Upload
fahatulaftai
View
220
Download
0
Embed Size (px)
Citation preview
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
1/13
Microsoft and The Xbox 360 Ring of Death 1
Microsoft and the Xbox 360
Microsoft; established on April 4, 1975 is an American multinational corporation
develops, manufactures, authorizations, and provisions a wide range of products and
services related to computing and networking. It is the biggest software corporation in
the world stately by revenues. They offer Microsoft Windows line of operating systems.
Microsoft is dominating the market now in both the PC operating system and office
suite markets with Microsoft Office.
Microsoft, a software company had long been the most popular operating system forplaying computer games also, but later on Microsoft concerned about being the market
leader in video game industry market with their XBOX 360 console in 2005.
The Xbox 360 was released on November 22, 2005; designed to be a high-defination
entertainment hub that comprised games, movies and music.Microsoft offered two
models of Xbox 360:
Premium package: a hard drive and headphones for $399.
Core version: with no hard drive priced at $299.
Also they comprised that high definition movie playback will be supported through
Xbox live store for downloadable content and concluded an HD-DVD add-on drive
capable of playing high-definition video discs.
Competitors:
Sony's PlayStation 3
Nintendo's Wii
Sega
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
2/13
Microsoft and The Xbox 360 Ring of Death 2
Executive summary:
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
3/13
Microsoft and The Xbox 360 Ring of Death 3
Key problems Of Xbox 360:
Technical Design and production defects:
X-Box 360 has certain technical design and product defects. More than 59% of
registered members experienced at least one Xbox 360 system failure.
One of the main problems was console malfunction, means stopped working afterdisplaying three flashing red lights around the power button.
And other investigation result showed that there were components missing in thedrive mechanism and gamers also found scratched discs while using the Xbox
360.
Poor quality control problem was also encountered by engineers at Microsoft.The possible reasons behind technical defects of Xbox 360 are:
Poor thermal design causing the overheating caused the Red Ring of Death andalso the scratched discs.
Missing components needed which are necessary to stabilize discs while they arespinning.
poor quality control at the companys Chinese manufacturing sites ( Celestica,Flextronics and Wistron)
Lack of customer confidence:
Repeated Hardware failure increased by 2007. Because of high system failure rate
consumers were ultimately losing their confidence on Xbox 360. Consumers were
complaining against dead consoles, red ding of death and overheating. By time high
system failure rate have caused increased rate of customers dissatisfaction.
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
4/13
Microsoft and The Xbox 360 Ring of Death 4
High repair cost was another issue. As this technological devices takes a lot to get
repaired so that every consumers cant afford to repair their Xbox 360 repeatedly
because that time general hardware failure was too much to handle by consumers.
Putting it all together consumer confidence was decreasing day by day for Xbox 360.
Supply Shortages
On beginning Microsoft faces a significant supply shortage during the consoles first few
months on the market. They had the customers waiting in front and a number of pre-
orders went unfulfilled too. Microsoft appealed it as the inflexible process of
manufacturing complex product by how supply shortage was there for Xbox 360.
Though despite all Microsoft claimed launch of Xbox 36o was a great success
Environment Analysis:
Analysis of the Internal Environment:
Findings of the internal strengths and weaknesses of the Xbox 360 from the case:
Strong brand image of Microsoft Providing online support. Significant market share. World leader in video gaming industry. Owned some most valuable brands within market
Design and production defect Poor quality control on Chinese manufacturing sites Using poor thermal design High production cost
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
5/13
Microsoft and The Xbox 360 Ring of Death 5
Alarming system failureAnalysis of externalenvironment:
More than five million customer base Usage as entertainment hub for games, movies and music. Grossing revenue through software sales & third party licenses Gathering live information about the consumers Expending own low cost processors.
Competitors (Sony and Nintendo ) are doping their console price High warranty repair cost Competitors are always improving their technology Users are lacking confidence. Unwilling relationship with the subcontractors
Internal environmental scanning:
Loss from Design and production defect: Xbox 360 video game console ismatter to a number of technical complications and failures that can render it
unworkable. Design flaws of Xbox 360 have resulted more than US$1 billion in
warranty repair cost and contributed to a nearly $2billion loss for the 2006-07
fiscal year. Even Microsoft has faced supply shortage in the very beginning of
launching Xbox 360.
