1. Explain your company’s profile as an MNC?
2. Use one theory related to ‘globalisation of business’ to analyse the status of your company?
3. What is entry strategy performed by the company?
4. What are the key international business challenges for your company?
5. From the UN Global Compact Principles/Sustainable Development Goals, which area that your MNC will need to focus in their current and future business Why?
Microsoft Company is a multinational corporation that is headquartered in the United States of America and was established back in1975 under a strong leadership and visionary leaders who saw it grow to the present state of the company. It is incumbent to note that it is among the leading multinational firms in the manufacturing of technology related devices such as computers, gaming, and tablets among a wide range of other gadgets (Chan, 2014). This activity immensely helps to place the product it in a better competitive position with the other rival as well as coexistent companies. In the current context, the Microsoft’s investment strategies in China have been considered for further evaluation.
Company’s profile as an MNC
Ideally, it is in the top position globally regarding developing systems licenses and supporting of wider range software gadgets and the services under their reputable brand. Primarily, it centers on the production of operating systems, desktop, cross-device productivity applications, server management tools, service applications, and another array of tools and services that suit the demand of its market at a particular time of the season (Dempsey, 2017). Nonetheless, being a large company, it does work under different challenges due to its size and other multiple investments it has made in various countries in the world. The significant problem is the high competition level and the fast changing technology and other riskiness that centers it due to its size and further expansion to other areas that are very prone to some influential factors such as insecurity. Notably, the company has devised some clear modus operandi to counter some of the challenges the firm is undergoing through so as to heighten its productivity and efficiency in the market.
Dunning Eclectic Paradigm theory
This theory primarily states that a country has an absolute advantage if it can meet the demands of its consumers by maintaining the efficiency of the highest order so as to enhance the productivity and mutuality which would in turn work to the advantage of the company (Da Veiga and Martins 2015). The theory further states that when two different countries specialize in various products, there is a higher likelihood of the two nations increasing their sales since the demands of their products would be readily available for consumption due to their variability in products. There are three major factors of Dunning Eclectic Paradigm theory considered at the time of making international business decisions. These factors are Ownership advantage, Internationalization advantage as well as location advantage.
Figure 1: Dunning Eclectic Paradigm Theory
(Source: Kotabe and Kothari 2016)
Microsoft has a significant advantage in the context of ownership in China. For instance Microsoft owns an international research lab in the Chinese market, which is predicted to largest software market in near future. In addition to that, Microsoft has effectively established partnership with the Chinese municipality as well as central government. The most attractive market for information system is major advantage for Microsoft. The internalization of Microsoft in Chinese soil provides a very intense advantage in comparison with the costs associated to the offshore business. For instance, Microsoft sells more than 5 million computers every year in China (Khanna and Palepu 2013). In addition to that, rapid industrialization drive of Chinese government provides an ample opportunity for Microsoft to choose most attractive location. Therefore, we can easily analyses that the Chinese investment is most beneficial for every factor of Dunning Eclectic Paradigm theory.
Factors affecting Firm’s choice
Business scholars view a multinational business as one of the most costly and risky endeavors. Therefore, it requires a clear outline of modus operandi so as to prevent havoc which comes with poor planning of one’s business. Microsoft Company has operations in the entire world, and thus its entry into Chinese market was influenced by quite some factors in the hosting country such as political, economic, technological, and social issues (Aithal et al. 2015). These factors are discussed below:
Competitiveness:
The infrastructural development drive has made the Chinese market as most attractive for Microsoft. In addition to that, China is one of the major pool of skilled labor, which was the influential factor for any information system company. The business value chain development in China also helped Microsoft to invest in China more easily (Shaw and Luiz 2017). The employees in China are both skilled as well as low cost, which attracted Microsoft to attain evident competitive advantage.
Regulatory Environment:
Chinese has been most accommodating to the foreign companies, as the state was in dire need of FDI. The favorable policies and rules significantly encouraged Microsoft to invest in China. In addition to that, joint venture with the other software companies in China enabled Microsoft to have greater customer base.
Stability:
The political and economic stability has been another major contributor for Microsoft to make decision of investing in China (Da Veiga and Martins 2015). The peoples liberation party has been strongly governed Chinese state for a long time. In addition to that, continuous economic growth has attracted Microsoft to invest in China.
