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INTB 6217 SAP Shanghai Case Study

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SAP Shanghai Case INTB 6217
Establishing a research centre in Shanghai in China was important to SAP because it will enable
the company to transform from development lab to full research and development centre in that
part of the globe. Even global leading technology companies that start new units in foreign markets
face challenges concerning the sustainability and future growth of the unit. Difficulties may range
from human resources to dealing with aggressive competitors both locally and multinational
corporations.
Aside from SAP’s issue in finding experts and innovators because of shortage in innovativeness
in China, there are still many challenges to be considered including competition from big players
like HP and Microsoft entering the Chinese market. They are not just competing in technology but
also competing in hiring staff and competent researchers via internship programs and
compensation packages. Other challenges include:
Culture, Administrative, Geographic and Economic distance. Cultural difference and
business practices, Language barriers leading to misunderstanding, setup costs because
China require significant investments in localization. Government influence: changing
market regulations. Many companies are government run which is affecting the decision
making process with regard to selection of ERP software. Chinese government had big
influence on the domestic market and large number of the Chinese big firms are either
owned by the government or were joint ventures/partnerships.
Limited talent pool where all of the technology firms are choosing from (recruitment war)
Long standing tolerance of Chinese or copyright infringement and intellectual property
protection concerns
Increase in labor wages and the fact that Key researchers are paid Global Standard Salaries.
Increase in employee turnover
SAP business applications and research division were not well known in Chinese
employment circles
Most of the large companies are risk averse because they are run by the government and
not willing to try new things
Competition from local Chinese companies who dominated over the small and medium
sized customers, which means that SAP and major entry players like HP and Microsoft are
all competing on large Chinese companies (Limited segment)

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SAP Shanghai Case INTB 6217
On the other hand, there are also benefits for opening a research centre in Shanghai including:
Research centre in China could be used for multipurpose including business development
and management of clients’ relationships.
Potential for growth is attractive and there is a lot of room to boom and flexibility. Over
55% of enterprises did not adopt ERP from larger ERP companies.
Government incentives and tax cuts to attract foreign direct investments
Cheaper labour and cost savings on research costs
Having a fully develop research centre will provide easier communications between the
company’s various divisions and manufacturing. SAP has an existing development centre
in Shanghai and enjoys strong relationships with local customers, suppliers and
employment markets.
Conclusions and Recommendations
Considering the above, I believe the benefits of starting R&D centre in Shanghai outweighs the
challenges. However, SAP is faced with challenges and need to change and adapt new strategies
in R&D, human resources and management, marketing and advertisement and market entry. To
be successful, the company shall re-evaluate its strategic objectives and critical success factors to
ensure alignment with its business R&D strategy. Specify the company goals for the research
milestones and research outcomes. Keep employees informed through open communications.
Focus on development of employees to increase efficiencies and cohesiveness among the network
members. Offer competitive salaries, promise of promotions and moving up the ladder and
incentives to employees who relocate to the new facility. SAP shall extend its network to top
universities in China and setup programs in computer science to raise awareness among the
students and graduates that SAP is activity looking for talented individuals to work in their research
unit. The latter may help the firm retain and attract new talented employees. Also, the company
should consider promoting PhD internships at their R&D centre. The company should relocate
experienced managers to its new R&D unit to help share the knowledge. In addition, SAP should
consider working with the government and increase their awareness about the existence of SAP
solutions and benefits. Investigate into its Chinese website and look for ways to improve the
presentation and understanding. I believe based on the above recommendations, SAP has a great
potential on succeeding and increasing its market share in China.

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SAP Shanghai Case INTB 6217 Establishing a research centre in Shanghai in China was important to SAP because it will enable the company to transform from development lab to full research and development centre in that part of the globe. Even global leading technology companies that start new units in foreign markets face challenges concerning the sustainability and future growth of the unit. Difficulties may range from human resources to dealing with aggressive competitors both locally and multinational corporations. Aside from SAP’s issue in finding experts and innovators because of shortage in innovativeness in China, there are still many challenges to be considered including competition from big players like HP and Microsoft entering the Chinese market. They are not just competing in technology but also competing in hiring staff and competent researchers via internship programs an ...
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