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XBOX & MICROSOFT’S BATTLE FOR THE LIVING ROOM
Teaching Note

Case Overview

Microsoft, a renowned software company found in 1975, is one of the largest corporations in the world. Since its inception, Microsoft not only established itself as a leader in the software industry, but also succeeded in diversifying into various software related businesses. Today, Microsoft is an eminent name in computer applications, multimedia, Internet service, and movie products. At the turn of the century, Microsoft decided to enter a new market – the videogame industry, and introduced its videogame console – the Xbox.

The Xbox business venture presents several challenges to Microsoft. First, Microsoft needs to sell enough units of consoles and videogames to consumers to make its videogames division profitable. Second, as with most its other businesses, Microsoft hopes to attain leadership position in videogames industry. Despite the fact that videogames are a primary form of modern entertainment, hence, presents significant business opportunities, only very few vendors have had the chances of achieving dominance in the industry. Third, through Xbox, Microsoft wishes to evolve from a PC software company into a home entertainment company. The Xbox is an intermediary for Microsoft to sell its thousands of entertainment products and services through both direct and indirect methods. For Microsoft, the battle for the living room is not just a war over a console; it is a war of Microsoft’s future prosperity.

The release of the Xbox involved several crucial business decisions. By analyzing this case, students have the chance to deal with issues relating to strategy development, product positioning, core competencies, and competition advantages in a realistic situation.

Intended Courses and Audiences

This case can with CHAPTERS 2 and 3. When analyzing this

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