Local Chinese Market and Business Climate:
The local Chinese market has been focused on modernization. The need of digital technology has been quite effective to make the business climate favorable for Microsoft. The drive of modernization from the government also attracted Microsoft as they have the facility to partner with the municipality and central government. In addition to that, huge population also presented a major scope to attain lucrative growth for the company.
Uppsala internationalization theory
Uppsala internationalization theory will be utilized precisely due to its wide range of application and because it provides one with valuable knowledge on operations of MNCs. This theory outlines characteristics of the international companies by describing their rudimentary understanding of the market overseas before one commences on the establishment of the business. It states that a multinational corporation should guarantee the host company on the trust and the commitment (Gunnigle et al. 2015). This statement falls under the political scenario since the state regulations such has payment of taxes and adhering to the rules and regulations enforced by the hosting company pertaining foreign investors should be followed. Microsoft effectively followed this theory at the time of expanding its business in China. Microsoft never exported directly to China. It established its representative office in Beijing. It has created its own sales branch in China. It has mainly focused on Chinese language software, Chinese friendly computers as well as training program. Currently, the sales and marketing headquarter of Microsoft is located in Shanghai. The commitment of Microsoft towards Chinese market has increased in such extent that the company is focused on making its products available and simplified to the Chinese (Sisko et al. 2014). In addition to that, Microsoft has announced that it has been committed to increase its investment in the cloud computing sector of China.
Chow (2016) alludes that running the business at an international caliber requires a very authentic approach due to the myriad of problems in which one has to face before fully establishing the business. For that case, Microsoft Company was subjected to come up with the wisest idea on how to take technology business elsewhere away from their motherland. One of the major strategies applied was the public policy approach. This tactic was implemented in the majority of their host countries. The main reason for using this method was to protect their intellectual capability in the market. This strategy was profitable since the firms within the regions in which they were trading more so in Europe were not sophisticated as Microsoft. Therefore, it gave this corporation an opportunity to enjoy the accruals which come with monopoly market (Dyreng and Markle 2016). Despite that, they experienced pitfalls as a result of the uprising from different groups who filed cases in the court of law demanding that Microsoft should withdraw from being a monopolistic association. However, they succeeded since they were supported by the government of the United States in the court battles.
Secondly, Microsoft used a strategy of closely partnering with the government in the hosting country. For instance, in China after a long period of unrest and rejection of their products, Microsoft applied this tactic. After an extended period of reviews from the government agencies, they were given an opportunity of carrying out their trading activities. Besides, the government of China and Beijing who had refuted seriously on their products legalized millions of computers from the Microsoft Company to be used in the state offices (Kaynak et al. 2014). This take by the two governments played a key role in ensuring that counterfeit Microsoft products in the country from the companies who were illegally using the Microsoft software were done away with completely. Consequently, Microsoft increased its sales in these countries and also building up of a great relationship between this Bill Gates Company and the government of China.
International Business Challenges
In spite of being the best company in personal computing technology in the world, Microsoft faces many problems. According to Vlcek (2017), Microsoft Company is on the verge of collapsing due to the challenges in which it is encountering despite that it was once an icon company in the world. Struggling PC market has been listed as one of the matters which if not dealt with on time, this company might regret ever joining the business world. The Personal Computing system in the recent years has been outlawed by the emergence of Smartphone and tablets (Chow 2015). Most of the consumers prefer using the Smartphone and the tablets since they are not cumbersome and it offers the same internet services just like the case of the PC. For that reason, the sale of the PC has become a menace to the company since the rate at which the consumers are purchasing them is quite minimal.
Additionally, device failure brought forth to a distraught image of the corporation. For instance, in their attempt to use their product Zune to emulate Apple’s iPod was faced with massive embarrassment due to crashing and burning of that product (Roggi et al. 2017). Nevertheless, development momentum has shown more favor to the use of the Android and iOS since they are more profitable as compared to Microsoft. The company’s intention to center their attention on both hardware and software in the mobile industry is subject to internal business conflicts thus hampering their progress. Such problems have made the international market to retreat on dealing with their products since they have started experiencing a lot of doubts on its standards. The competition menace is facing this company resulting from different companies’ competing for the same market overseas alarming. This problem has caused consecutive losses which its recovery is not easy. It is crucial for the management to seek on how they can curtail these matters so as to prevent the entire corporation from collapsing.
