Microsoft in Japan - Term Paper Example

Microsoft in Japan Executive Summary The study involves analysing the pathway to starting business including the challenges and opportunities that are encountered along the way. The company on the lime light is Microsoft as it sought to expand its business to Japan. They had the privilege of using the Japanese-US tax-free policy, which provided low costs for starting the business (Worlds Development report, 2010). They however encounter major challenges in communication due to the language barrier between them and the Japanese. It is necessary for a company to first research about the country of interest and the business climate before taking the risk to invest in a foreign place. Company Background Bill gates and Paul Allen founded Microsoft Company in 1975. The company’s headquarters is in US and they develop, sell, support, manufacture, as well as license computer soft wares. The company has over one hundred thousand employees and the computer soft wares they sell include the Microsoft office, windows operating software and internet explorer browser. The multinational company also sells hardware’s such as phones, tablets and the X-box games console. The company estimated its revenue to be around $77b by 2013. The Knowledge Assessment method is used to analyse challenges and opportunities that the company encounters following investment in a foreign company. Like in the case of a clothing line company that expanded its market globally, it faced many challenges. Being a small business, it should have first invested in its educating the employees on possible challenges and how to deal with them. The government policies were very different from their home country, and they had difficulties adjusting to the forms of taxes as well as importation policies. The company was also not aware of taxes and quotas that the foreign government had imposed on the sale of imported clothes and they ended up making a loss instead of expected profits (International Business Publications, 2012). Country Background In analysing the industry, organization, as well as investment analysis in japan, the costs of starting a business in japan have reduced drastically since the domestic recession and resulting price deflation of the past 8 - 10 years. Office rents and the values of land have also declined since the bursting of Japan's property bubble toward the end of the 1980s. After the domestic recession, many companies in japan reduced the summer and winter bonuses that they had traditionally paid to their employees. By 2004, the Japanese economy stated rebounding and the bonuses returned to an extent that some companied paying their employees a salary of up to US$9,260. This factor may discourage a company to enter the market because of this expensive labour force. Their government however expects a shortage in labour and this may change the business climate for new entrants. Companies that what to enter the market should do it early before the inflation pressure kicks in in the few years to come. Entry Strategy Entry strategy involves the strategy used to enter the market. It includes the planned methods of delivering and distributing goods to foreign markets (Sharon, 2012). The company used the joint venture method with the existing corporations to enter the market. Given the current low cost of entering the Japanese market, the company made substantial profits in japan because of the competitive services and products they offered (Hark, 2008). In additional, the company had a winning attitude and this made it thrive. When it comes to distribution, the company entered distributer contract negotiations. The company agreed to a transfer price negotiation with the distributors. The foreign company later realised the true value of its product in the Japanese market and found that the distributors were selling at 50% to 200% more than the home market list price. Using distributers was however not effective because they felt that the percentage of actual revenue they were receiving were low compared to markets in other countries (Daniel, 2014). A properly planned entry into the Japanese market will generate revenue, profit and many advantages. In addition to this, it will enhance a company's valuation because investors believe that a company that is able to succeed in the Japanese market can succeed everywhere (Hodgson, Sano, & Graham, 2008). A failed attempt at Japanese market comes with losses in terms of money and credibility as well. Microsoft succeeded in Japan and it has done well in other nations. Marketing and R & D strategies Early entry into the Japanese market was a profitable business decisions for Microsoft. They identified the market as a fast moving one, and there acquired a fast-moving status. This way they were able to enter the online auction market and acquired cultural sensitive marketing strategies (Ian, 2012). Achieving a first-mover status in the Japanese market is always a critical advantage because the Japan's business culture ensures that consumers and corporate buyers are unusually loyal to suppliers as well as they get loyalty, quality and reliability in return. Japanese consumers and companies carry out evaluation and research on products before buying. The Japanese market tendency to supplier loyalty is also due to the thorough purchase evaluations they make. When it comes to prices, high price mark ups are noted in the luxury designer, high-brand goods, as well as automobiles. Japanese companies tend to pay higher prices for the products and services they buy compared to their foreign rivals (Ian, 2012). The Japanese market has proved to be the world's most profitable for an array of companies and it now accounts for two thirds of those companies’ global profits. These companies in return have invested heavily in the Japanese market during the past years and have open several large stores in Tokyo and other places in Japan. Opportunities and challenges Microsoft took advantage of the Japanese-US non-tax treaty reduced costs for starting a business venture in Japan. There was also a reduced cost of doing business and was contributed to by the fact that there is an intense concentration of businesses in the larger Tokyo area. The domestic recession and resulting price decrease contributed greatly to lower price rents and lower land values, this gave Microsoft an advantageous opportunity to start. Based on the new opportunities and technological advances, it acted as the perfect opportunity for companies willing to make new games for the newest Microsoft game console Xbox-one to the Asian market, which was near the Asian coasts. Japan provided a strategic market because of its citizens who constituently want to have latest technology, the capacity of advanced technology in Japan is high hence, and it allowed Microsoft to form partnerships with the cooperation s there. In addition to a large pool of ethical and qualified personnel, it also opens gateway to the china large market. There were also some demerits encountered and they included huge delays and slow decision-making. This was because evaluating game studios was thorough. Difference in cultural beliefs prevented joint Japanese companies from making some games for Microsoft. In addition, entering into the gaming market in Japan once again will require new strategies and plans because their competitors outdid Microsoft. Conclusion The Japanese market is quite fast moving, quality conscious, and service conscious besides being brand conscious. This is what they expect from the suppliers, and they they offer a good market in return. Technology is developing at a fast rate and any business venture that is driven towards technology, will thrive, as well as get much cooperation to merge with. There are major challenges along the way but once a business thrives, they opened doors for bigger opportunities. This is achievable through employing the best marketing strategies, price polies, service delivery, and choice of distribution. All this should aim at meeting the demands of the consumer (Organization for Economic Co-operation and development, 2008). References Hodgson, J. D., Sano, Y., & Graham, J. L. (2008). Doing business with the new Japan: Succeeding in America's richest international market. Lanham: Rowman & Littlefield Publishers. International Business Publications, USA. (2012). Japan Business Law Handbook: Strategic Information and Laws. Intl Business Pubns USA. Ian Melville. (2012). Marketing in Japan.print review Haak, U. M., & Haak, R. (2008). Market entry in Japan: Theory and management in a turbulent era. Basingstoke: Palgrave Macmillan Daniel Isenberg. 28/3/2014. Jap@n.Inc. Entering the Japanese market. Sharon, P.6/14/2011. The Seattle Times. Microsoft: Tech giant enter new markets. World’s development report.7/22/2010. United Nations conference on Trade and Development. Organisation for Economic Co-operation and Development. (2008). staying competitive in the global economy: Compendium of studies on global value chains. Paris: OECD. Read More