case study sap establishing a research center over china

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Analyze SAP strategic entry into China and the challenges in establishing a research center with this competitive market

Company overview
SAP entry into Software market
Establishing SAP Labs in China
Recommendations Content Competitors SAP overview Benchmarks Products and Services China’s software industry Porter‘s "diamond model“ explains how firms can gain competitive advantage on international markets and thus become exporters of their goods and services Demand Conditions Government policies 1972 1978 SAP Founded from IBM employees in Germany SAP turns 10 providing service to 250 companies in Germany, Austria, and Switzerland 1982
Opens international subsidiaries in Denmark, Sweden, Italy, and the US
Customer milestone: Dow
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Compensation Wars for local talent

Expatriates recruited also very expensive

Difficult to retain staff due to high opportunities
=problem for project that require 3-7 years

Annual raises were common up to 15% or more

Top graduates expected a high level of personal engagement Recruiting Challenges Solutions Key decision making for SAP Labs in China Recommendations Support of long-term investment in technology and R&D
Tax incentives
Reduced 15% corporate income tax
150% deduction for R&D expenditures if R&D spending has increased by 10% from the prior year
Access to cheap land
Establishing facilities in China eases market access premise to sell products
Government allows easier access to clients
Relationship building is very important
Political stability supports long-term investments Some Facts
1.5 million employees
CAGR: 29% over past three years
20,719 firms in software industry High market potential only 45% of companies had adapted ERP systems
Demanding customers due to specifications of Chinese market
Rapidly changing and developing market
Market of the future: trends can be identified here
Strong development of general Chinese economy Limited competition, mostly smaller companies with focus on SMEs

SAP is market leader in large enterprise segment
Focus of strategy is to deliver high quality software as a standardized solution with constant improvements and innovation
SAP‘s structure: Geocentric firm sets the basis for

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