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Atlantic Computer Case


Study
Marketing II Assignment

Group 17
AMITESH PRIOLKAR
(2009009)

MANISH

ARORA (2009022) NEELAY


THALY (2009026)
SAGAR KHICHADE
(2009040)
ALOK SHETTY (2009047)
SIDDHARTH CHAKU
(2009048)

Case Issue
Develop a pricing strategy for Atlantic bundle - the new Tronn server
and the PESA (Performance Enhancing Server Accelerator) software tool
before SME trade show

Company Overview

Atlantic Computers is a manufacturer of Servers and High-tech

products
Jason Jowers joined the Company four months back and he was
responsible for the pricing strategy of the Atlantic Bundle i.e (A

package of the Tronn server and PESA software tool)


The Tronn was developed mainly for the emerging US market

opportunity for basic web servers


The Performance Enhancing Server Accelerator (PESA) would
allow Tronn to perform four times faster than its usual speed for

standard procedures and hence the bundling made sense


Existence of 2 market segments - High Performance and Basic

Servers
Atlantic has 20% market share in High Performance Servers with

Radia being premier product over 30 years


An emerging market for basic servers is coming up in the late

1990s
Decided to introduce the Basic server into the market by 2000 with
the belief that it wont be seen as a substitute of the High
Performance Servers

Advantages of PESA & Tronn

PESA will improve Tronn speed by 4 times


Need to purchase fewer servers
Lower annual electricity charges
Less software licensing fee

Less labor costs


Customer segments which will gain advantage by using PESA
Customers in web server & file sharing application segments

Two market segments

High
performanc
e servers
Basic
Servers

Segment
size

Projected
Projected
st
demand(1
demand(ne
yr)
xt 2 yrs)

Atlantic
Market
share

Largest

200000 units

3% annually

20%

50000 units

36%
compound
annual growth

Ontari
o
Market
Share

Zink
50%

Competitor:

Ontario Computer Inc.


Majority sales generated by online trade.
Business model based on operational excellence so drove out
many non value-added costs so could compete largely on price.

Customers

Sample Web Server Basic Server (New SME) Customer

This customer will be the target customer as they stand to


benefit the maximum from Tronn with PESA

Sample File Sharing Basic Server (New SME) customer:

As computing power without PESA is same as the competitors, pricing


will have to be considered in this case. PESA is not giving any added
advantage for graphical application.

Sample Heavy computing application Customer:

As computing power without PESA is same as the competitors pricing


will have to be considered in this case. PESA is not giving any added
advantage for high computing application.

Available options for pricing strategy:


A. Status quo pricing

Offer PESA free of charge, price Tronn at $2000.


Loss of $20,00,000 spent on developing PESA
Product may seem equivalent to Ontarios Zink, and will have to
compete for market share.
Not a very good option.

B. Competition based pricing

Zinks 4 servers = 1 Atlantic Bundle


Zinks price - $1700, so Atlantic Bundles price = 1700*4 = $6800
This price is very high than competitors product Zink, and
customers may not buy servers as per projection
Not a very good option.

C. Cost plus pricing


Considering market is growing at a compounded rate of 36%, the
figures have been calculated accordingly

Cost of 1 Tronn server - $1538


Cost of developing PESA $2000000.
So if we add these costs, total cost for Atlantic Bundle will be more
than $1538.

Cost of 1 Zink server - $1214


So even cost plus pricing will be not very encouraging for Atlantic

Case3: Cost plus pricing


Total No. of Tron servers sold in 3 years
Total No. of Tron servers sold in 3 years (with PESA)(50%
attach rate)
Cost of PESA per server (in $)
Price (without PESA)(in $)
Price (with PESA)(in $)

21068
10534
189.8
6
1999.
4
2246.
22

D. Value in use pricing

Atlantic Bundle needs to be projected as a new product with high value


addition one basic server with 4 times speed
Additional savings can be shown to customers by comparing 4 Zink server
costs with 1 Atlantic Bundle cost.

Pricing Strategy for DayTraderJournal.com


We recommend Value based approach as it would lead to:

Lower acquisition cost - $5900.00


Lower possession cost
High speed processing
Savings - $3900.00

Pricing Strategy for Look Sharp Advertising


We recommend Value based approach as it would lead to:

Lower possession cost - $1000


Make highly requested information amongst employees readily

available
Availability of top notch post sales support

Pricing Strategy for HGIDMM


We recommend Value based approach as it would lead to:

Capable of maximizing speed of mathematical computations


Availablity of all round support
Flexible payment terms
Savings - $4800.00

Recommendations for Cadenas sales force


The sales force needs to be trained to sell products on the basis of the
following points

Focus on the value of the server to the customer

Performance especially with PESA software tool

Emphasize on the lower acquisition and possession costs

Ensure excellent after sales service for customers

Reaction of Zinks management


In the Short Term

Zinks management might reduce the price of its server

In that case, Atlantic can charge according to the cost plus


approach and show the savings ($2,611) to the client i.e Zinks
price can fall maximum upto their costs of $1214 countering
Atlantics cost of $2246. But since their 4 servers are needed,
the total cost for Zink equals 1214*4 = $4856 on which Tronn
still earns a saving of $2611.

In the Long Term

Zinks management may come up with an identical software

Atlantic can provide the PESA software free in that case

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