New Xbox 360 - Term Paper Example

1. Write an Executive Summary Xbox 360, the latest generation gaming console from Microsoft, had its launch in 2005. It came up with an improved technology, incorporating new features. In the initial phases, it faced sizable technical problems. Although, those problems had been solved, it is behind its competitor Nintendo in the sales figures, with high price and other product features being a major drawback for Microsoft, when compared to Nintendo. Microsoft’s promotions are also not working and the money spent is not being recovered aptly. To further optimize its functioning and reach wide customer base, Microsoft has to implement certain positive strategies. 2. Introduction The Xbox 360 is the seventh generation of video game consoles from Microsoft. It is the second game console from Microsoft, succeeding the successful Xbox. It was first unveiled in May 2005 on MTV and then details about its configuration and other specifics revealed at the Electronic Entertainment Expo (E3), the annual video game conference and show, held at the Los Angeles Convention center. It was officially launched in United States in November 2005, and also had a worldwide release towards the end of the year. In the current gaming console market, Xbox 360 has competitors in the form of Sony's PlayStation 3 and Nintendo's Wii. Although, it faced some technical problems in the initial phase of the launch, Microsoft has announced that the “present Xbox 360 is merely ‘mid-cycle’ and is set to remain as MS’s mainstream console for ‘at least another five years” (Tingle, 2010). Thus, it has become crucial for Microsoft to optimally manage all the issues including marketing issues surrounding Xbox 360 for some more time. 3. Situation Analysis: SWOT Strength: Xbox 360’s main strength lies in its integration of next generation technologies and features including motion and even voice sensing Kinect, access to online gaming community and even media content in the form of streaming services, High Definition technology, etc (“SWOT Strength Weakness Opportunity Thread of Gaming”) It has backward compatibility with previous well known Xbox games It also works as superior media hub, downloading and playing various media content. Weakness: It is priced higher than its main competitor Nintendo Wii, although it is priced equally with Playstation 3. In addition, the accessories as well as the games are also expensive Apart from its successful Halo, Xbox does not have exceptional and popular games, as they seems to be promoting or improving their game console, instead of working more on game developments. The technical problems still continues to affect Xbox 360’s brand image Opportunity With Xbox 360 offering optimal media related features and services, it is being viewed as a potential buy by a wider section of the customer base, apart from the gamers, or who want to buy it only for gaming. With the incorporation of Kinect, it can offer more diverse and interesting games, suiting the different needs and tastes of the customer base like the fitness or exercise based games Opportunities could also arise in the form of partnerships with Hollywood studios to make films, adapted from successful games. Threat Sales are not on expected lines in Europe and Asia. “Strategy Analytics says that Xbox 360's relative weakness in Europe and Asia "acts as a drag on its global performance,” (“Strategy Analytics”). The main threat comes from Nintendo and its low pricing strategy, and also from Playstation, who has scored over Microsoft in the crucial European market. Hardware complication has been a key issue, with outside suppliers of technology also underperforming. 4. Marketing Mix Product Nowadays both the hardcore gamers and also the casual gamers expect their gaming consoles to play not only the games with improved graphics, but also want them to play with others through online and importantly want their consoles to play high-definition video and audio content. Xbox 360 as a product is able to fulfill both these expectations with apt hardware, softwares and services. A key part of Xbox 360 as a product is the motion and voice sensing controller, Kinect. “Kinect uses a sensor, camera and microphone to detect players' movements and translate them into on-screen actions, such as kicking a ball, driving a race car, in addition, it l also respond to voice commands, such as "play a movie”.” (Atkinson 2010). Also, the newly launched console is slimmer than the previous model and as 5 USB ports, compared to the 3 in older versions. Price The prices of the Xbox 360 gaming console currently in the market start from the range of $199 and ends at $399. The basic model priced at $199 has a hard disk capacity of 4GB and has built-in wi-fi, a black wireless controller, a standard definition composite A/V cable, but there is no Kinect. While the other models with Kinect and many more accessories is priced at $299 and $399, with difference being the hard drive capacity, with the model priced at $399 having 250 GB hard disk, while $299 priced one has just 4 GB. (“Say Hello to the New Xbox 360”) Promotion Promotion wise, Microsoft has been splurging its money to maximally reach Xbox 360 to as many customers as possible. Apart from the finances, Microsoft also came up unique or concept oriented promotional campaigns to reach more wider base. Among those campaigns, the “Live Your Moment” campaign was carried out through various mediums including print advertising, billboard displays as well as through retail in the form action figures and merchandise. Microsoft made the single largest marketing investment in Xbox history on this promotional campaign, spending more money on a series of promotions that it did for the launch of the Xbox 360 or Halo 3. (Ivan, 2008). Place Apart from allowing the users to play games independently or also their friends and family members, Xbox 360’s Xbox Live service provides the players options to compete online with others all over the world. So, when one focuses on the marketing mix of place in relation to Xbox 360, the place could constitute both the physical places (homes, offices, etc) to virtual place in the form of online community. When one focuses on the physical place of homes, the place, where the Xbox 360 is found in a home is also a key thing. With Xbox 360 mainly focusing on the target base of young people, it could be mostly found in rooms of them, instead of being in other rooms. 