INTL 706 Section – 004

Global Business Strategy

In Class Assignment #1

Case Studies on Emerging Markets

Student Name: Viral Raiyani

Student No.: 300931274

College Name: Centennial College

Course Name: Global Business

Strategy

Course Code: INTL 706

Section: 004

Professor: Luis Silva

Date: 29 January, 2018

Case 1 - Emerging Markets: Microsoft's Evolving China Strategy

1. From an industry-based view, why does Microsoft feel threatened by Linux

in China and globally?

Microsoft’s Windows Operating System is a proprietary software product that

is built and managed by Microsoft’s own team on engineers. In 1990s and
even today, Windows is a major breadwinner for Microsoft that contributes
more than 90% towards its revenues.

In a rage to protect its intellectual property i.e. software (IPR) and with its
antipiracy policies, Microsoft went on a rampage of legal lawsuits in China,
to force people to use a legal copy of its Windows (Peng, 2013). However,
this entire lawsuit drama forced people to look for alternatives and opened
market for its open-source competitor Linux, which is free to use for personal
and business purposes. The Government of China and businesses all over the
world started promoting and using Linux as an alternative to Windows and as
a result, public infrastructure started to develop that occupied Linux as its core
foundation (Peng, 2013).

The main reason why Microsoft feels threatened is the development of public
infrastructure and use of Linux at its core foundation sparked development of
an alternative ecosystem that is a very low cost next best option to Windows
and has the power to kill the long-run dependence on Microsoft’s Windows
which ultimately endanger its profitability, deemed monopoly and most
importantly, its very own decades long legacy and existence.
2. From a resource-based view, what valuable and unique resources and
capabilities does Microsoft have in the eyes of Chinese users and the
government?

Following are the valuable resources and capabilities that Microsoft has in the
eyes of Chinese users and the government:

 Microsoft’s Windows is highly resourceful and easy to use software that

boosts the productivity of people.
 Microsoft’s Windows was trusted to not contain any spyware as Microsoft
allowed access to the fundamental code of the Windows so that the
Government can verify and replace the code with its own proprietary and
custom code to prevent spying.
 Microsoft’s Windows works on most hardwares available in the market
and therefore it worked on any computer built by the manufacturers like
Lenovo or custom built and assembled by the user.
 Almost 90% of the users used Windows for their computing needs.
 A subject on computers was added to the school learning curriculum and
schools preferred Windows to teach computer to students.
 Children would learn windows from childhood and as a result would
become loyal users of the Microsoft’s Windows.
 With majority of users preferring Microsoft’s Windows, most custom and
third-party software are also developed on Windows and thus, they work
exclusively on windows.
Following are the unique resources and capabilities that Microsoft has in the
eyes of Chinese users and the government:

 In 1990, Microsoft’s Windows was the only computer operating system

with Graphical User Interface, unlike others who relied on a command line
interface and were hard to operate.
 All hardware manufacturers made their hardware keeping in mind the
windows configuration. Thus, Microsoft’s Windows is also leading and
driving the hardware industry.
 Microsoft’s Windows is the only operating system that can work on a
hardware that can be customized to meet the processing power and speed
requirements of the user. Thus, attracting businesses to make computers
and windows an integral part of their process.
 Microsoft’s Windows was the only operating system in 1990s that
provided after sales service though security updates on periodic basis.
 In 1990’s Microsoft’s Windows was the only platform that could be used
to make custom software for the computers.
3. From an institution-based view, what are the major lessons from Microsoft's
strategic choices?

From an institution-based view, the major lessons from Microsoft’s strategic

choices are as follows:

 Never hurt your customers, especially when they are the Government of a
developing country like China that is also your biggest target market.
 The language of politeness and friendship is better understood than the
language of legal law suits.
 Winning trust is the master key to overcome every hurdle and to win trust
and control in the market.
 Everyone who needs you may not be able to afford you. Thus, if you want
to enjoy monopoly in market, make sure you are affordable enough to
everyone who needs you.
 Always maintain close and strong relationships with those to whom your
product is complimentary to their own. Such relationships will help you
flourish your business on a larger scale. (Example, relationship with
computer manufacturers like Lenovo helped Microsoft as they shipped-out
their computers with Windows-On-Board.)
 Last but not the least, always look at the bigger picture. Short-term profits
may be misleading and an unsustainable success.
 Case 2 - Emerging Markets: High Fashion Fights Recession

1. Using the five forces framework, how would you characterize the competition
in the luxury goods industry? Rate each of the forces (High, Medium or Low)
and explain or justify your rating.

