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Microsoft Outsourcing Xbox Production

Microsoft Outsourcing Xbox Production. About Microsoft. Formed in 1975; IPO in 1986 Global annual revenue of US $62 billion  Nearly 90,000 employees in 105 countries Develops, manufactures, licenses, supports a wide range of software products for computing devices

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Microsoft Outsourcing Xbox Production

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  1. Microsoft Outsourcing Xbox Production

  2. About Microsoft • Formed in 1975; IPO in 1986 • Global annual revenue of US $62 billion  • Nearly 90,000 employees in 105 countries • Develops, manufactures, licenses, supports a wide range of software products for computing devices • Current Market Cap of $226.19B. Comparable economy: Egypt - GDP: $187,954B (Population: 79m) Thailand - GDP: 263,889B (Population: 66m) 2

  3. Microsoft’s Challenges • Primary a software company, however it long had a small but important hardware business selling computer mice, keyboards and joysticks under the Microsoft brand • Xbox was different: it was a fully functional specialized computer with multiple components including microprocessors, memory chips, graphic chips and an internal hard drive. • Microsoft quickly decided that it lacked the manufacturing and logistics capabilities to make the Xbox itself and manage a global supply chain. 3

  4. Outsourcing • The procuring of services or products, such as the parts used in manufacturing a motor vehicle, from an outside supplier or manufacturer in order to cut costs 4

  5. Advantages/Disadvantages 5

  6. About Flextronics • Singapore-based Electronics Manufacturing Services (EMS) provider • $13Billion Sales, 100K Employees in 28 countries • Supplier to Dell, Ericsson, HP, Siemens, Sony & Xerox 6

  7. Flextronics Advantage • Uses “industrial park” strategy • Can shift production from country to country • Had excellent web-based information systems for real-time exchange • Had experience with Microsoft (e.g. in computer mice) 7

  8. Xbox Market Launch • PS2 released and was dominating market • Game Cube announced for Christmas launch • Xbox launch: 3 days before Christmas (US) 2 months before the Game Cube (Europe and Australia)

  9. Xbox Market Launch • Microsoft was able to balance demand and supply • Over 25 million units were sold (2006) • Outsourcing partner can be a competitive advantage

  10. Success Story Outsourcing success blueprint: • Choose a partner, not a contractor • Set expectations early in the process + = 11

  11. Conclusion • Sophisticated and effective outsourcing relationships are becoming more typical in every industry • Microsoft's decision to outsource the Xbox manufacturing illustrates just how sophisticated and effective partnering with outside contractors can be in the twenty-first century, no matter what the industry or product 12

  12. Thank You Q&A 13

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