National and international considerations
In order for Microsoft Corporation to implement the two business strategic plans, it needs to take into account key national and international considerations for effective operation both within the local market and the international market. As mentioned earlier, the two strategic actions include: increasing the presence in the Software-as-a-Service market globally and manufacture of mobile handset device to gain control of the value chain in the Smart-Phone market, first domestically (United States) then European market such as Austria. As the company begins to execute the two strategic actions within the international market, there are conflicts that may arise as a result of the differences in culture. The conflicts therefore have to be managed by first developing an understanding of the cultural differences in education, customs, value system, religion, and languages.
According to Greenworld (2012), the Saas products are one of the easiest to adapt to any local market. This has been revolutionized by the ability of companies to conduct sales online in addition to customers being able to sign up from any location in the world. This creates a huge potential for Microsoft Corporation to gain quick return on investment through online sales both within the local market in the US and worldwide. The company therefore has identified specific Saas markets outside the US that shows potential of growth. It is within these international markets that Microsoft will roll out its first strategic action plan of increasing its presence within the Software as a Service market. These markets include: Europe, Japan, China, and Brazil. All these market are the top Saas markets outside the United States. This therefore means that Microsoft has to take into account the international considerations that might affect it business activities with these host countries. Similarly the online smart phone device industry shows potential for growth in these countries.
Language is an important consideration for Microsoft Corporation as it makes online sales for Saas products and smart phone devices. The UK, Canada, Australia, New Zealand, and Singapore have strong markets in which it can increase presence. These countries are also English speaking countries with strong infrastructures for internet usage and web marketing. Since these countries are English speaking countries, the culture is almost similar with that of the US. Rolling out the two business plans in these countries will not create cultural conflict compared to non English speaking countries. Other markets such as Germany and Austria have large economies and are among the top Saas and smart phone markets in the world. However, these countries have very little acceptance of English as a business language. None the less, these countries also have huge infrastructure in place for internet usage and web marketing. In order to engage operations in these countries, translation of websites, the Saas products, and the smart phone devices is required. The operating system used in the smart phone devices needs to be translated into the local language to adapt to the cultural aspects of the local market.
In other markets, translation of into the local language may not pose the only challenge for Microsoft Corporation to execute its strategic business plan. IP protection, low prices level, and the risk of counterfeit are also issues that Microsoft has to consider. However, the Saas products are generally regarded to be safe from risks of counterfeit compared to enterprise software products.
Cultural differences will influence the management practices of Microsoft Corporation in the various international markets where it intends to execute the strategic actions. It will also influence the motivation of employees and the organizational structure. According to Hofstede (1984), there are also four specific variables that can be used to research the cultural environment upon which Microsoft Corporation is expected to execute its strategic actions. The four variables include uncertainty avoidance, power distance, masculinity-femininity, and individualism-collectivism. Intensive research needs to be done on these four variables in all the international markets. The findings therefore will provide the much needed information for Microsoft operation managers to effectively roll out the business strategic plan in the international market.
Managing the conflicts that may arise as a result of cultural difference requires the use of a model to illustrate differences in behavior between cultures. The model to be used is based on the notion that international operations of Microsoft Corporation should be regarded as a means of producing change and innovation within the organization. This change should be felt by the workforce and stakeholders both within the host country and in the parent country. Three main factors will determine this change: the individual’s dominant cultural lifestyle, strategic option leaders and change agents, and communication of innovation.
International tax considerations are also key factors that Microsoft Corporation needs to take into account while executing its software activities within the international market. There is need for the company to be aware of the rules governing withholding of taxes in different countries because failure may imply minimizing withholding taxes on any transaction. As a result the company may see quick eroding of its after tax income. In many countries, withholding taxes will cost the company more than 30% of any licensing income earned. This may come as a surprise to the company if it fails to prepare for it. For instance, when a foreign customer makes a purchase of any of the Saas products, the local government of the host country will require that the customer withholds part of the payment and submits it in the form of taxes to the local tax authority on behalf of Microsoft Corporation.
This therefore requires that Microsoft relies on the US domestic income tax treaties as a way of reducing high withholding taxes in foreign markets. These treaties are important since they give provisions for reduced withholding rates on any payments made across borders. However, the treaties are limited to only countries in which the US entered into agreement with. However, in case Microsoft intends to make any online sale within a country in which it does not have an incomes tax treaty with, the company may consider treaty shopping. This is where the company uses another country which has favorable terms taxes with both the US and the client’s country. Such considerations are aimed at preparing to sell the Software as a Service product online.
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