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For one thing, they could have dropped the Xbox brand name. It's done nothing but weigh them down this gen

For a second thing, they could have tried buying rights for JRPGS that Japanese people already know and love, not spend millions on original titles they're wary of in a diminishing market.

For a third thing they could have shipped a system that didn't have the exact same disc sctratching stigma that blighted the first Xbox in the region.

For a fourth thing they could have tried making new kinds of games that appeal to the people like Nintendo have; the hardcore Japanese market was in serious decline even before 360.

For a fifth thing they could have employed marketers who recognised "DO! DO! DO!" pisses people off even in Japan, and deosn't connect to 360.

For a sixth thing they could have spread their considerable finances on securing support from a larger number of less high profile titles rather than the small number of AAA big ass titles: It made the linup look thin, and when N3 and Blue Dragon failed on the back of massive cash investments and advertising, it scared smaller 3rd parties off of even trying.

For a seventh thing, they could have tried securing more than one representative game from each Japanese oriented genre, instead of 15 FPSs and 2 beat-em-ups.

For an eighth thing, they should have figured out how to make it and the power unit smaller and quieter. Not such a big deal, and it appears every unit would burst into flames if any smaller, but the Wii gets cute points.

Finally, what do Cake Shops have to do with 360's? 

 

Oh, and if they wanted to get the 5-fold boost they need to reach the heights of 100 million units ala playstation (and their plans) then a 1 million lead over last gen isn't enough.