood 2006, p.6). Government policies limiting Microsoft from selling its products to certain customers such as government agencies indicate that the authorities in China do not want to allow dominance of foreign software companies in the country. In several events, Microsoft lost legal battles in suits filed by Chinese companies seeking legal redress in cases of patent violation.
Despite the difficult situation in China, Microsoft has been trying to convince the Chinese government to enhance regulation of software market practices to protect foreign companies, especially Microsoft. Gradually, the Chinese markets have reduced the rate of piracy of Microsoft’s products by a significant proportion.
However, the level of software piracy is still high with about eighty percent of Microsoft’s products still being pirated in China (Blanchard 2012, p.4). This makes the software business in China an unprofitable venture for the software giant.
Microsoft has decided to continue developing their establishment in China by investing billions of dollars in the Chinese software industry. In addition, the company has obtained concessions with the Chinese government seeking support for Microsoft in the vast country. However, considering the scale of effort that Microsoft has put in strengthening its ties with the Chinese people and the government, the progress is still far from satisfactory.
This is supported by the fact that the government still implements policies that give preference to products of local software developers. Since there is a noticeable improvement in the market and policy situation in China, Microsoft has set the country to be a future major partner in the software industry (Khanna 2007, p.20). Cordial relations between political leaders of the Republic of China and Microsoft officials such a Bill Gates indicate that the cold relationship between China and Microsoft will eventually thaw out.
Microsoft Challenges in Dealing with Lower Levels of Chinese Government
While Microsoft has a good relationship with high-level officials in China, the company cannot control attitude in the lower levels of the authorities (Blanchard 2012, p.1). Officials from the relevant ministries have severally advocated for use of alternative software rather than Microsoft’s products.
In addition, relevant ministries under which matters relating to development and sale of software fall are gearing towards increasing the sales of locally developed software. This ambition curtails the ability of the lower levels of the government, which are responsible for policy implementation, to cultivate a good relationship with Microsoft.
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Google’s Challenge to China and Microsoft’s Course
When the Chinese authorities seemed to censor internet operations in China, Google, a software developer, chose to withdraw some of its services from the country in protest against the censorship and the market condition in the country (Vaidhyanathan 2011, p.118). This action highlighted Microsoft’s decision to continue cooperation with China.
Microsoft gained from its actions in that it is possible for the company to establish a permanent base in the Chinese market once systems in China eventually begin to rely heavily on its software (Blanchard 2012, p.5). This may make the company one of the biggest profitable software developers in China.
On the other hand, Microsoft stands to lose if the government in the United States has a negative reaction to the former’s actions. In this essence, the local market in the United States may continue to shrink and other local competitors might take advantage of Microsoft’s vulnerability (Levy 2011, p.267).
Blanchard, J 2012, Microsoft Opens The Gates: Patent Piracy and Political Challenges in China, San Francisco state university’, San Francisco.
Fernández, J. A., & Underwood, L 2006, China CEO: voices of experience from 20 international business leaders, Wiley, Singapore.
Khanna, T 2007, Billions of entrepreneurs: how China and India are reshaping their futures–and yours, Harvard Business School Press, Boston, Mass.
Levy, S 2011, In the plex: how Google thinks, works, and shapes our lives, Simon & Schuster, New York.
Vaidhyanathan, S 2011, The Googlization of everything, University of California Press, Berkeley.