Friday, September 29, 2006

Breaking into new markets

There has been a lot of guff on the internet the past couple weeks with the coming of the Zune and quite a few people have been nay saying about it.

Let me just say this: 2001, Sony Playstation had 70+% market share.

Welcome to 2006: Sony Playstation has around 50%, and the X-Box is looking at between 20-25%.

In four years of being on the market that is remarkable growth for MS in the console department.

So, lets apply this to mp3 players. Funny enough, the statistics are pretty close to the same. Apple has around a 70-75% market share with the iPod brand. Now given 4 years is MS going to have 20+% market share?

At first glance I would have to say no. See, the competition to the the Zune is the 30gb iPod. The problem that I am seeing in this is this:

In the console market there is a very limited amount of competition. You can count the big players on one hand. Not only is there a very limited amount of competition, but there is not a wide product range. So we have consoles, and those producers also produce portable units as well. That means those handfull of companies are competing on a very limited play field. That is nothing like the mp3 playing field. Why not?

Go to Amazon.com and do a search on mp3 players. Refine that search to simply audio/video units, and it results in 3,895 products. That is a whole lot of potential competition for Microsoft to face. So lets do a quick SWOT of Microsoft and the Zune:

Strengths:
1. C'mon, its Microsoft.
2. Enormous capital to leverage.
3. Industry connections.
4. Well developed R&D teams.
5. Ability to incorporate functions in various other MS programs.

Weaknesses:
1. New to the mp3 player field.
2. Anti-MS crowd.
3. Bloated organization
4. Inability to limit scope and release product on time.
5. Product fills a limited category. (ie. not everybody wants a 30gb, semi-heavy mp3 and video player).

Opportunities:
1. Chance to really push into the mp3 market.
2. Get more MS products into consumers hands.
3. Increased profits (and of course decrease the profits of its competitors).
4. Further development of MS in the electronics realm... and expansion of their home entertainment concept.

Threats:
1. Competition... this is their first venture into this field.
2. Having their prices undercut.
3. Success of the anti-MS campaign.
4. Potential problems that arise from hardware they are using (can these things be hacked via WiFi?).
5. High technological turn-over. (Need to constantly innovate... or be a cost leader of course).

Okay, that is just a little bit of stuff that could go into a SWOT. There is more that can be added to the list, but that is the general idea.

So what it boils down to is: I think that MS can make inroads into the mp3 market. I really do. It isn't going to be as easy as getting into the console market though... so they had better be ready to commit a good deal of their resources and talent to back up their new venture.

2 Comments:

Anonymous Anonymous said...

This is a great blog for those who don't get out to enough board meetings.

10/02/2006 7:50 AM  
Blogger Justin said...

Haha, ahhh... I thought its been pretty lively. I guess I'll have to scrap tomorrows entry on financial statement analysis and why it is important to make your employees aware of what their role is in the organizations performance.

Actually, I might. I've never felt better at work than when I had a good idea of how I affected the bottom line.

10/02/2006 11:11 PM  

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