r505Matt said:
@theprof00, there's something you are missing though, Microsoft responds to Sony's price drops because they don't need to move first. I'm sure they have analysts that are smarter than anyone here that have figured out that they obtain higher profit margins by waiting with price cuts. I'm sure they could easily handle selling everything MUCH cheaper, but they have no need to. That does NOT mean Sony isn't in a price war. Sony needs to cut prices just to be competitive. Is that not a price war? |
Sony needs to cut prices to appeal to the consumer, not to push MS out of the way.
By cutting price, MS is creating the atmosphere of a price war. They want the consumer to look at the initial cost, instead of the value. But you're right, it is smart to return price cut with price cut. But at the price Sony was setting, MS was dropping their price even further. It's not like they were matching the pricing, they were outdoing it. That is in essence, a price war strategy.
Sony has yet to sell a console for cheaper than the cheapest MS console.
Consider as well, that MS needed to push Sony out of the way because of the sheer amount of brand recognition and dominance Sony has had over the last couple generations. There are several ways to enter a competetive market and be successful, and one way, is to take big initial losses in order to grow your base. That is what MS is doing. Yes, MS is taking losses at the most opportune times (in retaliatory price cutting) but that's only standard business. When there is increased competition, you must increase competition. Just because it is standard business does not mean that it isn't a price war.
It's a fine line and no doubt confusing, but sony is dropping price to reel in consumers who are on the fence, and MS is dropping price "turn" new customers. There are numerous people who wanted to buy a ps3 at launch but could not afford it.
