Microsoft, the world’s biggest personal computer software company, developed MS-DOS and Windows, the operating system and graphical user interface that now reside on more than 90 percent of the world’s personal computers. In addition, Microsoft has a slew of best-selling applications software, including its word processing program, spreadsheet program, and presentation program.

An integral part of Microsoft’s international strategy has been expansion into mainland China, which was projected to become the third-largest PC market in the world in 2001. With a population of 1.273 billion, China represents a potentially huge market for Microsoft. Microsoft’s initial goal was to build up Chinese sales from nothing in 1994 to $100 million by 2000, a goal that it appears to have met. However, sales could have been very much higher were it not for a number of problems that Microsoft encountered in China.

The most obvious and serious obstacle to Microsoft’s success in China has been the rampant level of software piracy. Some 90 to 95 percent of the software used in China is pirated, according to figures from the Business Software Alliance. Microsoft is a prime target of this activity. Most Microsoft products used in China are illegal copies. China’s government is believed to be one of the worst offenders. Microsoft’s lawyers complain that Beijing doesn’t budget for software purchases, forcing its cash-strapped bureaucracy to find cheap software solutions.