microsoft case presentation (mock)

34
Growth Strategy in the Gaming Market Eric Younkin Presented to Microsoft Corporation by

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This is the PowerPoint that accompanied the presentation I gave to 35 fellow Seniors in my Capstone Sales Management course at the University of Akron. The project I chose was a full case study on Microsoft's Mobile Gaming Unit, what it's strengths and weaknesses were, a brief financial analysis, and finally a recommendation of a new strategy the group would take.

TRANSCRIPT

Page 1: Microsoft Case Presentation (mock)

Growth Strategy in the Gaming Market

Eric Younkin

Presented to Microsoft Corporation by

Page 2: Microsoft Case Presentation (mock)

Overview of the Gaming Market

•$30.9 Billion dollars in 2005

•$48.3 Billion dollars by 2010

•Industry includes:

• Console hardware and software

• Handheld hardware and software

• Broadband (internet)

• Interactive TV (TiVo, DirecTV)

• Mobile (cell phones)

Page 3: Microsoft Case Presentation (mock)

Global Video Game MarketBy sector, in years 2000, 2003 and 2005, with projections of 2010. ($ in Millions)

2010

$5,771 $17,164

2005$3,894 $13,055

2003$6,047 $16,449

2000$4,791 $9,451

Global Game Market CategoryConsole Hardware Console Software

Page 4: Microsoft Case Presentation (mock)

Global Video Game MarketBy sector, in years 2000, 2003 and 2005, with projections of 2010. ($ in Millions)

2010

$1,715 $3,113

2005$3,855 $4,829

2003$1,501 $2,238

2000$1,945 $2,872

Global Game Market CategoryHandheld Hardware Handheld Software

Page 5: Microsoft Case Presentation (mock)

Global Video Game MarketBy sector, in years 2000, 2003 and 2005, with projections of 2010. ($ in Millions)

2010

$6,352 $3,037 $11,186

2005$1,944 $786 $2,572

2003$497 $249 $587

2000$70 $81 $65

Global Game Market CategoryBroadband Interactive TV Mobile

Page 6: Microsoft Case Presentation (mock)

Mobile Gaming Overview

•Limited growth in Console hardware and software

•Stagnant growth in Traditional Handheld Gaming

•Strong growth in Broadband

•Decent growth in Interactive TV

•Strong growth in Mobile Gaming

Page 7: Microsoft Case Presentation (mock)

Current Strategy

•Focused differentiation

•Found niche in crowded market with the XBOX

•Spent $8.2 billion dollars in R&D last year in Entertainment

and Devices division

•Devoted to 15%+ increase in R&D for 30 years

•Stay razor sharp through acquisitions of companies on the

edge of technological breakthroughs

•Compete in the global market with nearly all product lines

Page 8: Microsoft Case Presentation (mock)

Microsoft Strengths

•Financial Position – Cash heavy, little debt

•Volume buyer power over suppliers

•Brand Strength – Market leader

•Socially responsible

•Advertising – Popular campaigns

•In House Game Studio

•Partnerships with leading software developers

•Heavy investments in R&D

Page 9: Microsoft Case Presentation (mock)

Microsoft Strengths

•Partnership with LG cell phones

•User experience with your products

•Global Business presence

•Experienced workforce and managers

• Bill Gates respected chairman

• Steve Ballmer respected CEO

•First mover advantage with the 360

•Online game presence in XBOX Live

Page 10: Microsoft Case Presentation (mock)

Microsoft Weaknesses

•XBOX lacks BluRay player

•Inferior graphics to the Playstation 3

•Little online sales presence

•Buyer confusion with Arcade, Pro and Elite XBOX’s

•No presence in the mobile gaming market

•Market leader – nobody to follow, everybody taking

aim at you.

Page 11: Microsoft Case Presentation (mock)

Microsoft Opportunities

•Mobile Gaming Market

• Cell phone gaming market

•Online sales presence

•Surpass Sony’s technological advantage

•Bring Online gaming strength to the mobile market

•Leverage strong customer base to new product

Page 12: Microsoft Case Presentation (mock)

Microsoft Threats•Shrinking Gaming Console market

•Adverse shifts in exchange rates and trade policies

globally

•Vulnerable to economic downturn more than competitors

•Fierce and constantly advancing competition

•New and cheaper rivals in the industry

Page 13: Microsoft Case Presentation (mock)

Supplier Power -Outsourced Components-Small number of major suppliers-Suppliers prefer steady purchase stream

Threat of Substitutes

-Three major Competitors-Technology is shrinking-Newer, more powerful Smart Phones

Barriers to Entry

-Rivalry is already fierce-Extremely high R & D costs-Proprietary technology and patents-Products must have strong third party software offering

Buyer Power

-Retailers have very little power-Demand is very high-End User has most of the power

Rivalry-3 Major competitors

-High barriers of entry-Medium Supplier Power

-High Buyer Power-Low switching costs

-Overall, high level of rivalry

Porter’s 5 Forces

Page 14: Microsoft Case Presentation (mock)

Key Success Factors•Constant product refresh cycle

• Nintendo decline at the hands of a Sony Playstation

•Differentiation from competition

• XBOX 360 vs. Wii vs. Playstation 3

•Quality of game selection

• Exclusive titles such as Halo, Gran Turismo, Mario

Page 15: Microsoft Case Presentation (mock)

Financial Analysis

Microsoft 29.26%

Nintendo 15.38%

Sony 2.96%

Industry 3.79%

S&P 500 10.46%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Net Profit Margin

Page 16: Microsoft Case Presentation (mock)

