CASE STUDY

PROGRAMME Bachelor of Commerce in Supply Chain Management

MODULE Principles of Project Management

YEAR Two

INTAKE July2020 Semester two

TOTAL MARKS 20
Read the Case Study below and answer the questions that follow

Microsoft Xbox 360

When Microsoft rushed its video game console, Xbox, to market in November 2005 it had a one-year
advantage over Sony and Nintendo. By 2007 they had sold over 11.6 million units at prices between $279
and $479 … depending on the configuration.

Unresolved issues plagued the project from the beginning. When Journalists and reviewers were invited
to try the game in 2005, before it became available on store shelves, they encountered problems when
connecting it to the internet (N’Gai, 2007). Shortly after the game was introduced to the public, users
complained that that the console damaged game disks and that these disks could no longer be used
(Cliff, 2007). In 2005 Microsoft recalled the power cords concerned that they posed a fire hazard
(Wolverton and Takanashi, 2007). Then in December 2006, in an apparent response to these and other
issues, Microsoft extended the warranty from 90 days to one year.

But problems persisted. Blogs and forums complained about the “Red Ring of Death” referring to a string
of three lights that illuminate on the console when a serious problem is detected. One survey found that
the return rate was 33 percent (Cliff, E, 2007)

Then in July 2007, Robbie Bach, president of Microsoft’s Entertainment and Device Division, said that “In
the past few months, we have been having to make Xbox 360 console repairs at a rate too high for our
liking” (Associated Press, 2007) (Mintz, 2007). Shortly thereafter, Microsoft announced an extension of
the warranty from one to three years at an expected cost of $1 billion. This represented about $100 for
every Xbox sold since its introduction in 2005.

Later in the same month Microsoft announced that its top gaming executive, Peter Moore, was leaving
the company, but they denied that his departure was related to the Xbox’s engineering problems
(Wingfield, 2007)).

Lessons Learned
Perhaps the dominant lesson here is the trap called “conservatism” in which new data is largely ignored
to protect the status quo. Here, in the face of a continuous stream of product returns and customer
complaints, those who were responsible for the project were unwilling to acknowledge that the problem
was serious; that customer satisfaction and loyalty was deteriorating rapidly; that the product needed to
be redesigned; and that customer satisfaction needed to be addressed.

The sunk cost trap also played its part. In the sunk cost trap, a course of action is not abandoned because
considerable time or money has already been spent on the project, and those in charge are reluctant to
abandon the project or take steps to delay the project in any way. For the Xbox, considerable investment
in the product had already been made, sales were strong, and since the division had yet to turn a profit,
there was pressure to continue at any cost. Returning to earlier stages of design, issuing a recall for the
defective units, and replacing them with new units was apparently not a realistic option.

Question 1 (20 Marks)

1.1. Identify the problems that Microsoft encountered when it launched its Xbox 360 console. (5 Marks)

1.2. “For the Xbox, considerable investment in the product had already been made, sales were strong,
and since the division had yet to turn a profit, there was pressure to continue at any cost. Returning
to earlier stages of design, issuing a recall for the defective units, and replacing them with new units
was apparently not a realistic option.”
It is clear that Microsoft had to deliver the project on schedule; hence they could not recall the
defective units. Identify and briefly explain the theory that relates to the extract above. (5 Marks)

1.3. Successful completion of a project requires finishing the scope of work within budget and a certain
time frame whilst managing resource utilization, meeting quality expectations and managing risks.
All this must be done while assuring customer satisfaction. Discuss how Microsoft could have
managed project constraints to successfully deliver the Xbox 360 project. (10 Marks)
Assignment Format

 Word Limit: Your assignment (excluding index, cover page, list of references and appendices)
must not exceed 8 pages.
 Your assignment must include a table of contents page
 Text: Arial or Times New Roman, Font Size: 12, Spacing: 1.5 lines. All text must be justified at
each margin.
 Your answers must include theories, charts, tables, appendices or exhibits necessary to support
your analysis and recommendations.
 References – At least 7 academic sources of reference must be used. (These include
textbooks, journal articles and internet sources that are relevant to your field of study. Academic
sources do not include Wikipedia and blogs). The MANCOSA study guide must not be used as
a source of reference. You must include Reference list at the end of your assignment. Information
quoted/paraphrased from sources listed in your Reference list must be referenced in-text. The
Harvard system of referencing must be used.
 You MUST use theory/ literature to support your discussion/ observation and opinions.
 Ensure that readings are not merely reproduced in the assignment without original critical
comments and views.
 Students must proof read and edit their work prior to submission. Assignments must be free from
errors and of a professional standard.

The End