Microsoft - Outsourcing Xbox
Background
Microsoft, from its inception, has been known for its software, especially its Windows platform. It has changed the way we operate computers and through its software, has made the computer user-friendly and very efficient. Microsoft, however, does not want to only specialize in the software department. They have thus expanded their excellence in other departments such as gaming, music and hardware.
Problem
When Microsoft entered the video game console market, they were faced with a dilemma: whether to manufacture the Xbox themselves or outsource it to a third company. Microsoft ultimately chose to outsource the production to Flextronics. Flextronics’ 'industrial park' strategy is what allowed it to manage its supply chain, making the production of Xbox more efficient and cost effective. They also had factories around the world, which were all under the centralized information system, s they could shift the production from one country to another if necessary for optimal profitability.
Analysis
1. What is the strategic advantage to Microsoft of outsourcing Xbox production to Flextronics?
Microsoft has a lot to gain from outsourcing the Xbox production to Flextronics. Microsoft’s core competency is producing software, not hardware. So by the Law of Comparative Advantage, it is best for Microsoft to let someone, who is good at producing hardware, produce the Xbox. Flextronics not only offers their expertise in hardware, but also their network of connections worldwide which reduces production costs, thus making the market value of Xbox lower and more affordable. Because of Microsoft’s web-based information system, they are able to share information with Flextro...
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... for Xbox and therefore, Flextronics can modify their production schedule to meet those demands in the same real-time as well. The communication makes sure that the entire process is closely monitored by both sides so there is tighter coordination and efficiency to minimize inventory, avoid shortages and develop a balance between the supply and its demand.
Conclusion
Microsoft made a wise decision by choosing to outsource the manufacturing of Xbox to Flextronics. They are not as competent in making the components for Xbox as they are in constructing software. Flextronics, on the other hand, is a large enough company with ample funds and experience in the manufacturing of hardware, like Xbox. They have the expertise and logistics to produce efficiently and cost effectively, while maintaining the level of quality that Microsoft demands as a well-known brand.
Many people, with the government are trying to label Microsoft as a monopoly. Why is there any delay going around doing that? There is no reason to brand Microsoft as a monopoly. There is part of monopolistic competition and supply-demand acting on this case.
Microsoft is an American company that was founded by William Henry Gates III, as known as Bill Gates, and his his high school friend Paul Gardner Allen in 1975 April 4. But unluckily, Paul Allen resigned from Microsoft in 1983 after developing Hodgkin’s disease. In 1985 October 20, Microsoft released Microsoft window. It is the first original operating system. It is a graphical extension for MS-DOS. Even though, it’s not handy like nowadays Microsoft window. Then in 1990, Microsoft introduced Microsoft office, which is a bundle office productivity application with Microsoft Word and Microsoft excel. The Microsoft Word was the first application that could display italics. And the Microsoft Office would be available for free for all the PC World’s computer that is produce on that same year in November. In the 2000 February 17, Microsoft released Window 2000 operating system, and according to Microsoft it is the most safe operating system in the world at that time. But still, there are so many problems and glitches need to be fixed. Besides there are mutable computer viruses are made specially to attack Window 2000. Rush to gain back the sales. In the 2001 October 25 Window xp is available. The new operating system fix most of the problem. Although some of the user were still complaining the system that it will take your information, but in the 2007 January, there are 76% of people in the entire world are using the operating system.
In the console-gaming world people know Sony and Nintendo. Microsoft may be the largest and richest software company in the world, but it’s unknown when it comes to console gaming. Microsoft is counting on the Xbox to change that perception. Gamers may not be willing to take a chance with the Microsoft Xbox, even if it is far superior to any console ever made. Nintendo Gamecube is nothing if charismatic. Nintendo’s new machine is half the size of any other console and looks like a toy with its brightly colored plastic shell and handle. It’s destined to be home of such popular games as Mario, Donkey Kong, Pikachu, and Kirby. Nintendo Gamecube seems mismatched as it goes up against the Microsoft Xbox and the Sony Playstation 2 (a multimedia mayhem that Sony says it’s supposed to be “The Future Of Entertainment”). All this makes you think; what makes Nintendo believe it can possibly go up against the ultra-sophisticated Xbox.
For many years, companies were vertically integrated; they owned their entire supply chain. Necessary in industries heavily laden with proprietary information, this method of management was incorrectly applied to industries that had only a limited number of exclusive parts and shared the rest with other products. As companies learned their products and their competition’s products shared a significant number of parts, a new wave of manufacturing methods was developed. Electronic Manufacturing Services (EMS) was developed as a method to create asset-light companies. Necessary when changing tastes meant large inventories would be costly paperweights in a short time, this method created many unforeseen problems. The economies of scale necessary to lock in low rates were eliminated as companies ordered fewer products more frequently. Also as companies forfeited the control over their entire supply chain, issues with logistics, manufacturing, and procurement proved troublesome.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
The first type is the primary activities and costs that is contains of five different activities. Nintendo had only one manufacturer in the past which was “Taiwan based Foxconn precision Components”. This company was responsible to manufacture the components of Wii; the last new video game of Nintendo. But after the firm noticed that the demand on its new video game continue to increase, the management of Nintendo decided to diversify its suppliers that manufacture their video games’ components such as; the chips, and for assembling the Wii system. This was related to the supply chain management.
