Marketing Strategies

Robust Adaptive Strategy Implementation

Initial Application

Microsoft’s entry into the video game industry exemplifies the firm’s implementation of robust adaptive strategies. Instead of only focusing on operating systems and computer software, Microsoft has expanded to other business ventures in the gaming industry. 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.

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