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An analysis of the Microsoft’s troubles in China
Report written by
Executive Summary
This report describes and analysis the troubles Microsoft met when it tried to profit and increase the market share in China. This report finds that: (1) software piracies and government rejections are the major troubles Microsoft met in China and some overseas countries, (2) the countermeasure which Microsoft used and their affections. In conclusions, it will be shown that Microsoft has to find some more countermeasures that decided on China and some other countries’ situation.
Table of Contents
Title Page
Executive Summary
Table of Contents
1. Introduction 1
2. Analysis & Discussion 2 - 8
3. Conclusion 9
4. Bibliography 10
5. References 11- 12
Introduction:
This report analyses the marketing and intellectual property right troubles of Microsoft in PR. China. During the last several years, Microsoft kept on losing profits in Chinese IT market even it has achieved the sales goals. Software piracy and political issues have become the impediment for Microsoft to increase sales in Chinese market. This report aims to: (1), analysis how and why Microsoft meets some troubles in China (2), analysis the similar situation Microsoft meets in worldwide market. This report concludes that Microsoft must make countermeasures base on Chinese situation.
Discussion/Analysis
Problems Microsoft met in Mainland China
Chinese IT (Information Technology) market background and why it is so important to Microsoft
China has nearly 1.4 billion people, and it is the largest population in the world. In the Chinese government research, in year of 2002, 21 Chinese computer companies produced 11,817,600 computers, and 11,747,600 computers were sold. (Gao 2003) IDC, which is an international market intelligence and advisory company in the information technology industries, said the Chinese software market value was 1.9715 billion US dollars in 2001 and 2.81527 billion US dollars in 2002. (Tom.com 2003)
It was said China IT market will keep on increasing 5% to 10% every year, and till 2030 the value of office software will be more than hundreds million US dollars. (Xiang 2003) Even the Chinese software piracy is very serious, Microsoft still sold its software ‘from nothing in 1994 to $100 million by 2000’ (Charles, pp.90) Since Chinese IT market has become one of largest IT market and its value increases every year, any IT company won’t want to lose such a profitable market. ‘In the last two years, Microsoft sale in China has increased 200%. And I wish after 5 years, it will be more than 1 billion Chinese Yuan’ said by Tang Jun, the president of Microsoft China company. (Microsft.com 2003)
Chinese software competition background and the Chinese government purposes
There is another report by CCID (A Chinese government department of IT industry); the Chinese software companies just have less than 33% IT market share in 2002. (Tom.com 2003) That means the overseas IT companies took more than 67% Chinese IT market share.
From Chinese modern history, we can find that every government leaders of People’s Republic of China has the similar opinion, which is ‘paddle his own canoe and self-dependence’. (Lin 2003) Though China government needs overseas investors, it doesn’t want the investors to affect the state companies. From the first day China opened to the world, Chinese government has decided some restrictive policies to limit the overseas affections to Chinese state companies. For example, ‘overseas companies can’t invest in broadcast domain’. (Pudong.com 2003) So we can find that Chinese government just wants to use the oversea investment to develop its own companies’.
The problems Microsoft met, and the reasons of why it met
Software piracy problem in China and why it happens
It is the major problem for Microsoft to increase its sales in China and some other developed countries. ‘Some 90 to 95 percent of the software used in China is pirated, according to figures from the Business Software Alliance. Microsoft is a prime target of this activity. Most Microsoft products used in China are illegal copies.’ (Charles, pp.90) Though there were more than 100 millions computers were sold in China, and most of them used Microsoft products, it was very hard for Microsoft to benefit from those computers.
There are three major reasons can be used to explain why so many software piracies happen in China.
1. The first reason, and also can be considered as the main reason, is the legal Microsoft software is too expansive for Chinese buyers. China is a developing country, and because of the large population, the average resource is very low. Till 2002, the average year income of Chinese was 900 US dollars only. Even in the best-developed areas like Shanghai city, the average year income is still less than 5000 US dollars. (Chinese Economy year report, 2002) Because of this reason, ‘In October 1994, Microsoft reduced the price on its Chinese software by as much as 200 percent and it has kept prices low since.’ (Charles, pp.91) But it didn’t help much, because whatever Microsoft reduces the software price, the illegal software CD will always be sold in the lowest price.
