xbox case
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. 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
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. 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