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Microsoft-Outsourcing Xbox Production
5 October 2011
1. What was the strategic advantage to Microsoft of outsourcing Xbox production to Flextronics?
a) Microsoft had been pursuing an “industrial park” strategy that enabled the company to tightly manage its own supply chain, reduce the chances of supply disruptions, and lower costs. Flextronics had an “industrial park” strategy in place that meet Microsoft’s strategic vision.
b) Flextronics had a global presence – just as Microsoft wanted.
c) Using web-based systems Flextronics and Microsoft have the ability to share information on a real-time basis which was crucial to doing business with Microsoft.
d) Lastly, Microsoft had done was already in business with Flextronics and quite simply, Microsoft trusted Flextronics.
2. a) What were the risks associated with outsourcing to Flextronics?
By outsourcing to Flextronics, Microsoft assumed the risk of losing control over the supply chain process, took the risk of Flextronics not delivering their end of the bargain and the transference of knowledge “Secret Sauce” could have been proven to be detrimental to Microsoft.
b) Did Microsoft mitigate these risks? Yes – the risks were mitigated. As discussed in question # 1 of this Case Study, Microsoft had a strategic vision and Flextronic strategic approach was a good match for that vision. Due to Flextronics Industrial Park strategic strategy the supply chain was managed tightly and lower costs were passed on to Microsoft. Flextronics global presence allowed them to be flexible in the production arena that resulted in lower production costs by changing from location to location. The healthy and timely flow of communication between Flextronics and Microsoft resulted in better quality control and customer service. Lastly – Microsoft minimized the risk by outsourcing with a company it was familiar with and trusted.
c) Do you think Microsoft would have been...