Marketing Strategies

Robust Adaptive Strategy Implementation

Initial Application
. Microsoft took the Horizon 2 approach, [7] and started making plans for entry into the video
game world with its Xbox. Although this was a relatively risky venture with tremendous initial
costs, Microsoft predicted that the eventual return on investment would be substantial.
Because of an established financial base, Microsoft has plenty of room to experiment in
various industries. Also, Microsoft has become proficient at parallelism and experimentation,
allowing it to easily find high peaks throughout industries. The firm used its software
expertise as its “common base of knowledge” in the development of the Xbox. [7]

Current Application
Currently Microsoft is incorporating the Horizon 1 approach using “adaptive walks.” They are
continually updating and experimenting with the Xbox 360, giving it increasing capabilities.
Microsoft recently upgraded the GUI of the 360 with the New Xbox Experience software
update. With this upgrade, users can stream movies through Xbox Live. Also, users can rip
games onto the hard drive, increasing gaming quality. [20]

Creating Competitive Advantage

Product Implementations
In order to create competitive advantage in the gaming industry, Microsoft enacted crucial
product implementations that allowed it to differentiate itself from its competitors. After
coming in second to PlayStation 2 in number of units sold, Microsoft decided to enhance the
Xbox, coming out with the acclaimed Xbox 360. The new system effectively doubled the
bandwidth and added eight times the memory of the original Xbox. In addition, its CPU had
ten times the processing power of the Xbox. These additions of enhanced graphics and
playing power attracted new customers. Microsoft also created a service, known as the Xbox
Live. Subscribers have the unique experience of interacting with other gamers, streaming
media, and even buying add-ons to games. This differentiation strategy has proven
extremely successful, and even in the recession has a record number of sales [8].

System Implementations
On the side of system implementations, Microsoft has somewhat locked in customers. Once a
customer has purchased a console at, say for example $300, they are essentially making an
investment and will most likely purchase games for that specific console in order to get their
money’s worth. The games are where Microsoft makes most of its money, so the strategy
works. Access to the Xbox platform is said to be ‘rigorously controlled by Xbox’, creating a
barrier to entry in an already difficult to enter market. [11] Xbox developers also established a
major alliance when one of the most popular game developers, EA Games. This "alliance
factor" also holds true with Xbox being the only one to carry Halo and Gears of War. These
opportunity to be the only compatible console made potential revenue for Microsoft grow
tremendously. The same applies for the Xbox partnering with Netflix in order to bring Xbox
Live subscribers movies on demand. All of these strategies combined have helped keep
Microsoft near the top, even though they were the last to enter the gaming industry.

Porter's Four Competitive Strategies Application

Microsoft’s approach to Porter’s four competitive strategies for the Xbox would be focus in the
video game industry, and differentiation of their product from others. Xbox is labeled under
focus, because it is only dealing with one section of the technological world which is the video
game industry. It is also labeled under differentiation because Microsoft offers a specialized
product with various features, making it stand out from the competition. One example
includes the online gaming network Xbox Live, which is unmatched as far as available
services. It is exclusively designed to only work on Xbox systems, while the capabilities and
functionality of the broadband network far exceed those of its competitors.

Xbox Is a Test for

the One Microsoft
Strategy
The new console includes a grab
bag of tools from other divisions
By 
Dina Bass

The Xbox One game console at its unveiling on May 21 in Redmond,

Wash. Photograph by Karen Ducey/Invision for Microsoft via AP Photo
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For years, Microsoft’s Xbox video game console division was a bit
like a sullen teenager in dealings with its parent company: It kept
its distance and pretended they weren’t related. The debut of the
Xbox One on Nov. 22 marks a new phase in the relationship. The
console incorporates software and systems developed throughout
the rest of Microsoft and is the first big test of what the company
calls its One Microsoft strategy. Pushed by outgoing Chief
Executive Officer Steve Ballmer, the idea is to encourage
Microsoft’s product groups to work together and tear down once-
rigid walls between divisions.

With the console industry’s revenue falling, Microsoft is marketing

the Xbox One as a kind of living room set-top box, a device used
to watch and control live television as well as streaming video
from services such as Netflix and Hulu. Given that Microsoft has
sold about 80 million Xbox 360s since 2005, the console may also
be its best chance to turn Xbox fans into customers of Microsoft
cloud services and devices. “It’s more than a gaming platform,”
says Julie Larson-Green, Microsoft’s executive vice president for
hardware. “We’re thinking more about our devices as a stage for
all of Microsoft.” The risk: If the input from other divisions hurts
the Xbox One’s performance, Microsoft will have sabotaged its
only product with a dedicated consumer following.

The Xbox One’s operating system includes Windows 8 and speeds

switching between apps and games. Windows also means a
broader range of apps for users, because it makes software
development easier than on earlier Xbox systems. Windows 8’s
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snap feature lets users watch a football game while running a
fantasy gridiron app alongside it. Users can pan and zoom during
Skype calls, and cloud service SkyDrive allows them to view
photos and videos they’ve uploaded from other devices. Say
“Xbox, record,” and cloud service Azure will save the last 30
seconds of game play as a video clip that players can share with
friends.

Like Microsoft, Sony is trying to push further into streaming video

and other services with its PlayStation 4, released in North
America on Nov. 15. “While gaming is at the heart of PlayStation
4, we know that PlayStation fans love all forms of digital
entertainment,” says Sony spokesman Dan Race, adding that
Sony Pictures is developing original content for the PS4. The
console industry’s revenue fell 32 percent, to $13.3 billion, from
2008 to 2012 and is forecast to decline again this year, according
to market researcher NPD Group. The new generation of
hardware may help slow that skid: The PS4 sold 1 million copies
within 24 hours. Nintendo’s year-old, $300 Wii U is less powerful
than the other two consoles, but spokesman Charlie Scibetta says
its TVii service can also toggle between streaming services and
live broadcasts, and integrate users’ social media accounts.
The Xbox 360 had the edge over the PlayStation 3 and the Wii
and Wii U in U.S. sales, topping NPD’s sales chart for 32 straight
months until Sony snapped the streak in September. With the PS4
starting at $399, compared with $499 for the Xbox One, Sony
may have the advantage this time, says Michael Pachter, an
analyst with Wedbush Securities. Yusuf Mehdi, a Microsoft vice
president who oversees Xbox marketing, says, “If we are
successful, because we are $100 more, it will be because we had
these differentiated features.”

Chief Product Officer Marc Whitten says Xbox One users may soon
be able to link a front-door camera to their consoles and use
Skype to identify visitors, or say “Xbox, what’s the weather?” to
get a report. For now, the console has limited software designed
specifically for Microsoft smartphones and tablets. But the Xbox
One will have to win over consumers before Microsoft can worry
about any next steps, says Gartner analyst Brian Blau. “The Xbox
has been their hero product. It gives them that cool,” he says. “If
they don’t get it right, they probably don’t have a lot more
chances.”

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