Outsourcing of Xbox Production by Microsoft and Flextronics

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Case Study Analysis: Microsoft: The outsourcing of XBOX production International Business IB300
April 10, 2011

In summary the following case was about Microsoft’s quest to enter the video game market with its Xbox gaming console. Microsoft’s history of having a small hardware business forced Microsoft to make a crucial decision about whether it should manufacture this gaming console along with managing a global supply chain or outsource the manufacturing to a third party. They quickly decided that it would be in their best interest to outsource the manufacturing of this product since they lacked the manufacturing and logistics capabilities needed. (Case study, 2011) After review of several potential suppliers, it decided to outsource assembly and significant logistics functions to Flextronics, a Singapore-based contract manufacturer. Flextronics was a global corporation with a large amount of employee’s and was already working with other major companies such as Xerox and Dell.

Microsoft and Flextronics had previous business relations and Flextronics was the manufacturer of its mice. The rapport and relationship that Microsoft had with Flextronics, was a major reason Microsoft decided to go with Flextronics. In addition, Microsoft was looking for a partner that could supply the gaming consoles at a low price while maintaining high quality and was able to work jointly with Microsoft on a real time basis. One of the benefits of going with Flextronics was their industrial park strategy which helped it manage supply chain closely, reduce supply disruptions and lower costs that were passed down to Microsoft. Secondly, Flextronics had a global presence and was able to shift production from location to location as needed to keep costs down. Third, Flextronics used web-based information systems that enabled Microsoft to feed information on demand conditions to Flextronics. This information exchange between the two would ensure that production schedules...
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