5. Financial Section When Xbox 360 was launched in 2005, at that time itself, Microsoft spent close to 100 million dollars for promotional activities, and when it launched the Kinect in 2010, they spent around 500 million dollars. “Backed by a half-billion-dollar budget, the tech giant is rolling out a major movie-style marketing blitz aimed at driving its motion-sensing device to the top of holiday wish lists.” (Atkinson 2010). However, when one looks at the overall picture, and analyze, whether the Microsoft is able to get back the investment of 500 million dollars through heightened sales, it is not so. That is, even after the 500 million dollars marketing campaign, Microsoft is able to sale a lesser number of consoles than expected. Importantly, the revenue earned from those sales, is a lot less than the 500 million dollars spent, let alone there is a profit. According to market research company, NPD, immediately after that marketing campaign, the Xbox 360 sales for the months of November, December and January was 1,148,500 units. When one calculates the number of units, Microsoft hypothetically could have bought with that half a billion dollars, it comes to around 1,666,666 units. Thus, it is clear that the marketing campaign resulted in less than the invested sales. “Seeing how Microsoft would have higher 360 sales if they took the Kinect marketing budget and blown it buying their own product (1,666,666 units), Microsoft cannot possibly be pleased with this.” (The “incredible” 360). Challenges Althouhg, the initial major problems seem to have been solved, minor glitches continue to arise. Apart from this product related challenge, it also faces competition challenge from Nintendo. Its competitors, PS3 and Nintendo also has more or less same product, but with Nintendo being the pioneer in motion sensing technology, they have slight edge in the product category. Although, Microsoft’s Kinect is being welcomed, Nintendo being the first mover, has garnered a strong customer base. Price wise also, Nintendo has the edge, as it offers gaming console with the motion controller only for $250, around $50 less than Xbox 360 with Kinect. This is much lower than other competitors because PS3 with all its controllers and accessories comes at a bundle price of $400. When it comes to promotion, as discussed above, the amount spent is not being reflected in the sales figures. When the target market of Xbox 360 is focused and thereby its place in the home, it is clear that they focus mainly on the fixed target audience of young people and middle aged people. This prevents them from focusing on other segments, and thereby prevents them from enlarging their customer base. 7. General recommendations and Conclusions The first step, Microsoft has to take is resolving all the technical glitches in the consoles. This way, the new consoles to be sold will not have any of the problems, currently pointed out. Importantly, at the same time, it needs to provide constant support for these problems to its existing users. This way, Xbox 360 can be viewed as trouble free, enjoyable gaming console. On the same lines, Microsoft has to further fine tune motion sensing controller, Kinect, so it maintains edge over Nintendo’s Wii. By incorporating more technology and offering more features in its Kinect, Xbox 360 can push not only Nintendo but also Playstation. Price wise, Microsoft can go for some price reduction to be competitive with Nintendo. Although, Microsoft offers price cuts during particular periods, it is still hanging on with Playstation, instead of slightly reducing the prices and competing with the leader, Nintendo. Furthermore, the innovation of motion sensing technology is attracting not only the gamers but also the non gamers as well. Thus, Microsoft can widen its customer base, and launch marketing activities focusing on slightly older non-gaming customers as well, who may want an entertainment console, which can play video and audio. With Nintendo doing it successfully, Microsoft with its Xbox can reach a larger customer segment, thereby increasing the sales and bringing in more profits. Although, Xbox 360 does not face major problems, and is still being bought by the customers, if these above aspects are covered or solved, it can have better sales figure. References Atkinson, C. (2010). “Microsoft’s move - tech giant spends big to launch Wii rival Kinect.” New York Post. Retrieved from: http://www.allbusiness.com/marketing-advertising/marketing- advertising-channels/15205289-1.html “The “incredible” 360.” Malstrom’s Articles News. Retrieved from: http://seanmalstrom.wordpress.com/2011/02/18/the-incredible-360/ Ivan, T. (2008). “MS Launches Biggest Ever Xbox 360 Marketing Blitz.” Edge. Retrieved from: http://www.next-gen.biz/news/ms-launches-biggest-ever-xbox-360-marketing-blitz Tingle, A. (2010). “New Xbox 360 (Xbox 360 ‘Slim’) Delays Xbox 720 Till 2015.” Nexus. Retrieved from: http://nexus404.com/Blog/2010/06/21/new-xbox-360-xbox-360-slim- delays-xbox-720-till-2015-xbox-360-presently-mid-cycle-says-microsoft-weve-got-at- least-another-five-years-of-this-generation/ “Say Hello to the New Xbox 360.” Xbox 360. Retrieved from: http://www.xbox.com/en- US/xbox360/consoles?xr=shellnav “Strategy Analytics: PS3 Passes Xbox 360 in Global Active Devices.” Fresh News. Retrieved from: http://www.freshnews.com/news/474212/strategy-analytics-ps3-passes-xbox-360- global-active-devices “SWOT Strength Weakness Opportunity Thread of Gaming Industry.” Zimbio. 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