Alarming system failure: Xbox 360 console malfunction was one of the majorissue for Microsoft. The Xbox 360 has faced several system failure. More than
59% of registered members experienced at least one Xbox 360 system failure ,
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
6/13
Microsoft and The Xbox 360 Ring of Death 6
which turned into savior technical fault ever by Microsoft. Consumers were
consistently reporting about brand-new 360s,from game crashes to hard drives
that dont work and the three flashing red light known as red ring of death,
overheating. The overall situation of system failure caused customer
dissatisfaction and other major issues for Microsoft.
Poor quality control on Chinese manufacturing sites: Microsoftsubcontracted production of the Xbox 360 to three Chinese manufacturers,
Celestica, Flextronics and Wistron. Flextronics and Wistron also produced the
original Xbox but Celestica was a new partner for Microsoft. When the Microsoft
design issue came up sits multiple things which were causing Xbox 360 failures
but Microsoft engineers believed that the problems were the result of design
flaws and poor qualitycontrol at the companys Chinese manufacturing site.
PEST Analysis:
Political:
Microsoft provides third party licenses. Consoles are covered by warranty program.Economical:
Selling product on Won significant market share
Social:
Lack of consumer confidence. It designed to be entertainment hub Direct Information sharing with the customers
Technological:
After sale repairmen facility Downloadable content Online gaming service
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
7/13
Microsoft and The Xbox 360 Ring of Death 7
External Environmental Scanning:
Competitors (Sony and Nintendo): Microsoft launched its console in 2005,one year before the rivals Sony and Nintendo wii. They have established their
customer base already within one year. Despite this positive plan, Xbox 360
made a wrong move, by time Nintendo wii quickly captured lead of monthly sales
in major market and Sony slowly started gaining around the market. Microsoft
underestimated the competitors by overseeing the development and launch of
Microsofts next generation consoles. The launce of the Nintendo wii and Sony
PlayStation 3 in November 2006 had a major impact on Xbox 360 sales. In 2007,
Microsoft sold 250000 Xbox 360 consoles in japan, third most important market
for video games after North America and Europe compared to 3.6 million
Nintendo Wiis and 1.2 million Sony PS3s. Xbox 360s high failure rate played a
role in the consoles declining market share.
Users are lacking confidence: Repeated Hardware failure, overheating, threeflashing light, scratched discs, design flaws, missing components etc. a vast list of
problems customers faced from Xbox 360.In 2005 Xbox was loved by consumers,
it was a huge demand in consumers. But by 2006 customer satisfaction rate
started to fall because of console malfunction. In 2007, it got worse when
consumers had repeatedly failed unit frequently. They started to give up on
consumers. 2111 people experienced at least one Xbox 360 failure. By
comparison, the failure rates for the Nintendo Wii and the Sony PlayStation 3
were estimated to be 2.7 percent and 10 percent respectively whereas Xbox 360
had failure rates of between 16 and 33 percent. Consumers were dissatisfied
crucially on Xbox 360.
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
8/13
Microsoft and The Xbox 360 Ring of Death 8
Strategic Group Maps:
Porters five forces analysis:
Bargaining power of Buyers:Manufacturers of Xbox 360 depended on Buyers to
stay in business, for those buyers were a significant portion of the industries revenue.
Because of low switching cost buyers easily could switch to the competitors. And it was
logical because customers confidence over Xbox were lost by then of console
malfunction.
Threat of Potential entrants:Industry of video game console is very mature.
Manufacture must be able to achieve economies of scale. The upscale technological
product like Xbox 360 consoles takes an incredible amount of capital to manufacture.
Top manufactures have huge amount of loyal customers which may shrink the market
share for new entrant.
Competitors:Major competitors like PS 1, 2 & 3, Nintendo Wii and GameCube are so
closely balanced that it increases the rivalry inside the industry. Lack of differentiation
opportunities also caused the close competition. Competitors are compared to one
another constantly because of same product. And each and every Competitors are
improving themselves frequently with new technology.
Bargaining power of suppliers: There are so many parts that are used to produce
an gaming device. Microsoft outsourced their product to three Chinese electronics
manufacturers. Manufacturers and subcontractors can easily switch to another supplier
or manufacturers if it is necessary.
Threat of Substitute: There are too many same kind of substitute product in themarket Peoples have a chance to choose between the blue-ray, personal computer, HD
TV and other lower priced gaming device as a entertainment tool. Substitutes products
all depend on the geographic location and the economic condition of the consumer.
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
9/13
Microsoft and The Xbox 360 Ring of Death 9
SITUATIONAL ANALYSIS:
EFAS Matrixes for Xbox 360:
Key External Factors Weight RatingWeighted
Score
Opportunities Comments
More than five million customer
base
0.15 5 0.75
Strong network ofconsumer bringsmaximum profitfor the company.