United Nations Sustainable Development Goals (UNSDGs) are the agendas in which this body came up with an objective of improving the living standards and making the world a better place by the year 2030. The goal of the UN focal point will come into realization with the aid from the established and the upcoming companies and different groups and civil societies in the world. Microsoft need to focus on its cloud computing business more significantly. The demand of cloud computing in China has been growing in an exponential manner. On the other hand, the organizations also have to keep in mind that the Chinese Government is committed to make their own counterpart operating system so that foreign companies cannot dominate Chinese market. This attitude can be a major threat for Microsoft in near future. Moreover, the company also has to check the software piracy. It has been continuously incurred loss for the company.
Conclusion:
To conclude, Kotabe and Kothari (2016) assert that Microsoft Company should focus on the provision of quality education by sponsoring their employees to learn more about systems so as to help in facilitating innovation. By doing so, Microsoft Company will be in better place to production since the world is fast moving towards sustainable quality education. More so, they should embrace upon corporate social responsibility by sponsoring developing countries in which they are trading in by constructing schools and installing them with modern learning facilities.
Reflection
I have learnt that this assistance will greatly help in boosting the education standards across the world (Choi & Lee, 2016). Microsoft Company can as well ensure that they are responsible for consumption and production. They should devise a mechanism by which they ensure that as they make the PCs its output and the resources used are reasonable enough. Microsoft Company should also come up with products which are environmentally friendly. It is devastating to see how their products such as computers pose a lot of danger to human health due to the emissions they produce.
References
Aguilera-Caracuel, J., Guerrero-Villegas, J. and Morales-Raya, M., 2015. Corporate Citizenship of Multinational Enterprises and Financial Performance: The Moderating Effect of Operating in Developing Countries. Ethical Perspectives, 22(3), pp.437-467.
Aithal, P.S., Shenoy, P. and Neelam, P., 2015. Opportunities & Challenges in Starting Software Company in Developing Countries.
Chan, L.Y., 2014. Corporate social responsibility of multinational corporations.
Choi, E. and Lee, K.C., 2016. Relationship between social network structure dynamics and innovation: Micro-level analyses of virtual cross-functional teams in a multinational B2B firm. Computers in Human Behavior, 65, pp.151-162.
Chow, D.C., 2015. How China Promotes Its State-Owned Enterprises at the Expense of Multinational Companies Doing Business in China and in Other Countries.
Chow, D.C., 2016. China’s Enforcement of Its Anti-Monopoly Law and Risks to Multinational Companies. Santa Clara J. Int’l L., 14, p.99.
Da Veiga, A. and Martins, N., 2015. Factorial invariance of an information security culture assessment instrument for multinational organisations with operations across data protection jurisdictions.
Dempsey, P., 2017. The Teardown: Microsoft Surface Studio PC. Engineering & Technology, 12(1), pp.80-81.
Dyreng, S.D. and Markle, K.S., 2016. The Effect of Financial Constraints on Income Shifting by US Multinationals. The Accounting Review, 91(6), pp.1601-1627.
Gunnigle, P., Pulignano, V., Edwards, T., Belizón, M.J., Navrbjerg, S., Olsen, K.M. and Susaeta, L., 2015. Advancing understanding on industrial relations in multinational companies: Key research challenges and the INTREPID contribution. Journal of Industrial Relations,
Kaynak, E., Mockler, R. and Dologite, D.G., 2014. Multinational strategic management: an integrative entrepreneurial context-specific process. Routledge.
Khanna, T. and Palepu, K., 2013. Winning in emerging markets: A road map for strategy and execution. Harvard Business Press.
Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths to building a competitive advantage from emerging markets to developed countries. Journal of World Business, 51(5), pp.729-743.
Pitelis, C.N. and Teece, D., 2015. Dynamic Capabilities, the Multinational Corporation, and (Capturing Co-Created Value from) Innovation.
Roggi, O., Giannozzi, A. and Baglioni, T., 2017. Valuing emerging markets companies: new approaches to determine the effective exposure to country risk. Research in International Business and Finance, 39, pp.553-567.
Shaw, B. and Luiz, J.M., 2017. The Impact of Distance (External) and Organizational Factors (Internal) on the Knowledge Chain of Multinational Corporations: South Africa as a Host Country. Thunderbird International Business Review.
Sisko Maarit Lipiäinen, H., Ensio Karjaluoto, H. and Nevalainen, M., 2014. Digital channels in the internal communication of a multinational corporation. Corporate Communications: An International Journal, 19(3), pp.275-286.
Vlcek, W., 2017. Multinational Corporations and the Digital Economy. In Offshore Finance and Global Governance (pp. 43-70). Palgrave Macmillan UK.
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