2. The second reason is the Chinese copyright protection is not as good as some developed countries, for example USA, or Australia. Although China has joined the World Trade Organization, and it is the Chinese government responsibility to enforce the copyright laws; it seems that Chinese government doesn’t want to do that. If all the personal computers using legal Microsoft software, every Chinese buyer needs to pay more than 500 US dollars. And there were more than ten million computer sold in last year, so that is very huge money. Maybe we can understand Chinese government by listening to one Chinese hacker, ‘It is the only way for poor people get free education resources, and it is the cheapest way to develop our country.’ (Qing 2003)
3. The third reason is the Chinese copyright law is not perfect designed. Every country’s copyright law is based on the international copyright law. The international copyright law is set up by some conventions; for example, ‘BERNE CONVENTION FOR THE PROTECTION OF LITERARY AND ARTISTIC WORKS’ (Zhipei 2003) The international copyright law is the basic structure of individual country copyright law. And all the individual country copyright law was also designed to protect the other countries’ copyright automatically and fairly if the other countries have joined the international copyright organizations, like World Trade Organization (WTO). That means if one Chinese company cracks American software codes, it will be punished in Chinese court.
Though all the copyright law is based on the international copyright law, there are some differences if comparing some countries’ copyright law. In Chinese copyright law, the penalties to pirates are just simply designed to ‘Any person who commits infringing acts, apart from the penalties, such as paying compensation for damages or confiscating the infringing copies and equipment of reproduction, may be imprisoned for more than three years and less then seven years and may be fined concurrently’ (copyinfo.com 2003). In Australian Copyright Act, the software pirates are classified to many classes and situations, and the punishments are clearly designed for different situations. Because of that, the Chinese software pirates may get less punishment than the Australian software pirates if they do the some piracies. That’s why Chinese copyright law can’t effectual stop the copyright piracies.
Chinese government doesn’t feel satisfied with Microsoft products
In Chinese government leaders’ mind, because the American air force and navy exist in some countries around China, USA will always be the potential enemy. Chinese government never gives up to reoccupy Taiwan, and in many articles which analysis the possible war in Taiwan Strait, American army is always be put in the consideration. ‘The Chinese government declared it was concerned about security issues related to Microsoft software. Some warned that holes in Microsoft’s computer code might allow the United States access to Chinese networks or even enable it, in times of war, to shut those networks down.’ (Charles, pp.90) This is a very serious problem to Microsoft; the Chinese army believes, ‘Without information security, there is no national security in politics, economics, and military affairs.’ (Charles, pp.90) In 2001, Microsoft failed in invite public bidding by Beijing city government. The winner is one Chinese software company. One of the major reasons for why losing order is the security hole. (Overview of Chinese IT market, 2003)
Microsoft’s countermeasures for software piracy and government’s satisfaction
At first, Microsoft Chinese company reduced the prices by ‘as much as 200 percent’, and some software priced at $100 to $200’, but it is useless because the illegal copy of the same software may just priced at $5 or $10. (Charles, pp.91) It is impossible for Microsoft to check every computer system, especially the private users. But it is possible to check some companies and business agencies. So Microsoft used some informal ways to get the piracy information of some Chinese companies, and then use the information to force the illegal users to buy the permissions. That is a very amazing way, but it is also a very successful way. (Guohua 2003)
How to make Chinese government be satisfied with Microsoft is quiet difficult to find the answers. The reason why Chinese government prefers Linux system and some other software that based on Linux are not because of Linux system is more secure than Microsoft products. Actually, the Linux system has more possible security holes than Microsoft, but because of the resource code is opened, the government can fix the security problems by itself.
Since the security hole is the major reason for Chinese government to reject Microsoft products, Microsoft decided to open the software resource codes to Chinese government. In one agreement that made by Chinese government and Microsoft, it said that Chinese government can see almost all the resource codes and there are seven government companies or research centers can see part of the resource codes. (Sohu.com 2003)
The similar problems Microsoft met in some other countries
Software piracies in some other countries
‘A report being released Monday by the Business Software Alliance, which includes companies such as Microsoft, Apple Computer and Adobe, attributes the shift to growing computer markets in countries that traditionally have high piracy rates, such as Vietnam, China and India.’ (Siliconvalley.com 2003) It seems that soft piracies many more happened in developing counties than developed countries. These piracies happening reason is the same – Microsoft products are too expensive for developing countries to buy.