Usage as entertainment hub forgames, movies and music.
0.11 3 0.33
Introducedexclusive & uniquetechnology ongaming industry.
Grossing revenue throughsoftware sales & third party
licenses.
0.08 4 0.32
Engaging in profitmaximization.
Gathering live information aboutthe consumers
0.12 1 0.12
Maintainingconsumerrelationship.
Expending own low costprocessors
0.05 2 0.1
Generating Costcutting process butnot losing sales.
Threats
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
10/13
Microsoft and The Xbox 360 Ring of Death 10
Competitors are decreasing priceand improving technology. 0.15 3 0.45
Caused toughcompetition facedfor video gamingconsole.
High warranty repair cost 0.07 1 0.07
Caused customers
unwillingness torepeat purchase.
Users are lacking confidence. 0.18 4 0.72
Caused customerdissatisfactionabout the product
Unwilling relationship with thesubcontractors 0.09 2 0.18
Caused poorquality products
with technical flaws
Total 1.00 3.04
IFAS Matrixes for Xbox 360
Key Internal Factors Weight RatingWeighted
ScoreComments
Strengths
Strong brand image of Microsoft.
0.15 5 0.75
Key to success.
Providing online support. 0.08 2 0.16
Increasingprofitmaximizationthrough usingtechnology
Significant market share. 0.10 3 0.3
Increasing
Productivity.
Owned some most valuable brandswithin market. 0.04 1 0.04
Diversifiedbusiness area.
World leader in video gaming industry0.10 4 0.4
Competitiveadvantage.
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
11/13
Microsoft and The Xbox 360 Ring of Death 11
Weaknesses
Design and production defect
0.18 4 0.72
Reducingextra wages
Poor quality control on Chinesemanufacturing sites
0.13 2 0.26
High pensionandretirement
benefits
Using poor thermal design
0.15 3 0.45
Introducingnew routes
High production cost
0.07 1 0.07
Increase intraining and
recruiting cost
Total 1.00 3.15
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
12/13
Microsoft and The Xbox 360 Ring of Death 12
Internal Factors
External factors
Strengths (S) Weakness (W)
Strong brand image ofMicrosoft
Providing online support.
Significant market share. World leader in video
gaming industry.
Owned some most valuablebrands within market
Design and productiondefect
Poor quality control onChinese manufacturing sites
Using poor thermal design High production cost
Opportunities (O) SO Strategies WO Strategies
More than five millioncustomer base Usage as
entertainment hub
Grossing revenuethrough software sales& third party licenses
Gathering liveinformation about theconsumers
Expending own lowcost processors.
Using brand image toexpand new customer
base
Improve game consolewith new feature byaccording to customersframe of mind
Marketing valuablebrands as a alternativeentertainment
Lowering the productioncost by using customized lowcost quality processors
Introduce proper qualitycontrol on all manufacturingsites
Make the consoles moreattractive and reliable byeusing high-tech technology
Threat (T) ST Strategies WT Strategies
Competitors (Sonyand Nintendo ) aredoping their consoleprice
High warranty repaircost
Competitors arealways improvingtheir technology
Users are lackingconfidence.
Unwilling relationshipwith thesubcontractors
Using brand image to makeenough loyal customergroup
Introduce long term planwith technologicaladvancement to protect andexpand market share
Reducing system failure rateand providing quality aftersale service
Partnering with anothermanufacturer who are moreexperience in designingcomplex computer hardware
7/31/2019 Microsoft and the XBOX 360 Ring of Death1
13/13
Microsoft and The Xbox 360 Ring of Death 13
Possible solution for the problems:
Technical Design and production defects: Technical design and production
defects can be avoided by reducing system failure rate and providing quality product.
Lead proper quality control on all manufacturing sites can help to avoid as much as
flaws. As the Chinese manufacturing is poor then partnering with alternative
manufacturer who are experienced in designing complex computer hardware will help
to make quality products. After sale service for technical difficulties also can be a good
way. Experienced human resource needed for this kind of complex designed product.
Rather than focusing on rapid growth in market share making quality product should
get more attention; evaluating every console produced by skilled people, re-checking the
devices is needed.
Lack of customer confidence: Using brand image to expand new customer base can
help to regain the confidence. Make the consoles more attractive and reliable bye using
high-tech technology. Introduce long term plan with technological advancement to
protect and expand market share
Supply Shortages
using good material and deploying more research bodies mproving testing systemimproving production machineries