Microsoft Strategist Discusses the Challenges of Global Markets

When he negotiates with governments about selling Microsoft products in overseas markets, Craig Mundie, senior advisor to the company's CEO, Steve Ballmer, said he thinks of a tip given to him by his old friend Henry Kissinger.

"Relationships matter," said Mundie, who spoke at Yale SOM on April 3. "Building them and sustaining them is a critical piece of diplomacy. In this business you have to have friends before you need friends."

Mundie was a guest speaker in the Gordon Grand Fellowship Lecture series. He discussed the challenges that U.S. technology companies face in global markets.

After Microsoft's experience defending itself against an antitrust suit in the United States in the late 1990s, Mundie knew that the company needed a better understanding of the complexities of the global markets it wanted to enter. "More and more we're drawn into a wide range of questions for which there aren't obvious answers," he said.

As Microsoft expanded globally, Mundie created the company's Technology Policy Group, which routinely works with countries where the company sells or wants to debut products and services. Part of the group's focus is to learn about the local regulatory environment and building relationships with government and business leaders.

The two issues Microsoft has most often faced abroad, Mundie said, are governmental concerns about antitrust violations and wariness about becoming dependent on technology supplied by a foreign company.

In negotiations, Mundie said, he found it most useful to position himself as a representative of the technology industry and not as someone interested only in advancing Microsoft's agenda. He said that he often appealed to officials' mandates to help their economies grow. "With governments, businesses generally don't have a lot of leverage, and the reason is governments don't have profit motives," Mundie said.

Technology companies that sell products or services with the potential to alter a nation's social and political environment often must contend with policy issues, Mundie said. Microsoft faced such issues in China, where government has a tradition of controlling the dissemination of news and information. "So if you want to operate a search engine, you're a news provider," Mundie said. "There are many such examples where you're helping shape the environment you want to be in."

In India, Microsoft has faced an uncertain tax situation, because the Indian government is still determining how to tax companies selling "ephemeral goods," such as internet connectivity. The tax laws, written for a different era and to cover physical products rather than software or online services, must be reinterpreted, Mundie said. "The nature of the product is what creates the ambiguity," he said.

As technology companies continue to expand globally, Mundie said, they will have a growing need for highly skilled business leaders. "The complexity of global business is high, and I think a lot of the people who are non-tech execs are the people who deal every day with that complexity," he said. "The entire outward-facing aspect of technology companies is going to have to get more and more sophisticated, and people who are well trained and have a lot of skills in marketing, for example, are going to get more and more important."