Question

Two leading design firms, Astro Studios of San Francisco and Hers Experimental Design Laboratory, Inc, of Osaka, Japan, worked with Microsoft to design the Xbox 360 video game console. IBM, ATI, and Sis designed the Xbox 360 's hardware. Three firms Flextronics, Wistron, and Celestica- manufactured the Xbox 360 at their plants in China and Taiwan. Describe the roles of market coordination and coordination by firms in the design, manufacture, and marketing of the Xbox 360.

Short answer

Design, hardware, and manufacturing were coordinated by firms, primarily Microsoft, which directed and managed specific tasks while also utilizing market coordination for contracting purposes.

Step-by-step solution

Understand Market Coordination

Market coordination refers to how different independent firms or entities coordinate through market mechanisms, such as prices and contracts, without centralized control. Think of it as a system where supply and demand guide the actions of different companies involved.

Understand Coordination by Firms

Coordination by firms involves centralized decision-making within an organization. Firms employ managers to plan, organize, and control resources to achieve specific goals. Inside a firm, decisions are made by individuals or teams appointed to manage various tasks and no external market mechanisms are needed.

Identify Design Firms and Roles

Two design firms, Astro Studios and Hers Experimental Design Laboratory, worked with Microsoft on the design of the Xbox 360. This shows coordination by firms. Microsoft likely coordinated their efforts by giving them specific design requirements and feedback.

Identify Hardware Design Firms and Roles

Three other firms, IBM, ATI, and Sis, handled the hardware design of the Xbox 360. Their work with Microsoft also illustrates coordination by firms since Microsoft likely managed their contributions to the project.

Identify Manufacturing Firms and Roles

Flextronics, Wistron, and Celestica were in charge of manufacturing the Xbox 360 in their plants in China and Taiwan. Microsoft coordinated with these firms through contracts, specifications, and quality control mechanisms - again an example of coordination by firms.

Explain Overall Coordination

The entire process involved both market coordination and coordination by firms. However, primary coordination was done by firms (through Microsoft) directing specific roles and tasks to various design, hardware, and manufacturing companies. Market coordination played a role in terms of contracting and possibly negotiating prices or terms with these firms.

Key concepts

Market Coordination

Market coordination is about how different independent firms interact through the market to achieve common goals. It's like an orchestra where each musician plays their part without a conductor, relying instead on the music sheet and each other.
In the case of the Xbox 360, market coordination is seen in how Microsoft worked with multiple independent companies. For example, when Microsoft negotiated contracts and terms with Astro Studios and Hers Experimental Design Laboratory, they used market mechanisms.
This style of coordination relies on:

• Supply and demand
• Prices
• Contracts

Without centralized control, the companies worked together to meet the requirements set forth. Essentially, everyone knew their role, and what was expected of them, which facilitated smooth cooperation.

Coordination by Firms

Coordination by firms happens when a single firm or organization controls and directs the activities needed to achieve a common goal. This is more like a conductor leading an orchestra.
Microsoft, acting as the coordinator, managed the design and manufacturing of the Xbox 360 by setting guidelines and requirements and ensuring that every partner firm met those standards.
Here’s how coordination by firms manifested in the Xbox 360 project:

• Microsoft provided specific design requirements and feedback to Astro Studios and Hers Experimental Design Laboratory.
• For hardware, Microsoft coordinated with IBM, ATI, and Sis, setting clear expectations and oversight.
• The manufacturing process was monitored and controlled through contracts, quality specifications, and periodic checks with Flextronics, Wistron, and Celestica.

Microsoft took on a central role, overseeing and integrating all parts of the project, ensuring each firm's work aligned with their overall strategy.

Design and Manufacturing Roles

Understanding the roles of different firms in the design and manufacturing process of the Xbox 360 is crucial. Let’s break it down:
Design: Astro Studios and Hers Experimental Design Laboratory were responsible for the visual and ergonomic aspects of the Xbox 360. They crafted how the console looked and felt, ensuring it would attract and please customers.
IBM, ATI, and Sis focused on the hardware design. They developed the internal components like the CPU and GPU, which are essential for the console's performance.
Manufacturing: Flextronics, Wistron, and Celestica took the designs and blueprints from IBM and the design firms to build the actual gaming consoles. Their role required precise manufacturing processes to meet the quality and performance standards set by Microsoft.
Each firm had a distinct and critical role. Good coordination by Microsoft ensured all parts came together seamlessly to create a successful product.