Financial Analysis

Microsoft 80.80%

Nintendo 41.80%

Sony 21.12%

Industry 17.06%

S&P 500 40.30%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Gross Profit Margin

Page 17: Microsoft Case Presentation (mock)

Financial Analysis

Microsoft 36.71%

Nintendo 28.49%

Sony 4.07% Industry 5.31%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Operating Profit Margin

Page 18: Microsoft Case Presentation (mock)

Financial Analysis

Microsoft 24.29%

Nintendo 14.27%

Sony 2.09%

Industry 3.38%

S&P 500 5.81%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Return on Assets

Page 19: Microsoft Case Presentation (mock)

Financial Analysis

Microsoft 48.73%

Nintendo 20.92%

Sony 7.59%

Industry 6.46%

S&P 500 20.51%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

Return on Equity

Page 20: Microsoft Case Presentation (mock)

Financial Analysis•Earnings per share

• $1.42 in 2007

• $1.87 in 2008

•Total Assets - $72,793,000

•Total Debt - $36,507,000

•Cash - $23,662,000

•Times-interest-earned: 13.93 times

•No long term debt or interest

Page 21: Microsoft Case Presentation (mock)

Financial AnalysisStock Price

Page 22: Microsoft Case Presentation (mock)

Global Video Game MarketOverview of Mobile Video Game units sold by competition

Nintendo Game Boy Advance

• June, 2001• 75.8 million

units sold• ASP - $100

dollars• Total

Revenue – $7.58 billion dollars

Nintendo DS / DS Lite

• November, 2004

• 21.3 million units sold

• ASP - $199 dollars

• Total Revenue – $4.24 billion dollars

Sony Playstation Portable

• March, 2005• 20 million

units sold• ASP - $249

dollars• Total Revenue

- $4.98 billion dollars

Apple iPhone and iPod Touch

• June, 2007• 30 million

units sold• ASP - $249

dollars• Total

Revenue -$7.47 billion dollars

Page 23: Microsoft Case Presentation (mock)

A New Strategy

•Rapid growth from Sony PSP and Apple iPhone / iPod

•$11.8 billion dollar expected Mobile gaming market by 2010

•No current offering in the Mobile gaming sector to meet

these needs

•XBOX 360 dominated with first mover advantage

•XBOX 360 sustained dominance with a focused

differentiated strategy – “The Gamer’s Game System”

Page 24: Microsoft Case Presentation (mock)

Microsoft Mobile Gaming Unit•Introduce a small, ultra portable gaming unit

• Cell phone capabilities

• Advanced Graphics (Atom processor, OLED screen)

• Extension of XBOX games (think Halo Mobile)

• XBOX Live compatibility – internet game play

• Email and Internet functionality

• Zune Marketplace access for photos, music and video

• Sync with Windows for access to home media

• Netflix streaming as in XBOX

• Leverage Game Studio for wide game selection

Page 25: Microsoft Case Presentation (mock)

Necessary Changes

•Leverage highly skilled workers from across the globe

and assign them to new launch

•Develop deadlines for new project and assign bonuses

to those who meet the deadline

•Management oversee goals and milestones

Page 26: Microsoft Case Presentation (mock)

Necessary Changes

•Frequently manage teams for progress and

performance

•Update eCommerce website to support added sales of

MGU’s by web savvy buyers

•Modest reduction in cost of Revenue

• Reduce by 15% over 2008

Page 27: Microsoft Case Presentation (mock)

Financial Implications of Strategy

•Invest additional 5%+ in Entertainment and Devices

Division Research and Development costs

• $67.2 million dollar increase

•Plan for 5-8% added expenditure for Marketing promotions

• $58.1 - 93 million dollar increase

•Large capital investment for initial product launch

•Warranty costs will be high initially to avoid poor quality

reputation

Page 28: Microsoft Case Presentation (mock)

Marketing Implications of Strategy

•Inevitable expenditure on Marketing campaign

• Leverage entire Entertainment Marketing Group

• Pre-release “teaser” promotions

• Possible promotion for free XBOX gear sponsored

on XBOX Live

• Diversify MGU from Nintendo DS and Apple iPhone

• Must reach and leverage XBOX Live community!

Page 29: Microsoft Case Presentation (mock)

Human Resources Implications of Strategy

•Developing new compensations systems

•Develop job description for any new MGU specific jobs

•Recruit, select, train and compensate new personnel

•Retain current employees

•Succession planning

Page 30: Microsoft Case Presentation (mock)

IT Implications of Strategy

•Update enterprise resource planning systems

•Update website for new product sales

•Train users on new programs needed due to MGU launch

•Fixing any problems due to new program installations

Page 31: Microsoft Case Presentation (mock)

Production Implications of Strategy

•Arrange and schedule production of MGU

•Ensure MGU is produced efficiently and with the utmost

quality

•Determine locations for the production of the MGU

•Verify that capacity supports mass production of device

Page 32: Microsoft Case Presentation (mock)

Measurable Milestones

•Competitor Mobile sales at the end of 2008:

• Nintendo DS – 21.3 million after 3 years

• Sony PSP – 20 million after 2 years

•Based on these numbers and our first mover advantage:

• We expect 5 million unit sales in year one

• Increasing to 15 million by end of year three

• Surpassing 30+ million by the end of year five

Page 33: Microsoft Case Presentation (mock)

Measurable Milestones

•Payback Period:

• End of year three, or 15 million units sold

• Break even point:

• End of year five, or 30 million units sold

•Increase market share to 38% in total gaming market

•1% initial year sales to have warranty costs

•Reduced to .5% by year three and beyond

Page 34: Microsoft Case Presentation (mock)

Discussion?