Indian Institute of Management

Indore

Atlantic Computer
Case Submission
Group- 1

Amandeep Prasad
Harshvardhan
Kartik Bhalla
Naman Badami
Rounak Agarwal
Saumya Gupta
Saumya Jalan
Shriya Kaul
ATLANTIC COMPUTER: A BUNDLE OF PRICING OPTIONS

Identification of the problem

Atlantic Computers Inc. is the largest player in servers and other high-tech products market. Radia was
its high-end performance servers and through it, it had developed a reputation of high quality,
responsive post sale assistance. Atlantic was a strong player and had captured 20% of the revenue
market share. Tronn was the new server in its Basic category and along with PESA (Performance
Enhancing Server Accelerator), it would allow Tronn to perform up to 4 times faster than its standard
speed. Thus, they had planned to bundle the product and now the big question in hand was the price of
the bundle

Analysis of the situation

There are four main types of pricing strategy.

1. Charging only for hardware as per the company traditions and giving PESA software as free

According to the standard followed in Atlantic Computers, they never used to charge anything
for software. In this approach they will offer PESA software for free. In this case the prices would
be comparable to its competitors.

2. Competitive Pricing-Charging price equivalent to 4 Zink servers

In this approach, we use the price of the competitors as benchmark to decide price of Tronn.
This would result in more profits for the company as well as from the point of view of
consumers since Tronn is equivalent to 2 Zink servers(conservative), 4 Zink servers (Aggressive).

3. Cost based Approach- Pricing PESA based on its development costs

In this approach we add the direct, indirect, fixed costs associated with a product and converting
it to per unit basis.

4. Value based pricing

In this approach, we calculate the benefits that the product gives to the customers and for this
case we are assuming 50-50 sharing of the savings gain with the customer.

Recommendations

Based on the attached analysis, we will be adopting the value-based pricing. With Option 1, we
will break even in third year of sales and there will be no value addition because of PESA to the
company’s profits. For Option 2, competition based pricing will not be a good option since
Ontario Zink is an established player in the market who can further start a price war. In the 3rd
approach, the profits are not as much as compared to Option 4. So we will be going with the
value based pricing wherein the profits are extremely high.