xbox in china - microsoft

Diego Alberto Paramio Perez

FIRST PART

• Introduction

• PESTEL Analysis

• SWOT Analysis

• Porter´s 5 forces

• 4 Risks Matrix

• Competitors and their strategies

• Market Entry Strategy

SECOND PART

• Chinese consumer market

• Segmentation

• The 7p´s of the Marketing Mix

INDEX

14 YEARS OF PROHIBITION

-Microsoft is back in China-Historic moment => Xbox One will be the first system launched in China.

THE CONSOLES MARKET IN 2013:-2,586,000 consoles were sold. -A 2.7 billion euros’ market.-New consoles make 44% more money than their predecessors.-Half a billion Chinese people already play video games on PC, mobile device or on the internet.

• Political:

• Economic:

• Social:

• Technology:

PESTEL ANALYSIS

• Soft antipiracy regulations• Government grants for editors• China has opened their barrier to consoles• High taxes for foreign companies

• Videogaming is a rocketing industry• Global Crisis • China´s economic growth (7,7% in 2013)• Exchange rates

• Age of consumers had changed (>35 years)• Woman´s revolution (51% of casual gamers)• Emerging middle class in China

• Company based on discovering new technologies

• Kinetic sensors for many purposes (video, medical, robotic …)

• Xbox: low price console for lower class• Xbox One: Launched Nov. 2013 – High Cost

PESTEL ANALYSIS

• Environmental: • Legal:

• New power adaptors with less energy consumption

• Very soft antipiracy regulations in China• Future modification of the Law• China´s cultural department inspection

SWOT ANALYSIS

• STRENGTHS:

• WEAKNESSES:

• OPPORTUNITIES:

• THREATS: • High Barrier to enter the market (4 billion dollars aprx.) SONY, NINTENDO

• PC Gaming• Smartphones, tablets

• Technological innovation• 17% invest in R&D vs 6,5% competitors• Know-how of 3 previous consoles• Collaboration with many gaming studios• Exclusive videogames• Our main competitors are Japanese

• Microsoft brand image• High rate hardware fails in xbox360

• Incredible emerging market• Hugest population in the world• Hostility with Japanese brands

RECOMMENDATIONS

• Make a huge research about Chinese consumers

• Big invest in marketing but in the «Chinese way»

• Modify the color of the console to red and gold (Xbox One)

• Translate videogames into Chinese

• Launch both versions : Low cost and hi-tech (360 and ONE)

• Make a free to play MOBA adapted to chinese market

• Include a free multiplayer Mahjong game with the console

PORTER 5’s FORCES

Threat of New Entrants: LOW

Many different barriers: lack of expertise, resources (heavy investments, capital requirements), Learning curves

Strong brand loyalty to existing products

Difficulties to get access to distribution channels

Threat of Substitutes: MODERATE

Development of new technologies, with more and more substitute products Ex.: Tablets, Smartphones, Laptops…

But: Switching costs are high

PORTER 5’s FORCES

Bargain Power of Buyers: MODERATE Easy to switch, and gamer population have a good

expertise/knowledges

But: Product Differentiation (with specific games) Few main competitors

Lot of buyers relative to sellers

Bargain Power of Suppliers: LOW

Success on the market profitable for the both parties

Many suppliers would collaborate with a company like Xbox

PORTER 5’s FORCES

COMPETITION

Main competitors which are coming soon on the chinese market (Nintendo and Sony)

Habits of chinese gamers (computers and smartphones)

Network of hackingFake Market

• Competitors: 0 /6• Market Size: 0/6• Customers: 3/6

• Raw materials: 1/6• Technology change: 3/6• Local labor qualify: 4/6• Logistic issues: 3/6• Dependancy on suplliers: 2/6

• Ratio of invest in R&D : 2/6• Get money back : 4/6• Joint Venture with local partner: 3/6

• Political issues: 4/6POLITICAL:

COMERCIAL:

INDUSTRIAL:

FINANCIAL:

Political

Comercial

Industrial

Financial

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

Risk Level

Risk Level

Competitors and their strategies

SONY

→ PS4 is sold $399 which is more cheaper than Xbox One

→ SONY released PS4 to enter the Chinese market.

