MANAGERIAL

COMMUNICATION - 3
Atlantic Computer: A Bundle of Pricing Options

COST PLUS STRATEGY ANALYSIS BY -

MADHUMITRAN(083)
MAHAK KAMRA (084)
MAITREYEE MUKHERJEE (086)
MANALI BIDKAR (087)
MASAYA SAHOO (088)
 INTRODUCTION
• Atlantic Computer, Inc., was the largest player in the overall computer
industry. The firm in general and its Server Division in particular had
come to be known for providing top-notch, highly reliable products,
and had developed a reputation for providing high quality, responsive
post sales assistance.
• Atlantic Computer is planning to launch Atlantic Bundle which
includes Tronn Server and PESA Software. Traditionally software are
launched for free, Jason Jowers is considering different pricing
strategies for Atlantic Bundle.
• Here is an analysis of Cost Plus Strategy which can prove to be
effective.
 COST PLUS PRICING STRATEGY
• Cost plus pricing is a method that determines the price of a product or service by using direct costs,
indirect costs, and fixed costs which are related to the production and sale of product and service.
This involves adding a markup to cover overheads and generate a profit.
WHY COST PLUS PRICING STRATEGY
• Simplifies pricing:- Calculating the overall cost of production for each server is simple making the
pricing process for the company easy. As a result, the business can set a fixed price for each server
depending on its production costs.
• Ensures profitability: the markup ensures that Atlantic Computers makes a profit on each server
sold, which is essential for the long-term sustainability of the company.
• Sets a standard for competition: Cost-plus pricing can serve as a benchmark for competitors to
follow, preventing price wars and maintaining a stable market for prices.
• It helps to cover variable costs and it ensures that Atlantic Computers is covering all of its costs and
not losing money on each sale.
• It also helps to cover the fixed cost with economies of scale.
 CALCULATIONS
Market demand of Basic Server of Atlantic
Particulars 2001 2002 2003 Total Demand Bundle
Market demand of Basic Server 50000 70000 92000 100000
80000
Atlantic Share 4% 9% 14%
60000
40000
20000
Atlantic Demand 2000 6300 12880 21180
0
2001 2002 2003

Particulars Values Working

Forecasted Sales( Tronn servers) 21180
Number of PESA Installations 10590 50% of 21180
PESA Software Development Costs 200000 Given
Cost of PESA per Installation 189 200000/10590
Cost of Tronn Server 1538 Given
Total Cost of Atlantic Bundle 1727 1538 + 189
Cost of 2 Atlantic Bundle 3454 1727 * 2
30% Markup 1036.2 .3 * 3454
Final Cost 4490.2 1036.2 + 3454
 THE INTERNAL STAKEHOLDERS
• The business head is concerned about whether the strategy chosen is profitable
or not and cost-plus pricing strategy ensures profitability as it involves 30%
markup.
• The sales manager is concerned about how much the company will be able to sell
while implementing a specific strategy. With a cost-plus strategy, the company
will be able to justify the pricing to customers and convince them that the
product is worth the cost. This involves highlighting the unique features and
benefits of the product, as well as comparing it favorably to the competition.
• Using the effectiveness of Tronn Server as its USP, cost plus pricing strategy will
enable the Atlantic Bundle to have a competitive advantage.
CONCLUSION
In conclusion, the case study highlights the importance of understanding customers'
needs and wants, as well as the importance of adopting a flexible pricing strategy that
takes into account both the value provided to customers and the company's profitability.

When implemented with forethought and prudence, Atlantic’s cost-plus pricing can lead
to powerful differentiation, greater customer trust, and steady, predictable profits for
the company.

The success of Atlantic Computers' cost-plus pricing strategy depends on the company's
ability to effectively communicate the value proposition of its Tronn servers to
customers and establish a strong brand presence in the market.

Atlantic computers can use cost-plus pricing to create and deliver the most enticing
value proposition of all. It becomes a cost leader, and its low costs, the resultant low
prices, and superior customer value become an integral part of its brand identity.
THANK YOU