| Grahamhsu said: ^Agreed however that still doesn't change my stance on that there is a chance Microsoft did see this coming and try to plan a strategy to turn the recession to their favor, but had no idea of the impact such strategy would create. However, I'm just a violin student at a music conservatory so when it comes to real economics I don't know much at all and even less about businesses in general. Being an economist yourself is it common for companies to make such moves or is it considered too big a risk/too much unknown? |
It is common for firms to lower price in a recession because people are less willing to spend money. You see a lot of sales and discounts when the economy is going poorly. As a result I would say that Microsoft's move wasn't really strategic.
However, what is interesting here is that neither of Microsoft's competitors were going to lower price - Nintendo because they already face excess demand (the Wii is if anything underpriced) and Sony because they are already selling at a significant loss. It is possible that Microsoft realised this and decided to take advantage of the fact.
Ultimately it's hard to say whether it's a strategic move or not. A lot of it depends on just how much Microsoft knew and when they decided they were going to cut the price. But either way it appears to have worked out well for Microsoft.
