Microsoft opens the gates: patent, piracy, and political challenges in China

1. What are the risks that Microsoft has faced in operating in China and dealing with the Chinese government? Do you see these risks as increasing, diminishing, or changing in the future? Are these risks unique to China or present in other developing countries?
The existed copyright problem is the main concern. To be specific, those risks include the widespread product piracy, pressures from the Chinese government to transfer its technology, host government promotion of competitor products, discriminatory procurement practices by subnational authorities in China, and strong encouragement to enter into joint ventures (JVs) with local firms.
China’s software piracy rate was 86 percent in 2005, and 79 percent in 2009, the risks is diminishing over the years as shown above.
Not like the situations in some developed counties, the strict regulations, policies and law can provide companies a healthier environment that has less harassment caused by copyright and other problems. The risk always exists in other developing countries due to the insufficient regulations of the society. In addition, the Piracy rate is higher in the developing countries because the piracy products are cheap.

2.
What approaches did Microsoft take to manage its political risks in China? Why might it have favored some of these techniques versus others? Which do you feel worked best? What should Microsoft do going forward?
To manage the political risk in China, first of all, Microsoft has bargaining power as being the world’s largest standalone software maker. It’s also able to influence Chinese economic growth and the development of the country’s indigenous technology sector, even able to exert pressure on China.
China has had double-digit GDP growth rates and a status as the world’s second largest PC market. Microsoft has bargaining power as being the world’s largest standalone software maker.
Since Microsoft became a part of the Chinese infrastructure, this approach was favored over the other techniques because it didn’t utilize force and it made Microsoft being initiative rather than passive.
As demonstrated that Microsoft would improve the software technology industry and the economy of China, it should continue to improve relations with the Chinese government and integrate and adapt its products into its culture. Innovation will also be the key factor to staying ahead of the rapidly growing technology sector in China.

3.

In its dealings with China, Microsoft frequently had to deal with lower levels of government. What special types of challenges and opportunities did this present?

In December 2001, the Beijing Municipal government shunned Microsoft by awarding operating system software contracts for 2,000 PCs to Red Flag Linux, a local Linux developer. This caused potential challenge which Microsoft capitalized upon and signed agreements with four leading Chinese computer makers – Legend, TCL, Tsinghua, Tongfang, and Great Wall – to preinstall Windows XP on their machines.
Microsoft also signed an accord with the Shanghai Municipal government, whereby it agreed to help develop Shanghai’s software sector, expand its Shanghai regional support center to a global support center, and train thousands of software architects. Microsoft also entered in a joint venture and later partnered with Shanghai Alliance Investment Ltd. to launch the MSN products and services to customers in China.

4.

Do other firms have the same risk management options as Microsoft? If so, why? If not, why not?
Microsoft is the world’s largest standalone software maker with operating systems running on 90 percent of all PCs worldwide. It has an advantage over other software companies because of its size, reputation and