Introduction
The report is based on the article “Xbox One” by Neal J. Roese and Evan Meagher kin Kellogg School of Management Journal. It is focused on the launch of Xbox One by Microsoft and the problems faced by it.
Background
Xbox has been one of the leading console series developed and produced by the Microsoft’s interactive entertainment business team. Don Mattrick, the president of the entertainment business division, presented a new console to the famous Xbox series as Xbox One. The product had been a target of numerous rumors and speculations even before the launch, mostly about its always-on (connected to internet) feature. The subsequent events brought more problems for the president and his team in terms of aggressive and intense reaction from the consumers. The reaction had led the management to a difficult situation and a bad public image.
Problem Statement
The major problem for Microsoft’s entertainment business team was the strong reaction of its loyal and faithful customers on the newly introduced feature on its Xbox One, which forced the gamers to be always connected to internet.The situation worsened after unprofessional reaction from one of its employees on social media. Additionally, the information was concealed from the market for a while before issuing a clarification on the features.It resulted in further backlash from the gamers as well. The new features also restricted the sharing of games between the gamers without third party approvals.
The situation forced Don Mattrick to call for an emergency meeting and asked his team to clear the schedule for the subsequent week. The product’s features and communication strategy were to be reviewed urgently before the starting the product sales.
Analysis
It is necessary to understand the industry, market, regulations and past events to understand the crisis in a better way.
Industry Overview
The console gaming market made 43% of the $70 billion video game market in 2013. The market had mostly been dominated by Microsoft and Sony in the current era. However, Nintendo had been the market leader in 1980 and early 1990s. Sony took over the market from 1994 to 2006 with the PlayStation 1and PlayStation 2. The market became more competitive lateron with Nintendo’s Wii consoles and Microsoft’s Xbox
The market trend had diverted to Sony and Microsoft, while Nintendo had lost the attraction by 2010. The sales of Wii fell from $182 million in 2010 to $71 million in 2012 and led to an end of seventh generation of consoles. It was the longest generation in history with span of eight years. The eighth was expected to be even longer, this was due to the fact there have been no improvement in the graphical performance.
Nintendo launched its Wii U in November, 2012 and marked the start of new generation of consoles. Sony and Microsoft followed with the announcements of PlayStation 4 and Xbox One respectively by the end of 2013. These consoles were considered to have reached a high level graphical performance and would not be able to bring anything significantly better to the table for at least a few years. This has led experts to anticipate even longer generation. The major factor for increasing the life of these consoles was attributed to the fact that they can updated operating systems through internet and fix any bugs.
The major competing factors for the consoles were based on price, exclusive games, graphical performance, innovation in the interface and brand loyalty. Nintendo was famous for many exclusive games like Mario Brothers, although not graphical intensive and power hungry, however, it competed based on price and targeted niche market ignored by Sony and Microsoft. The market share of Nintendo fell to 18% in 2012 from 39% in 2010. Wii and Wii U were priced competitively, hence reducing the competitive advantage it had over the others..............................
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