CASE STUDY (30 Marks] crosoft's Current Issues in China Hide A Deeper Problem in Emerging Markets -Jeremy Wagstaff and Gerry Shih, Reuters China The official asked the interpreter to double-check Gates' reply as he couldn't believe the figure was so low it's a a trip to Being a decade ago, Bill Gates was asked by a senior government official how much money Microsof Corp made blem that hasn't gone zna, Indeed, Microsotis current issues in China conceal a deeper problem for the US software plant despite the popularly of its Windows operating system and Office suite few people in emerging markets are willing to pay legitimate coples s not only costs Microsoft in lost revenue but is also holding back the spread of its newest Windows 8 version analysis even buyers of pirate software prefer older versions According to Star Counter a website that tracks what software is ded on Internet connected computers more than 90 percent of PCs in China - now the world's biggest market - are in ng pre-8 versions of Windows Microsoft is trying to tackle this This year it's offering Windows 8 at a discount to PC nufacturers who install its Bing search engine as the defaull And it's giving away versions of Windows 8 for hones and Te tablets I as the industry shifts from desktop to mobile the cloud and free or cheap software China sums up both the old and new llenges Microson faces in making money in emerging markets and increasingly, in developed ones Je great danger for the company is that what has happened to them in emerging markets basically no revenue from new s because of pitacy - is not far of what's happening everywhere,' said Ben Thompson the Tawan-based author of atechery.com a popular technology blog RE COST r sure China is a major and unique, headache for Microsoft Many of the problems are tied to a broader push by the inese government to limit foreign firms dominance and encourage local technology firms to become viable competitors Aller ars of healthy relations with Beqing, Microsoft last month was suddenly targeled by anti- monopoly regulators who raded is ina offices as part of a price-fuing investigation the spats mask the fact that Microsoft has never really cracked how to get people in emerging markets to pay for its tware. The company rarely breaks out revenues by geography, but it has provided clues about the size of the problem. In 11 then-CEO Steve Balmer reportedly told employees that because of piracy Microsoft earned less revenue in China than he Netherlands - with 1 percent of its population - Even though China bought as many computers as the United States cording to the BSA anti-piracy lobby group that Microsoft colounded, emerging markets account for 56 percent of all PCs in and 73 percent of software piracy of the 577 8 bilion revenue Microsoft generated in its 2013 financial year China Braz! Russia each 'exceeded $1 billion according to a Microsoft presentation For comparison Apple Inc generated 527 billion Srealer China, which includes Hong Kong and Taiwan, in its 2013 financial year For Microsoft that's a lot of lost revenue m the hean of its business Windows and Office are still very much the core of Microsoft says Sameer Singh an India sed analyst. The most recent breakdown by Microsoft of its results by product line--for the first quarter of fiscal 2014 - ws that 56 percent of its global revenue and 78 percent of operating profit came from Windows and Ofice crosoft doesn't just lose the revenue from pirale copies, it also loses access to customers who might buy other Microsoft ducts that work with or on top of Windows and Office Across most markets. Windows and Office account for more than hall evenues, says Andrew PickUp Microsof's Asia PR chiel This analysts say is because many of Microsoft's other products, .h as Exchange and Windows servers, depend on customers already using Windows and Office "The Microsoft ecosystem bviously pretty interconnected," says Jan Dawson of US-based Jackdaw Research "So it makes sense that the proportion evenue would be similar in emerging markets KED PCS fermagine the operating system is one of the costliest parts of the machine while mom-and-pop shops which form the favouracy memerging markets is that each part of the chain poses a problem for PC makers working on of relallers in such markets can't afford to turn away price-sensitive customers who are comfortable buying prale problem therefore starts with computer makers, Singh says, because "convincing them to ship every PC with Windows talled is dificultMargins on PCs for a company de Lenovo Group Lid are "near single digits," says Bryan Wang an vala Gartner a molts at up to 60 percent of PCs shipped in the emerging markets of Asia, says IDC research manager Handoko Andi. ve no Windows operating system pre-installed so-called "naked PCs, which usually instead carry some free, open source saling system like Linux That compares with about 25 percent in the region's developed markets like Japan and Australia A ckscan of Taobao the popular Chinese e-commerce sito operaled by Alibaba, shows a vast selection of PCs shipped with ustather than Windows Once the machines hit the relailers, it's hard to tell where legitimale software stops and piracy a recent morning in Zhongguancun, a teeming electronics hub in north Beijing, shopkeepers offered lo bundle what they d were legitimate versions of Windows with a new laptop, either for free or the equivalent of about $30. Microsoft began bying Lenovo in 2004 to stop shipping naked PCs, but the Chinese firm countered that its margins were loo low a person miliar with the negotiations said Two years later -just days before then-President Hu Jintao visited Gales' U.S. home - ina announced a new law requiring PCs to be shipped with operating systems. That merely dented piracy rates, which fell to percent in 2009 from 92 percent in 2004 according to the BSA Lenovo said it reached an agreement with Microsoft in June this year (2014) to ensure that Lenovo PCs sold in China would come pre-installed with a genuine Windows operating tem (Source https./.www.businessinsider.com/c-naked-pcs.lay-bare-microsofts-emerging markets:problem-2014-1021BETI date accessed 20th November 2020) Answer ALL the questions in this section. Question 1 (6 Marks) Identify the deeper problems Microsoft is facing regarding the sale of computers in China? Question 2 (6 Marks) Examine the pull factors of Internationalization in the context of the above case study. Question 3 (18 Marks) Examine the concept of Totalitarianism and Democracy in relation to the above case study provide relevant examples