Atlantic computers are the largest manufacturer of servers and other high tech products with a 20% market revenue share in the segment. The company plans to launch a basic server TRONN and software PESA due to growth in demand for basic servers.
* competitor: ONTARIO ZINK
* CAGR: 3%(BS segment)
* TRONN along with PESA works FOUR times more efficiently.
* Value of 2 TRONNs = Value of 4 ZINKs
Four types of pricing strategies:
* Competition based pricing
* Cost plus pricing
* Charging only for TRON
* Value in use pricing
The company should adopt COST PLUS PRICING with a price of $2245.5 because:
* Charging for PESA would increase its value and ...view middle of the document...
Case Analysis • Atlantic Computer is a manufacturer of servers and high-tech products. • Currently there 2 market segments: Traditional and Basic server markets. • Atlantic is a market leader in traditional market with its product Radia, which is a premier product. • Basic market is a new market and is a fast growing one. • For basic market, Atlantic has developed a server Tronn. Also Atlantic has developed a software tool PESA, Performance Enhancing Server Accelerator. Atlantic Computer Analysis- Group3
• 3. Case Analysis. Contd… • PESA enhances the Tronn server’s speed by 4 times from its normal speed. • Atlantic’s main competitor in basic market segment is Ontario, which commands 50% market share with its product Zinc. Atlantic Computer Analysis- Group3
• 4. Objective • The pricing strategy for the Atlantic bundle, which is Tronn server with PESA tool, need to be determined. • There are 4 options available. 1. Atlantic Computers can stay with the status quo and provide PESA as free with Tronn server. 2. It can choose competitive based pricing, which is charging customer to 4 times Ontario Zinc servers. 3. Arrive at price by cost-plus pricing. 4. Arrive at price based on value-in use pricing. • Also other questions regarding product’s target market, competitor’s and customer’s reaction need to be answered. Atlantic Computer Analysis- Group3
• 5. Option-1 • This option include charging for Tronn server only and give PESA tool for free. • Cost Of Atlantic bundle = $2,000 • Atlantic will have to forego the amount of R&D investments done in PESA software here. This amounts to $20,00,000. Atlantic Computer Analysis-Group3
• 6. Option 2 • Competition based pricing. • Conservatively 2 Tronn servers should be equal to 4 Zinc servers. Aggressively 1 Tronn server will be equal to 4 Zinc servers. • Price of 4 Zinc server = 1700*4 = $6,800 Conservative Aggressive Price of Atlantic Bundle $3,400 $6,800
• 7. Option 3 • Cost-plus pricing. • Expected sales in 3 years=(4*50000+9*70000+14*92000)/100 • Cost of Tronn server = $1,538 Atlantic Computer Analysis- Group3 Value Remarks Expected sales for Tronn servers(units) 21180 Expected number of PESA installations 10590 (50% of 21180) Cost of PESA per installation 189 (2,000,000/10590) Total cost of Atlantic bundle 1727 1538+189 30% mark-up 518.1 0.3*1727 Final cost 2245.1 1727+518.1
• 8. Option 4 • Value-in use pricing. •...