Xbox case free essay sample

What supply chain changes did Microsoft make between the Xbox and the Xbox 360? What was the motivation for these changes? Microsoft made several supply chain changes after their first experience in the game console market with the Xbox. Microsoft successfully secured a significant market share with the Xbox and expected to have higher sales with its successor: the Xbox 360. They also made the decision to introduce it a year before their main competitor, Sony, would in order to secure a large market share. Since both of Microsoft’s EMS suppliers had already been working at capacity, they contracted with a third EMS supplier, Celestica. Celestica began production in a new facility in China a year after launch to provide additional capacity and take advantage of the cheaper materials available in China. Another change was the decision to outsource the product design to Astro Studios in San Francisco. Many people had complained that the Xbox was ugly and too large. We will write a custom essay sample on Xbox case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Clearly, the Xbox’s product design did not provide a competitive advantage to Microsoft. Contracting with a renowned design company would almost guarantee the development of a more attractive and user friendly console. Microsoft believed a more visually aesthetic design would improve sales performance particularly in Japan as the Xbox was only able to capture 1% of the market share. Lastly, Microsoft decided to design custom-made chips that only they would own the rights to. This significantly reduced supplier power and helped Microsoft minimize costs as they could take their chip design to any chip manufacturer. Their original chip producers, Intel and NVidia, resisted this change because it would force them to compete on price. Previous videogame launches had been characterized by initial demand exceeding supply, even though launches had been regional, with many months separating each geographic expansion. What were the benefits and risks of the global launch planned for the Xbox 360? After losing out to Sony’s PlayStation 2 with the Xbox, Microsoft understood that securing a strong market presence and market share was vital to winning the console war. The Xbox’s â€Å"large controller† and â€Å"poor appearance† put off many consumers especially Japan, which comprises a huge portion of the market. Xbox’s market share in Japan was at â€Å"less than 1 percent† which was dramatically less than its share worldwide. As a result, Microsoft aimed to create a â€Å"small, elegant machine† with more wieldy controllers and the addition of online features. In order for this global launch to succeed, Xbox 360’s had to be supplied globally and sold almost simultaneously in all chosen geographic regions. There shouldn’t be much of a delay between geographic expansions as was the norm in previous video game launches. Microsoft anticipated receiving benefits such as enhanced economies of scale with the production from all of its suppliers, the ability to meet the extremely high predicted demand, and most significantly an earlier entrance to the market than the PlayStation 3. The PS3 was expected to have better technology with higher resolution and Blu-ray capabilities. This was all too familiar to Microsoft as it was in the opposite position it was in when it was launching the original Xbox. The global launch was executed during the holidays, which promised more sales. However, a global launch meant that Microsoft was subjecting itself to a couple of risks. An early launch date made Microsoft over-reliant on its manufacturer Flextronics and its manufacturing plant in Doumen, China, which was creating all of the Xbox 360’s. This plant’s ability to operate efficiently, effectively, and without significant error was crucial to the 360’s success. If a disaster occurred causing the plant to shut down or significantly slow down, Microsoft would lose many customers and sales. In addition, one of the main reasons for the early and global launch was to introduce the ability to play online to the video game market. But, the risk in this strategy was that there needed to be a sufficient amount of internet use across the globe including in third world countries for this to be worth it. Users in poorer countries with underdeveloped internet infrastructure may not have the ability to make use of these capabilities. After weighing these risks Microsoft launched globally and gained a large sales and market share advantage over Sony and the PS3, which would not launch for about another year.