In drumhead the undermentioned instance was about Microsoft’s quest to come in the picture game market with its Xbox gambling console. Microsoft’s history of holding a little hardware concern forced Microsoft to do a important determination about whether it should fabricate this gaming console along with pull offing a planetary supply concatenation or outsource the fabrication to a 3rd party. They rapidly decided that it would be in their best involvement to outsource the fabrication of this merchandise since they lacked the fabrication and logistics capablenesss needed. ( Case survey. 2011 ) After reappraisal of several possible providers. it decided to outsource assembly and important logistics maps to Flextronics. a Singapore-based contract maker. Flextronics was a planetary corporation with a big sum of employee’s and was already working with other major companies such as Xerox and Dell.
Microsoft and Flextronics had old concern dealingss and Flextronics was the maker of its mice. The resonance and relationship that Microsoft had with Flextronics. was a major ground Microsoft decided to travel with Flextronics. In add-on. Microsoft was looking for a spouse that could provide the gambling consoles at a low monetary value while keeping high quality and was able to work jointly with Microsoft on a existent clip footing. One of the benefits of traveling with Flextronics was their industrial park scheme which helped it pull off supply concatenation closely. cut down supply breaks and lower costs that were passed down to Microsoft. Second. Flextronics had a planetary presence and was able to switch production from location to location as needed to maintain 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 guarantee that production agendas between all of the participants in the supply concatenation are tightly coordinated so that stock list is minimized. deficits are avoided. and demand and supply are balanced. Last. Microsoft and Flextronics had strong personal relationships between employees which helped cement the concern dealing. Microsoft has faith in Flextronics ability to maker the console on clip.
In reexamining this instance survey and the actions that Microsoft took to come in the picture game market I think they strategically planned their success with turn overing out the Xbox. They evaluated the possibility of bring forthing the gaming console themselves versus outsourcing the production. In that rating. they carefully reviewed if they would be able to travel planetary with this production and run a planetary supply group. The biggest hazard it seems as though they would meet would be able to provide the demand for this gaming console managing the production themselves.
Besides. because of their past experience with merely little hardware devices this would be much more extended. Therefore. they concluded it would be in at that place best involvement every bit good as a strategic progress to outsource the production of the Xbox gambling system. I think they did their pre-planning extensively before traveling into the video game market because they looked at their ability as a company to maker the merchandise and how the merchandise could be produced more cost efficaciously while keeping the quality by person else. There determination to outsource the fabrication of this merchandise by the Flextronics which was a Singapore based contract maker. They found that Flextronics would be good in run intoing the supply demanded while maintaining the cost for production down while keeping the quality they were looking for with their merchandise.
If Microsoft had decided to maker the gambling console on their ain. they would hold been able to take the investing entry manner to bring forth these globally. The best signifier would hold been to make a entirely owned subordinate. a installation wholly owned and controlled by a individual parent company ( Wild & A ; Wild. 2010. p. 366 ) . By organizing a entirely owned subordinate. they would profit by holding complete control over the production of the game consoles which would diminish opportunities of rivals deriving entree to Microsoft’s competitory advantage ( Wild & A ; Wild. 2010. p. 367 ) . Microsoft would besides hold complete control over the subsidiary’s end product and monetary values and would have all net incomes generated every bit good ( Wild & A ; Wild. 2010. p. 367 ) .
They would be able to look for best options for bring forthing the gambling console while maintaining costs down. They would be able to guarantee that the quality criterions that they had set were being maintained. However. the disadvantage would be the sum of clip and cost that it would be Microsoft to acquire this subordinate up and running. In add-on. because of this being their first entry into the market they may non be able to bring forth the gambling consoles at a low cost with the new enterprise. Besides. the hazard exposure is high because a entirely owned subordinate requires significant company resources ( Wild & A ; Wild. 2010. p. 368 ) .
I think that Microsoft made a really good determination about outsourcing the production of the Xbox to Flextronic. Flextronic has high planetary gross revenues and has worked with large companies in the yesteryear. They have a proved path record with Microsoft every bit good as a antecedently good working relationship which is truly of import when doing these sorts of determinations. In add-on. Flextronics planetary presence enables the company to switch production as needed to go on to supply high quality and low cost. Therefore. Microsoft can number on the stableness of their monetary values. In shutting. it is obvious that Microsoft would be able to obtain the competitory advantage of come ining the picture bet oning market with utilizing Flextronics for the production of the Xbox.
Case Study: Microsoft: The outsourcing of XBOX production. ( 2011 ) Wild. J. & A ; Wild. K. ( 2010 ) . International Business: The Challenges of Globalization ( 5th ed. ) . New Jersey: Pearson Prentice Hall