→ Improve the processing speed and performance of graphics card

→ Strengthen social function.

→ Dual-core controller

Specification

• Product

• Price


SONY

• Place

→ Title distribution based disks

→ Allow to used title transaction

→ Allow to offline playing

→ Sale with combination digital distribution and PSN(PS Network System)

→ Holding event ‘Playstation Meeting 2013’

→ Providing entertainment contents which is customized gamers

: SONY provides new video and audio services using huge contents of company. They will progress program connected PSN

→ Online marketing with PSN

• Place

• Promotion


NINTENDO

• Product

→ NINTENDO released low price 2DS : To target young aged people. By the trend of tablet PC

→ NINTENDO released new product ‘Wii U’ recently

Specification

→ Tablet controller ‘Wii U game pad’

→ improved graphics and computer performance to overcome the weakness of Wii .


NINTENDO

• Price

→ NINTENDO adjust the price of Wii U from $350 to $300

• Place

• Promotion

→ online distribution using wifi

→ Developing mini game for smart phone. : introduce their products through their mini game

→ Holding free experience event

→ PR using the game characters : They advertised using the game characters such as making movie of Super Mario, character products of Pocket Monster

Market Entry Strategy

Reconfiguration Strategy

Adapt our existing product to a new market, where customers have different needs and expectations

• A superior service:An excellent after sales service either on xbox360 or on XboxOne.

• A fun customer service: create a new world, offer something different

• Innovative and adaptative marketing

• Price penetration strategy for Xbox 360

• Skimming price strategy for Xbox 1


Regional Base Expansion

Create a dense local presence and use it as a base for future expansion

• East Coast, where almost all the foreign companies are implemented (special tariffs and lower taxes)

• Main cities in center of China (Chengdu, Chongqing)

Reasons: • Higher wage average• Higher urbanisation rate• People get used to living in the « Occidental way of

life »


Stakeholder Strategy: SHOWING CONSIDERATION

Work on the same basis: supply chain, current suppliers

Collaboration with Chinese government (Commissioning Board, Monitors/Councillors, Report to Chinese authorities)

Development of strong partnerships with local companies (BesTV), to reach potential partnerships and shareholders


Current Strategy:

• Chinese gaming market represents 500 million people

• Objective for 1st year: get between 10-15% of market shares

• Creating a revolution in chinese habits in the gaming market

• Invest in Research and Develoment, and in Marketing

• Partnership with BesTV (entertainment company in China)

Help us to understand the chinese market

Get a main advantage: access to a well-organized distribution channel


Market Development Strategy:

• Take advantage of Sony’s absence, to strongly implement our brand for a long time

• Adapt our communication and our product to our competitors

Perspectives1. Chinese population still growing2. Easier access to technologies3. Increasing purchasing power of the

population

STICK IN PEOPLE’S MIND

Chinese Consumer market

Main consumers in China

• Young generation lead the consumer cultures in China

→ Referred to people who were born since 1980

→ This group become mainstream of consumption.

→ They grow below the reform and openness policy.

→. ‘The little emperor’.

• General characteristics of young generation

→. They prefer western culture and follow the fashion.

→ They seek variable lifestyle.

→ They are interested in games, entertainment and investment in stocks.

→ They have strong purchase power and seek to consume high-quality products.


Consumption characteristic of young generation

YOUNGGENERATION

바링허우 (80s)

주링허우 (90s)

1) Prefer luxury items and brands

2) Forming the new consumption of family

3) Mature consuming consciousness →. change from 'early adopter' to 'innovator'

1) Rational early adopter

2) Consuming experimentally

3) Online shopping


Digital consumer segmentation

• Digital Junkies

→ 6% of digital consumers. → The time on using digital devices and app twice more than other groups.\

→ This consumer group is called 'early adopters'. → 28% of them lived in a first class city → 42% are singles who are 18~24 years old. → Spend average 34.1 times per week to use digital media..