Other government rejections for security issues
Some countries governments have decided to use Linux operation systems in government offices, for example France, Japan, and Korea. ‘Korean government has decided that it will try to change the networks severs and computer systems to Linux system before 2007. Korean, Japan and China governments have made an agreement to help each other in developing Linux systems’. (Pconline.com 2002) It seems that not only Chinese government but also some other countries governments doubt the security issues of Microsoft products. So Microsoft has to pay some more attention to how to make the overseas governments feel satisfied with their products if it wants increase the market share in overseas.
Conclusion:
Software piracies and government rejections are the main troubles Microsoft met in China and some other countries. Although Microsoft has used several countermeasures (like reduced software prices and used legal issues to force the illegal users pay for the copyright), it is still difficult to profit as much as imagined and increase the market share. Microsoft has to face these difficulties in overseas software market, and decides some more countermeasures after analysis the different countries’ situation.
Bibliography:
References List:
Charles, W. ‘Global Business Today’, John E. Biernat, New York
Chinese Economy year report, 2002 ‘Chinese economy is keeping on increasing’, [online]. Available at URL:
http://www.cctv.com/financial/jiaodiantoushi/20030103/51.html [Accesse 1 October 2003].
Copyinfo.com 2003, ‘The Copyright Protection in China’, [online]. Available at URL: http://www.copyinfo.com/cpprtcten.htm [Accessed 2 October 2003].
Gao, S. 2003, ‘An analysis on Chinese PC produce and sales of 2003’, [online]. Available at URL: http://www.minitech.com.cn/Articles/PCmarket-1.htm [Accessed 30 September 2003].
Guohua, L 2003, ‘Ten problems Microsoft has in China’, [online]. Available at URL: http://tech.tom.com/sd/microsoft.html [Accessed 2 October 2003].
Lin, C. 2003, ‘Why we need paddle our own canoe and self-dependence’, [online]. Available at URL: http://www.snweb.com/gb/dadi/2002/23-24/a2324033.htm [Accessed 30 September 2003].
Microsoft.com 2003, ‘The Decisions of Microsoft China Company on Sales’, [online]. Available at URL: http://www.microsoft.com/china/partner/media/0730a.asp [Accessed 29 September 2003].
Overview of Chinese IT market, 2003, [online]. Available at URL: http://tech.sina.com.cn/it/m/2003-07-18/1408211022.shtml [Accessed 28 September 2003].
Pconline.com.cn 2002, ‘Korean government will use Linux system to instead Microsoft produts’, [online]. Available at URL: http://www.pconline.com.cn/news/importantnews/10310/225562.html [Accessed 28 September 2003].
Pudong.com 2003, ‘The prohibitive invest domains List for the oversea investors’, [online]. Available at URL: http://www.pu-dong.com/newl/jzml.htm [Accessed on 30 September 2003].
Qing,C. 2003, ‘why do I pirate’, [online]. Available at URL: http://www.blogchina.com/new/display/14173.html [accessed 30 September 2003].
Sohu.com 2003, ‘Microsoft opened software resource codes to Chinese government and 7 government units’, [online]. Available at URL: http://it.sohu.com/70/28/article213642870.shtml [accessed 30 September 2003].
Siliconvalley.com 2003, ‘Software piracy increases worldwide, trade group says, as Congress considers options’ [online]. Available at URL: http://www.siliconvalley.com/mld/siliconvalley/3437465.htm [accessed 30 September 2003].
Tom.com 2003, ‘Chinese software market report’, [online]. Available at URL: http://tech.tom.com/1898/2003825-56775.html [Accessed 30 September 2003].
Xiang, Y. 2003, ‘Microsoft has been a suspect to copy Chinese software’, [online]. Available at URL: http://www.copyyour.com/info/141.htm [Accessed 29 September 2003].
Zhipei, J. 2003, ‘The judicial Protection On Network Copyright From Court of People’s Republic of China (CPRC)’, [online]. Available at URL: http://www.civillaw.com.cn/english/researches/ [Accessed 2 October 2003].
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发表于 2004-1-26 10:20:55
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