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Competitors:
Sony's PlayStation 3 Nintendo's Wii Sega Microsoft and The Xbox 360 Ring of Death
Executive summary:
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 preorders 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:
Strength:
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
Weaknesses:
Design and production defect Poor quality control on Chinese manufacturing sites Using poor thermal design High production cost Microsoft and The Xbox 360 Ring of Death
Opportunities:
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.
Threats:
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
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: Microsoft subcontracted 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 quality control 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
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, three flashing 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.
SITUATIONAL ANALYSIS:
EFAS Matrixes for Xbox 360:
Weight
0.15
0.75
Usage as entertainment hub for games, movies and music. 0.11 Grossing revenue through software sales & third party licenses. 0.08 Gathering live information about the consumers 0.12 Expending own low cost processors 0.05 2 0.1 1 0.12 4 0.32 3 0.33
Maintaining consumer relationship. Generating Cost cutting process but not losing sales.
Threats
0.15
0.45
Caused tough competition faced for video gaming console. Caused customers unwillingness to repeat purchase. Caused customer dissatisfaction about the product Caused poor quality products with technical flaws
0.07
0.07
Users are lacking confidence. Unwilling relationship with the subcontractors Total
0.18
0.72
0.09 1.00
0.18 3.04
Weight
Rating
Strengths
Strong brand image of Microsoft. 0.15 5 0.75 Increasing profit maximization through using technology Increasing Productivity. Diversified business area. Competitive advantage. Key to success.
Providing online support. Significant market share. Owned some most valuable brands within market.
2 3 1 4
10
Weaknesses Design and production defect 0.18 Poor quality control on Chinese manufacturing sites 0.13 Using poor thermal design 0.15 High production cost 0.07 Total 1.00 1 0.07 3.15 3 0.45 2 0.26 4 0.72 Reducing extra wages High pension and retirement benefits Introducing new routes Increase in training and recruiting cost
11
Internal Factors
Strengths (S) Strong brand image of Microsoft Providing online support. Significant market share. World leader in video gaming industry. Owned some most valuable brands within market
Weakness (W) Design and production defect Poor quality control on Chinese manufacturing sites Using poor thermal design High production cost
External factors
Opportunities (O) More than five million customer base Usage as entertainment hub Grossing revenue through software sales & third party licenses Gathering live information about the consumers Expending own low cost processors. Threat (T) 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
SO Strategies Using brand image to expand new customer base Improve game console with new feature by according to customers frame of mind Marketing valuable brands as a alternative entertainment
WO Strategies Lowering the production cost by using customized low cost quality processors Introduce proper quality control on all manufacturing sites Make the consoles more attractive and reliable bye using high-tech technology
ST Strategies Using brand image to make enough loyal customer group Introduce long term plan with technological advancement to protect and expand market share
WT Strategies Reducing system failure rate and providing quality after sale service Partnering with another manufacturer who are more experience in designing complex computer hardware
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using good material and deploying more research bodies mproving testing system improving production machineries
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