• Gamers

→ 9% of digital consumers. → Spend more than average 8 hours on online games.→ They played game using PC and mobile.CF

→ 33% of this group are 18~24 years old and low-paid young consumers who lived in small and medium-sized cities.

SEGMENTATION

The video game market is changing and the public is diversifying

We will target adults, from 18 to 35 years old

The main segments are: - Children from 12 to 18 years old - Women from 18 to 35 years - Men from 18 to 35 years old - Adults over 35 years old

PRODUCTo Play Gameso Internet Browsingo Play Movieso Online Gamingo Play Musico Social Functions

+ Changes in the Chinese Market

• Red and Yellow (Xbox One)• Rename : Xbox Ba (8)• Panda Mascot

+ Limited Editions

• Gold Plated • Swarovski • Themed

PRICE

• Economies of scale reached

• Affordable price

• More profitable than main competitor (172 $ cost)

• Wide margin for bundles and price war

• Short term / Long term profits (Customer base)

• Price Penetration strategy

103 $ 149$

PRICE

471$ 499$

• Premium product (latest technology)• KINECT sensor, Blueray.

• More expensive than our competitors

• Build a strong customer base

• Skimming pricing

PLACE

Selling Directly Online / TaoBao

• Reduce distribution and retailer costs

• Main target : Technology experts

• TaoBao (159 Billion $ sales in 2012)

Corner in Electronic shops

• Similar to Apple

• Expert sellers from our company

• Try our products

- 4000k TV, 5,1 Headphones, ergonomic seats, minimalistic style.

PLACE

Our own Microsoft XBOX Shops

• Begining in Shangai

• Expanding to : Beijing, Guangzhou,HK, Chengdu …

• If the demand is enough, go to the rest of main cities

• Minimalistic style based on our actual corners

Main Supermarkets

• Finally reach massive consumers in supermarkets

• Carrefour, wall-mart, China resources vanguard…

• Still in charge of correct placement … (Selective)

PROMOTION

INTERNET PROMOTIONS (Innovators / Early adopters)

1. Viral Video

2. Explanation Video

3. Ambassadors Programme

4. Social media constests

5. Sponsorship of Pro Gamers

PROMOTION

Promotional Buses (Early Mayority)

• Customized buses with shocking vinils

• Chinese tour to schools and Universities

• Make tournaments inside

TV spots (Rest of the market)

• Big budgeted massive TV campaing

• Focused to explain advantages of our product

• Asia Media + Our marketers (Cultural differences)

SALES PROMOTION

Console Bundles (Billboards)

1. STARTER PACK : Console + Controller + 2 free games + 3

months xbox live subscription

2. ADVANCED PACK: Starter pack + 2nd controller + 12

months xbox live subscription

3. PREMIUM PACK: Advanced pack + Physical game +

Headphones 5.1

PHYSICAL EVIDENCEOne of our main problems ( Product ignorance)

• Tryouts in our corner shops

• Microsoft «Bus Experience»

• Presentation events around China

PEOPLE

• Foreign people with high level of chinese

• Local ambitious, charismatic people

• Weekly meetings with everyones ideas

• Reward best ideas and implement them

PROCESSXBOX LIVE (Adapted for Chinese market)

• Premium online service

• Best connection in Online games

• TV streaming content

• 2 free games each month

• 4,99$ / month

CUSTOMER SERVICE

• Strong focused customer service team

• Free telephone line for doubts

• Accesible forum

• Main point to change Butterflies into True Friends

CONCLUSION• We will try to gain the majority of the new emerging console market in

China introducing an affordable console (Xbox 360), launching it the 8 of August, 2014. (08/08/2014)

• Once we have reached a good market share quota (above 15%, incluiding PC gaming, tablets…) we will launch Xbox One (Xbox ba) so we can also have the latest technology for the Chinese market once they can appreciate as they have a better knowledge of the console world.

• We will assure that Chinese consumer will be loyal to our brand thanks to our marketing strategies of xbox360 and our superior customer service quality.

先到先得 (xiān dào xiān dé) - The early bird catches the worm