Forces Rating Justification

Competitive Medium This has been rated as Medium because even

Rivalry though luxury goods brands rely of differentiation,
distinctiveness and exclusivity of their product for
pricing decisions, they do sometimes take into
consideration, the pricing of competing brands.
This is an increasing trend among the low-cost
luxury brands who are targeting the rapidly
expanding middle income population who has the
potential to become rich elites one day and wants
to purchase more affordable luxury products
today.

Thus, the low-cost luxury goods brands capture

more sales compared to the high-end brands who
take some considerable damage as they lose the
potential and emerging customer base. In this way,
the low-cost brands give competition to the high-
end brands.

Threat of Low For a player in the luxury goods industry, it is the

New brand image that drives sales and revenues. Luxury
Entrants goods shoppers want to spend their money on
brands that are very special and reputable and
whose products are distinct and exclusive (Peng,
Emerging Markets: High Fashion Fights
Recession, 2013).
 For a new entrant, to create an image of a distinct
and reputable luxury goods vendor is a difficult job
and it comes at significant expenditures in
marketing and branding activities. With low initial
profit margins and inability to sustain losses, there
are cost and investment barriers to enter the luxury
goods industry and thus the Threat of New
Entrants is Low.

Threat of Low It is extremely hard to substitute a luxury product

Substitution as there is possibly no quality alternative available.
Theoretically, it can be said that since all luxury
brands rely on differentiation and are therefore
distinct and their products are exclusive to their
own banner, they cannot be substituted.

Therefore, if a customer buys a cheaper product

thinking of it as a substitute, the customer is highly
mistaken as buying a luxury as it is in fact a cheap
non-luxurious product.

Also, in terms of value, since luxury brands

differentiate their products with a focus on a niche,
it is not possible to capture those values in product
of another brand.
Thus, the Threat of Substitution is Low.

Bargaining Low Players in the luxury goods industry rely on a very

Power of small customer base to power their growth engines
Buyers and profitability. As a result, the nature of prices of
top-notch luxury brands like LVMH’s products is
highly in-elastic with zero promotional offers and
sale discounts (Peng, Emerging Markets: High
Fashion Fights Recession, 2013).

Also, with the elite rich shoppers willing to spend

their money on the fewer prestigious classic
products and their choices of suppliers for such
 products being extremely limited, the Bargaining
Power of Buyers is Low.

Bargaining Low I have rated this as low for a reason.

Power of
Suppliers One being the fact that with existence of a very few
top-notch luxury brands, the suppliers of materials
that make up the products of such brands also rely
on a few limited buyers of their products.

Also, it is extremely difficult to become a vendor

to luxury goods brand as they have their own set of
quality criteria and they often demand high
exclusivity in terms of supply.
This leaves the suppliers with limited options to do
business and the cost and consequences of making
a switch are often quite undesirable.

Second, it is an increasing trend among the major

players of the luxury goods industry to acquire
their own suppliers to have wider span of control
on their entire supply chain. Example, LVMH
acquired ArteCad, its Swiss watch dial supplier in
2011 (LVMH, 2011).

This leaves the Suppliers with Low Bargaining

Power.
 References
LVMH. (2011, November 10). LVMH acquires ArteCad, one of its main suppliers of Swiss
watch dials. Retrieved from lvmh.com: https://www.lvmh.com/news-documents/press-
releases/lvmh-acquires-artecad-one-of-its-main-suppliers-of-swiss-watch-dials/

Peng, M. (2013). Emerging Markets: High Fashion Fights Recession. In M. W. Peng, Global
Strategy (pp. 57-59). Toronto: Cengage Learning.

Peng, M. (2013). Emerging Markets: Microsoft's Evolving China Strategy. In M. W. Peng,

Global Strategy (pp. 27-29). Toronto: Cengage Learning.