The following paper analyzes the initial release of Microsoft's XBOX 360 gaming system release into the United States and the changes that occurred with the supply, demand and pricing of the product in the months following its release. The social science of economics tells us that supply, demand and price are closely related to one another and have a significant on how much of a particular good is purchased and the rate at which it is purchased by consumers. The XBOX 360 phenomenon is a solid example of the impact that changes in supply, demand and price have on the marketplace and the rate at which goods are purchased.
"Microsoft Corporation, is a multinational computer technology corporation with global annual revenue of US$44.28 billion and 71,553 employees in 102 countries as of July 2006. It develops, manufactures, licenses, and supports a wide range of software products for computing devices. Headquartered in Redmond, Washington, USA, its best selling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software, each of which has achieved near-ubiquity in the desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse as well as home entertainment products such as the Xbox, Xbox 360 and MSN TV" ("Microsoft").
Microsoft, one of the largest corporations in the world today, employs over 93,000 people and is a public, multinational company that manufactures, licenses, and supports a wide range of software products for computers and is most widely known for its Microsoft Windows operating system. Microsoft not only markets computer hardware products such as the Microsoft mouse and the Microsoft Natural keyboard, but it also manufactures and sells home entertainment products including, the Xbox, Xbox 360, and Zune. It also holds assets in other markets including the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia.
Nintendo, which is one of the largest video game companies, follows several steps and goes through different stages to create a value for its customers. To produce a video game controller, Nintendo outsourced the key components, which are needed for the production such as controller chips, from a number of different manufacturers. Nintendo formed partnerships with those manufacturers to supply them with the required components. The process of outsourcing the components from different manufacturers is considered as a good practice and cost effective because it reduces the production costs that Nintendo might have if they produced the components by themselves. As it is mentioned in the case, “Nintendo is not a technology company – it is a toy company” so, by outsourcing Nintendo als...
In this paper, team B will discuss the internal and external factors of the Microsoft Corporation. We will explain how these factors affect the four functions of management, planning, organizing, leading, and controlling. Also, we will explain how globalization, technology, innovation, diversity and ethics will be delegated to manage the different factors. Microsoft Corporation was established in 1975 in Albuquerque, New Mexico producing software for developing, manufacturing, licensing, and support for range of software products and service for different type of computing devices. Microsoft grew from six employees to the largest personal computer software company in the world. By 1978, Microsoft earned $500,000 in the first quarter, and by the end of the year they earned revenue of $1,000,000. In the early 1980s Microsoft, in collaboration with IBM they released MS-DOS as their first 16-bit operating system. However after the late 1980s, Microsoft started to build its reputation by creating the Microsoft windows operating system and Microsoft office product, which includes internet explorer, excel, PowerPoint, and word programs. Then in the late 1990s, Microsoft teamed with Sega to incorporated their windows software package into the game developer’s Dreamcast hardware. Also they developed their own gaming system called the Xbox and that eventually was replaced by the xbox360. Microsoft has come a long way and is no longer just a worldwide leader in computer programming but also a major part of the technology world. Microsoft windows have been the flagship and accounts for most of its revenue for Microsoft: but the company has also branched ...
Microsoft’s mission of placing a “PC running Microsoft software on every desk and in every home” drove their overall strategy early on. Depending on the business segment within Microsoft, one would see in place very different business models as the strategy for each line of business could vary. In the operating system (OS) segment, Microsoft initially brought in an existing product and modified this (MS-DOS) to work with the Intel microprocessor, which were the “brains” of the IBM PC. Microsoft partnered with IBM to provide the operating system for the IBM PC. In addition to developing Windows, Microsoft during this period was working to write applications for the Apple OS.
I believe that Microsoft has the best intensions for society, because they are constantly developing the software market into a more competitive and challenging industry. Microsoft’s success as a company is partly due to its commitment to making the best product possible and strategic business practices. The first reason Microsoft is not a monopoly is because of the standardized quality of its OS. Second is the intelligent business practices Microsoft has engaged in through many of its business partners. The legal issues of the alleged antitrust accusations from the department of justice are just totally overrated.
Lynch (2012) asserts that it is necessary for an organization to carry out an analysis of its resources and capabilities as it help it in identifying the places where value can be added by the organization. This also helps the company in finding out ways to gain competitive advantage in the market. The given case on Nintendo showed that by 2005, Nintendo appeared to be heading towards an end as its rivals Microsoft and Sony has captured the market through Xbox 360 and PlayStation 3 respectively. In this scenario, Nintendo innovated Wii which changed the market scenario in 2007. The case showed that innovative new strategy by Nintendo with its Wii games machine has transformed the industry and revived the profitability of the company. Since the release of the Wii, Nintendo is the leader in the video game industry. By introducing a totally new, one of a kind console, Nintendo has set clearly its goal and objectives, i.e. to reach an unexplored market share by introducing new gaming experiences, and therefore being the leader over its two main competitors, Sony and Microsoft. The case thus highlights the need to take a resource based view of the capabilities of the company so that such resources can be exploited to generate higher value for the firm.
Microsoft is the leading and the largest Software Company in the world. Found by William Gates and Paul Allen in 1975 Microsoft has grown and become a multibillion company in only ten years. It all started with a great vision – “a computer on every desk and every home” - that seemed almost impossible at the time. Now Microsoft has over 44,000 employees in 60 countries, net income of $3.45 billion and revenue of 11.36 billion. Company dramatic growth and success was driven by development and marketing of operational systems and personal productivity applications software.