Situation Analysis
The brand we represent is Microsoft Xbox. Below is a situation analysis for Microsoft Xbox as well as trends and driving forces for the last few years.
Industry Analysis:
Bargaining Power of Suppliers The bargaining power of suppliers for this industry is Low to Medium. Nintendo, Sony, and Microsoft respectively, are the world’s largest players in the video game industry (Euromonitor, 2014). With their sizes, these companies create bidding wars between suppliers for their business lowering the power that suppliers hold. The ability for suppliers to bargain simply on technology is weak, however the price is another matter. For example, the Xbox One costs $471 with a retail price of $499, giving it little room for profit
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Threat of New Entrants
Threat of new entrants is very high in the gaming industry. Open source gaming such as Ouya and Nexus Player are newcomers coming to compete in the industry. Ouya is an inexpensive system that lets users play countless of games from their android operating system and enables developers to create games easily (Ouya, 2013). While Nexus Player is a TV console operated by Android that lets users play games and movies (Crossley, 2014).
Rivalry
Global Video Game Console Industries must try to maintain a sustainable competitive advantage through innovation such as creating an upgraded version of the game every year or increase their on and off line presence to better satisfy their customers. There are many competitors in the Video Game industry that include PlayStation 3, Xbox 360 and Wii. These gaming consoles compete in terms of price, durability and loyalty. With Intensity Rivalry being a major determinant of competitiveness, video game companies work towards dominating the industry as well as gaining the major part of the industry profit pool. (Blackwell, 2002)
SWOT Analysis
Strengths
The Xbox One, being one top competitors in the gaming console industry has many features that differ from other gaming consoles. One main feature is the Xbox Live which is an online service for the Xbox console allowing an individual
Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.
The interface for the Xbox one is excellent because of how organised it is. On the Xbox you can easily find your games, social media, and the store. The Xbox one when you go from one app to another you hear a nice calm whooshing sound that isn’t annoying or can get stuck in your head. That is the exact opposite with the Playstation the sound is a bloop it is very annoying and it can get stuck in your head. Another great feature is the keyboard on the Xbox one it is very easy access. The keyboard on
To attempt counteract this cyclical slowdown, EB games have introduced an ever-growing variety of accessories with games to increase the revenue raising capacity of their respective consoles, as well as maintaining the loyalty and attention of a fickle gaming public. Some types of games have been released, with specialty controllers to great success, mitigating the expected lull in sales in the lead-up to new consoles. Recently however, the competition has become slightly skewed. Nintendo’s newfound dominance of the market is causing some headaches for Sony and Microsoft.
To start off Xbox has backwards compatibility. This means that the new console, the Xbox one, can play games from the old console, the Xbox 360. This is a vital feature so there can be less clutter and no effort of having to switch inputs. While it can play select games from the 360, the One cannot play original Xbox games
However, GameStop is still at a disadvantage, because there are such a large number of competitors in the industry. Buyer’s bargaining power are high, since there is no brand loyalty in the industry. Customers are very well aware of the market price of a product and will look for the best deals they can find. Suppliers have high bargaining power since suppliers can choose to integrate forward and sell their products themselves. The success of the retail gaming industry is very dependent on the availability of supplier’s goods. Additionally, since there are low barriers of entrance, substitute products and new entrants often appear in the market. Since most competitors in the industry do not have a strong presence, the expected retaliation towards new entrants is low. An increasing popularity of smartphone games and social media games such as Farmville on Facebook, allows customers to play against friends. Although these social media games do not offer the same experience as a video game, the fact that virtually no switching cost is associated with switching to a competitor’s game and since they are so cheap compared to video game disk and consoles, can easily drive customers from video gaming to online gaming. (Exhibit 2)
Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.
In July 1999, Microsoft legitimized its expansion beyond its core competencies, to invade the gaming hardware market with Xbox and made its impression on the thrill and action seeking needs of the sophisticated video gamers. It aimed at
Microsoft is trying to establish the Xbox One as the video game console leader in the Video Game Industry. The Xbox One is a third generation video game console for Microsoft. The video game industry continues to have steady growth. However,
Product positioning is the most difficult aspect of Microsoft’s marketing strategy for the Xbox. Consumers know that Microsoft is a great company and most computer owners have positive brand images of Microsoft. This really helps Microsoft get a jumpstart on their new product. But, the hard task comes when Microsoft
Question: Was Microsoft's decision to enter the game console business a good decision? Based on: Microsoft Xbox Online. University of Michigan Business School Case Study.
With the competition in the video games industry getting more intense, the next steps of the video game companies become more crucial for their positioning on the market. Due to the low product differentiation, the next market leader will be the platform provider that manages to offer an innovative gaming experience and a wider population of buyers that include all demographics. Although the industry is being totally dominated by Nintendo’s console, the industry is still considered to show a
Another strength that the Xbox One has is that it is financially backed by Microsoft. This company is very successful and can continue to finance the Xbox One, even during times in which the brand is having any difficulty breaking even or making a profit. Microsoft is also one of the most prominent technology companies in world, which is due in part to its willingness to continue to innovate through research and development. Because of this, many of Microsoft’s technological achievements have been incorporated into the Xbox One. For example, the Microsoft Cloud, which improves the quality of Xbox Live for many gamers as it speeds up load times and causes no host advantage. Microsoft’s achievements
The network effects in the video game industry are derived from the console system that is sold to consumers. If a company is able to increase penetration in this arena, though at-cost/ below-cost pricing or pull created through the development of desirable content, it can potentially lock in the added value of the video games sold for the system. Which is to say, the console locks-in the network effects in the industry and the games serve to reap the profits. The video games, however, may present something of a challenge in that they can be somewhat easily replicated by competitors. Nintendo used an encrypted chip system to reduce this possibility.
In order for Microsoft to become the leader in the console industry, it is critical to know the kind of consumers that are going to be targeted. According to the Fundamental Marketing article by Isaiah King, the target market for Microsoft Xbox users focuses on three main components: demographic, psychographic, and behavioral (Fundamental Marketing 1). The demographic of Xbox users range from age, generation, and gender. The hardcore gamers age group range from 16 to 30 years old. However, generation plays a huge role in the demographics of the console. Students of 18 years and younger are aimed highly more than older people, as they are leaders of the digital innovation. This variable of the demographic is important, as this age group will be the future industry in new products.
The suppliers get the advantages of making their products be showcased for the consumers thru these retailing outlets. A wider scope of retail outlets could mean wider scope for the brand recognition of the seller’s products, that is why these retailing giants has more power than suppliers. But when it comes to distribution, having a strong supplier is important, the company be better over competitors when it comes to qualitative factors such as on time deliveries on their branches and wider network of