MICROSOFT IN CHINA 

By Ernie Tadla

It took Bill Gates twelve years and billions of missed revenue, profit and market share opportunities to learn how to do business in China … the Chinese Way.

Microsoft came to China in 1992. Eleven years later, with global revenues of $35 billion US, in China the second largest PC market in the world, Microsoft-China revenue was $300 million, and it was operating at a loss.

Source: Newsweek, Asia edition. June 21/04

Several quotes from the article:
• “….. struggling to turn a profit, the brash American software giant is no longer trying to change China. Instead, China is changing the company.”

• “Microsoft started to heed the critics and to embrace China more fully. It is now broadly co-operating, even flying Chinese engineers to Redmond for training.”

• “CEO Steve Ballmer has credited his ‘very well-connected’ China CEO (pirated from Nortel) with improving relations with the leadership in Beijing.”

• “Even top Redmond executives are now sounding almost Confucian, certainly more patient than their norm, about profit in China. ‘We recognize this is a long journey’ said Kevin Johnson, Group VP of Worldwide Sales.”

For a current update on Microsoft and China, read Guanxi (The Art of Relationships): Microsoft, China, and Bill Gates’ Plan to Win the Road Ahead, by Robert Buderi and Gregory T. Huang.
 

WAL-MART IN CHINA

Wal-Mart came to China in 1996. In a retail market that has a 15 per cent a year annual sales growth, after a decade of fighting the Chinese Way, Wal-Mart had only 3.1 per cent of the market, compared with 60 per cent of the Mexican market. Like Microsoft, it has finally seen the light and is adapting to Chinese consumers customs and culture.
Recent changes include:

• acquiring a Taiwanese-owned chain of more than 100 box-stores in 20 provinces in China, for $1 billon, which will still give it only 8.9 per cent of the retail market.

• selling fresh fish, crabs, clams, eels and tortoises. Consumers plunge fishing nets into the serve-yourself, in-store tanks. No dead fish for the Chinese.

• Displaying meat uncovered.

• after eight years of fighting it, Wal-Mart has accepted organized labor and unions in their stores.

• replacing their American chief China executive, a 32-year Wal-Mart veteran from Bentonville, Arkansas, with a Chinese Hong-Kong retailing executive who ran 1,400 stores in Asia and has opened 800 stores since 2001.

Companies like Wal-Mart and Microsoft have deep pockets and other global revenue streams to be able to afford ten- and twelve-year learning curves in China.

My mentor used to say: “The wise man learns from experience.
The very wise learn from other people’s experience.”

From China Business Culture: Strategies for Success.
Wang, Zhang and Goodfellow.

“Understanding changing business values and the characteristics of the Chinese business culture is a challenging project. It is a process of accepting differences, adapting to change and adopting new ways of managing across cultures. Unfortunately, for every one cross-culturally viable project that proceeds to the formal stage of business-business negotiations, it is estimated that up to nine out of ten fail because of “misunderstandings. Cultural risk factors have been not taken seriously enough by many businesspeople.”

• Next Week:  Summary and Epilogue of “How to Live and Do Business in China: Eight Lessons I Learned from the Communists. 

Ernie Tadla  www.odysseychina.net