Good Essay On Microsoft Launches New Product

The Microsoft has launched its newest product, a new tablet named ‘Surface 3’ on 31st March, 2015. The company claims that it ‘thinnest and lightest’ of all its previous tablets. The price is also amazingly low at $500. Its lower price compared to the previous models like the Surface Pro 3 which was price at $800, is aimed at the students and also for home use. Other than the price it is also has other qualities to appeal to the consumers. The new tablet uses Windows 8.1 which was absent in the previous models like Surface 2 and Surface RT. In addition to that the operating system can be upgraded to Windows 10 once it is available in the market. If we analyse this new launch from a microeconomic viewpoint we can find that Microsoft has learned from the utter failure of its previous model the Surface RT and has used some marketing and product designing strategies that appeals to a large section of the consumers. First of all, the lower price will mean a higher demand as we move down the demand curve. Secondly, the improved quality, in physical terms-being thinner and lighter and the use of a smarter OS like Windows 8.1 will increase the consumers’ preference for the product which will be reflected in the right ward shift of the demand curve leading to an increase in demand. These two outcomes are depicted in figure 1 and 2.
Figure 1
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Q
Figure 2
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D1
D0
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In figure 2 we can see that the demand curve has shifted from rightwards from D0 to D1 due to product innovation.
Now, the question may arise that, how the company is keeping the price low. Is it compromising with its profits to get more market power? In fact the company has been successful in reducing the cost of the product in two intelligent ways. First, the screen size has been reduced from 10.8 inch from the 12.1 inch that the previous models had . This also implies that the size of the keyboard will be smaller. But the author feels that in spite of the smaller size of the keypad it is still more spacious than a notebook. The keyboard and trackpad can be purchased separately at $130. The second cost reducing factor is the processor. The new tablet uses Intel’s AtomX7 which has a lower cost compared to the Corei3 processor used by the Surface pro3. The reduction in cost can be depicted as a fall in the Average Variable Cost as shown in figure 3. The lower cost along with a higher demand will mean a higher profit for the company.
It should also be noted that those who are not comfortable with a low powered processor can get Surface 3 with 128GB storage and 4GB RAM which is priced at $600. So it will have some appeal to the professionals as well.
Figure 3

Cost AVC1

AVC0
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In figure 3 we depict the fall in the average cost brought about by the lowering of cost from the smaller screen size and low powered processor. The average cost has fallen from AVC0 to AVC1.
The product has a competitive edge over the MacBook, its close competitor with a battery life is 10 hours and MicroUSB cord. In an oligopolistic market setting this is going to give Microsoft a greater market share.

Works Cited

Stern, Joanna. "Surafce 3: Microsoft's Budget Tablet Gets Full Windows 8.1." Wall Street Journal 31 March 2015. English.