User:Microsoft Group Case

=Microsoft Group Case: Searching for Peaks in the Fitness Landscape= Ever since Microsoft entered the increasingly competitive video gaming market in 2001 with the debut of the XBOX, they have continued to develop strategies that they believe will ensure them success. They have switched to an ATI chip for the XBOX 360, improving performance, and Microsoft has pioneered interactive gaming with its XBOX live service. The road to gaming console success has not been an easy one though. The higher performance and overseas popularity of the PS3 along with the appeal of the Nintendo Wii to casual gamers has created a three horse race for gaming console supremacy. And no one is giving up anytime soon.

Group Interests
Microsoft’s evolution of the video gaming industry strongly interested us because our generation is the marketing target of their revolutionary technologies. As we, as consumers, make choices about what video game console we will support, we are acting as influential agents in the Complex Adaptive System of the video game console market. Every member of the class has likely played a video game before, and the experiences of the class are a smaller sample of the much larger market of video game consumers.

Background
Bill Gates and Microsoft knew that 2005 would be a crucial year for the success of their home entrertainment sector. The Sony PS2 had seen great success due to the ability to play PS1 games (backwards capability), a newly lowered price, and DVD capabilities. Sony was praying that consumers would wait till 2006 for their highly touted PS3. The Nintendo Gamecube had largely been a failure, offering "kiddie" games and no DVD capability. Nintendo sorely needed a winner and set their best minds on producing the Wii, an interactive gaming system with motion sensor controllers. The Microsoft XBOX had seen greater than anticipated success, however Microsoft was still left with a daunting task. They needed to release the XBOX 360 by christmas 2005 in order to beat the PS3 to the market and steal undecided console consumers. They would need to improve the XBOX while not incurring to many costs. How would these three companies deal with the fitness landscape laid out before them? The Case Update listed below is a result of our groups investigation of the three companies gains and setbacks to date.

Case Update
When developing a case update for the Microsoft project, our group first looked at the competitors of Microsoft and how they have affected the competitive fitness landscape; We then examined what Robust Adaptive Strategies Microsoft has pursued to deal with these challenges.

The first of these challengers and the most prominent in 2005 five was Sony. Sony's Playstation 2 (PS2) was the dominant console of the time with 76.9 million users across the world. Sony was the reigning king, and Microsoft was forced to look for a way to dethrone them. Sony's PS2 offered many games, solid performance, and a reasonable price tag. Sony was sitting on the peak of the fitness landscape, with the Microsoft XBOX behind, and the Nintendo Gamecube a distant thought. Sony was also in the midst of developing a highly expensive and extremely technologically advanced PS3. Sony believed that the video game industry was headed in the direction of more technologically advanced games and technologies. Their main threat was the threat of substitution by the XBOX 360, which was scheduled to be released ahead of the PS3. This threat was a serious one as the XBOX 360 was out for christmas season, with the PS3's release date being continually pushed back. The threat posed by the XBOX 360 and the upcoming Wii, which was comparatively under the radar at the time, would only add to the rivalry the three companies had been engaged in ever since the original XBOX's release in 2001.

Nintendo, a company that hadn't seen large scale gaming console success since the N64 of 1996, stood as the other challenger that would help shape Microsoft's competitive landscape. Nintendo's Gamecube hadn't penetrated the household gamer market as Nintendo had hoped. Users much preferred the PS2 as the system offered DVD capabilities and game selection that the Gamecube lacked. Nintendo was forced to make a decision- should they continue to develop faster software and hardware or should they send their "hikers" out in a slightly different direction. While Microsoft and Sony were spending upwards of $1 billion to develop their new top of the line systems, Nintendo decided to develop an interactive system that appealed to "casual gamers" called the Wii at a fraction of the cost. The Wii, released after the XBOX 360, was an instant hit because it attracted new gamers who weren't necessarily looking for hard core games. The Wii completely changed the fitness landscape and currently is the best selling system at 30 million units worldwide.

After Microsoft had seen better than anticipated success with the XBOX, they decided to continue with the XBOX 360, which was essentially a faster version of the XBOX. This could be considered a relatively "short jump" on the fitness landscape. Although the 360 was expensive to develop, Microsoft rushed it into production for the holiday season 2005, beginning production only 79 days before it was released. Also, with a price tag of $400, the 360 was a much more acceptably priced item relative to the PS3 (which would have to wait till Christmas 2006). Microsoft and Bill Gates stood in a position relatively similar to where they were in the early 80's. Only this time, instead of hedging the company's bets across different operating systems, they were hedging between the customer tastes of pricier, high-flying systems (the PS3) and lower priced, user friendly systems with less gaming capabilities (the Wii). Although the verdict is still out on the final score. As of July 2008, the XBOX 360 sold 20 million units, more than the PS3's 14.4 million, but considerably less than the Wii's 30 million. Sony took a relatively large risk ("fitness jump") with the PS3 due to blue ray capability and extremely high development costs. Nintendo also took a large risk by exploring a new market of casual gamers and relatively simple games. Microsoft's robust adaptive strategy left them with little risk of failure, but also little risk of extraordinary success. Sony and Nintendo took relatively larger jumps on the fitness landscape compared to Microsoft. Nintendo hit it big, penetrating new markets and selling the most consoles at a profit of $92 per unit; Sony lost (although has been gaining ground lately) with the least units sold and a loss of $300 per unit. Microsoft lies in the middle with the 2nd most sold at a loss of only $126 per unit but an overall gain due to game sales and profits from the XBOX live service.

Although Microsoft has encountered a myriad of challenges since 2005, particularly recent problems with Vista, this group case Wiki only deals with challenge that are relevant to Microsoft's entry in the gaming console market.