Case Report of Microsoft and the Xbox 360 Ring of Death

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Microsoft &
The Xbox 360 Ring of Death
COMM 5307
Professor: Ebarhim Mazaheri
Group 5
Liuquan Wang
Ning Ding
Wenjun Zhou
Keyue Zhang
Date: Jan 22, 2013

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Problem statements:
There are two main problems in Microsoft. The first is financial problem and market share of the Xbox 360. Microsoft suffered a great loss, nearly $2 billion loss for the 2006-07 fiscal year, because of major design flaws in the Xbox 360. The second is reputation of Microsoft, especially for Xbox 360. Because of the Xbox 360 ring of death, Microsoft suffered declined reputation and player’s disappointment. Even for a loyal Xbox lover who tried to fix it for a lot of times, he decided to sell it. Furthermore, Microsoft had to decide how to leverage those assets, especially for Xbox 360, to maintain its long-term strategic vision.

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Problem issues:

1.

Cost cover of Xbox 360.

2.

Honest and responsibility.

3.

Personnel appointment.

4.

Declined marketing share.

5.

Disappointment of players.

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6.

The peripheral of game is less than Sony and Wii.

7.

The high quality but high cost Internet of Xbox.

8.

The contradiction between outsourcing and Microsoft.

9.

Competitor’s threats and press, and other potential competitors.

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Industry analysis:

The video game industry is going throng significant growth. It is a large and growing market, including significant technological change, high growth rate, new product development and lack of a clear market leader. But it is hard to make success in this industry, which requires strong technology knowledge and intensive capital investment. !

SWOT analysis:

Strengthens:
1. It’s no doubt that, Xbox 360 had strong product innovation capability. 2. Microsoft invested much money for Xbox 360’s launch, which helped Xbox 360 gain great initial success and high market share.

3. Microsoft’s excellent bran image among customers played an important role in the

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sale of Xbox 360.
4. Microsoft’s wild global coverage and strong global distribution capability did a good effect on Xbox 360.
5. Xbox 360 provided a good online gaming environment to customers. 6. Thanks to Microsoft, Xbox 360 could gain enough capital support during its researching and launching.
7. Xbox had a good long term vision.
Weaknesses:
1. Xbox 360 had serious human resources problem.
2. Before launching Xbox 360, management didn’t do enough marketing research, which resulted in blind cash flow investment.
3. Just as mentioned above, design problems of hardware of Xbox 360 resulted in poor quality.
4. Xbox 360 had weak supply chain and outsourcing management. 5. Xbox had poor crisis public relations.

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6. Microsoft only had 69 days from the Xbox 360’s initial production date until launch day, this short window caused significant supply shortage.
Opportunities:
1. The game and entertainment industry has good prospection. 2. Microsoft can expand Xbox 360 to movies, music and Internet to service additional customer groups.
3. Xbox can expand its product line, for example: Xbox-mobile. Threats:
1. In the future, game companies won’t launch games for Xbox 360 only. 2. The competition in game industry is stiff, Xbox 360 has to keep innovation. Also, Xbox should keep an eye on the entrance of potential rivals, such as Razer. 3. Hardware suppliers have fierce competition, the prices on key inputs are rising. It’s very difficult for Xbox 360 to maintain low cost.

4. If rivals work out high technologies, Xbox 360 would stand in dangerous environment.

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5. With the rapid development of game industry, we are hard to control the inflow and outflow of customers, even have difficult to maintain current customer base. Competitive Analysis
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Sony PS3

Sony launched their PS3 in 2006

which is one year later than Xbox360. PS3 is the only

console capable of playing high-definition movies with its...
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