The Inevitable Failure Of Defensive Counter-attack Strategy - Strategic Mistake, Microsoft's Entry Into The Electronic Entertainment Industry

The direct competition between Microsoft and Sony in the Electronic Entertainment Industry is the most interesting case since the beginning of the 21 century.On the surface, it is Microsoft attacking Sony. Yet judging from the strategic perspective, it is Microsoft's reaction to Sony's offensive. The Microsoft's game console Xbox and Sony's PlayStation2 (hereinafter is referred to as "PS2") are actually the tools for taking the future of e-family in 21st century.The first part of this thesis introduces the complex background of Microsoft's entrance to the Electronic Entertainment Industry and the prosperity of the industry which is yet not big enough to attract the Microsoft. The true reason of Microsoft's action is that Sony PS2's positioning of "interactive entertainment terminal" makes a huge obstacle to MS e-family plan. Microsoft's partner Sega's withdrawal from video game hardware production and Nintendo's refusal give Microsoft no option but fight only by itself. The second part firstly summarizes the recent development of Electronic Entertainment Industry and its features, and then analyzes the structure of the industry, illustrating the danger which Microsoft confronts as the following factors: competitors (especially Sony), supplier's choice, consumers' choice, the availability of complements, and the profit model. In the last, the paper points out how the lack of creativity really matters in the competition of this industry and that the wrong strategic choice makes Microsoft unable to get over the big challenge of industry difference. Undoubtedly Microsoft's failure is inevitable. The final part aims at providing some advices to Microsoft based on its current situation by discussing several ways strengthening MS's competitiveness and strategic change, and studying the prospect of MS in the Electronic Entertainment Industry.