Characterize the competitive environment faced by Microsoft when it launched the original Xbox?

Console video game industry at the time placed game sales as the primary profit driver: the devices were usually sold at cost or at a loss, with their development and production costs subsidized with royalties from game publishers or sales of games designed in-house.
Because of that model, gaining market share was one of the primary goals of console manufacturer: getting consumer acceptance was important in making a system appealing for game publishers to invest into.

Competitive Rivalry within the industry (High):

According to the case, the original Xbox was introduced as a player in the second generation of consoles. The second gen was started by Sega with Dreamcast in 1999, but it was unsuccessful after introduction of PS2 by Sony.
Sony dominated the market with a very successful playstation 2: not only was PS2 essentially the only second generation console available for about a year after its introduction, allowing it to gain a huge library of software, it was a direct successor to a very popular PS1, backwards compatible with its software as well. All that made PS2 an obvious choice for PS1 owners and a very appealing option for everyone else in the market.

Bargaining Power of Hardware Suppliers (Medium):

There were several capable EMS firms.
Two major options for both CPU and GPU, in addition to the possibility of designing either one in house by employing the expertise of one of the chip developers.
Raw material is inexpensive.

Bargaining Power of Software Suppliers (High):

Since the profit of a console manufacturer depended on the sales of games, the game publishers can be in effect considered suppliers.
Given the additional cost of customizing the software for a particular console and paying royalties to the manufacturer, the console