Scribd Logo
Upload

Welcome to Scribd!

  • 67 views

    Atlantic Computer Sec-B

    Uploaded by

    Achyut Murarka
    Atlantic Computer is developing a pricing strategy for a new server bundle called the Atlantic Bundle. The bundle includes their high performance Tronn server loaded with the PESA software. The PESA software allows the Tronn server to provide the same level of performance as 4 basic servers from their main competitor, Ontario Computer. The document analyzes 4 potential pricing strategies - status quo pricing, competition based pricing, cost-plus pricing, and value-in-use pricing. It recommends adopting a value-in-use pricing strategy that shares 50% of the customer's savings from reduced costs. This approach achieves break even sales within one year and provides the highest profit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Atlantic Computer Sec-B

    Uploaded by

    Achyut Murarka
    67 views13 pages
    Atlantic Computer is developing a pricing strategy for a new server bundle called the Atlantic Bundle. The bundle includes their high performance Tronn server loaded with the PESA software. The PESA software allows the Tronn server to provide the same level of performance as 4 basic servers from their main competitor, Ontario Computer. The document analyzes 4 potential pricing strategies - status quo pricing, competition based pricing, cost-plus pricing, and value-in-use pricing. It recommends adopting a value-in-use pricing strategy that shares 50% of the customer's savings from reduced costs. This approach achieves break even sales within one year and provides the highest profit.

    Original Description:

    Atlantic computer case

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Atlantic Computer is developing a pricing strategy for a new server bundle called the Atlantic Bundle. The bundle includes their high performance Tronn server loaded with the PESA software. The PESA software allows the Tronn server to provide the same level of performance as 4 basic servers from their main competitor, Ontario Computer. The document analyzes 4 potential pricing strategies - status quo pricing, competition based pricing, cost-plus pricing, and value-in-use pricing. It recommends adopting a value-in-use pricing strategy that shares 50% of the customer's savings from reduced costs. This approach achieves break even sales within one year and provides the highest profit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    67 views13 pages

    Atlantic Computer Sec-B

    Uploaded by

    Achyut Murarka
    Atlantic Computer is developing a pricing strategy for a new server bundle called the Atlantic Bundle. The bundle includes their high performance Tronn server loaded with the PESA software. The PESA software allows the Tronn server to provide the same level of performance as 4 basic servers from their main competitor, Ontario Computer. The document analyzes 4 potential pricing strategies - status quo pricing, competition based pricing, cost-plus pricing, and value-in-use pricing. It recommends adopting a value-in-use pricing strategy that shares 50% of the customer's savings from reduced costs. This approach achieves break even sales within one year and provides the highest profit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Atlantic Computer

    A Bundle of Pricing
    Problem Statement

    To develop the pricing strategy for the Atlantic


    Bundle.
    To take into consideration :
     Which businesses are most likely to benefit from new offering
     How customers are likely to react
     How competitors are likely to respond to recommended pricing
    strategy
    Background

     In server market for 30 years ; high end performance servers called Radia
     Strategy based on Customer Intimacy and product differentiation
     Martzer, head of server division : Internet had yielded a market for low end
    systems.
     Tronn, with PESA Software, 4 times faster than standard speed, designed to
    make frequently requested information easily accessible.
    Competitor Analysis :
    Ontario Computer Inc
     Manufactures only low-end server market, Zink Product line
     50% revenue market share in basic server market
     Competed largely on price as business model was based on operational
    excellence
     Atlantic’s Tronn competed directly against Ontario’s Zink

    *Beta Test – Exhibit 2*


    Business customer receive same level of performance by one Tronn loaded
    with PESA as compared to buying 4 basic servers.
    Major Benefactors : Web-Server and File-Sharing application Segments
    Factors Influencing Pricing Strategy

     Traditional focus on hardware


     Rely upon cost-plus pricing analysis
     Careful consideration of customer segments
    • Importance of conveying savings
    o First order (fewer servers)
    o Second order (electricity charges, software license fees, labor costs)
    Alternatives

     Status-Quo Pricing : Stick with company tradition


     Competition Based Pricing : Charge price equal to 4 Ontario Zink servers
     Cost-plus Pricing Approach
     Price based on value-in-use pricing
    Status-Quo Pricing

     Atlantic Computers will sell Tronn at the price of $2000 with PESA software
    Tool free.

    Price of one Tronn Server(in $) 2000


    Cost per Server (in $) 1538
    Profit per Unit (in $) 462
    Fixed Cost on PESA R&D (in $) 2000000
    Break-Even Sale Target to cover 4329 units
    Fixed Costs
    Competition Based Pricing

    Alternative 2 : 1 Tronn Servers Vs 4 Zink Servers


    Alternative 1 : 2 Tronn Servers Vs 4 Zink Servers

    Price of 1 Tronn Server = Price of 4 Zink server


    Price of 1 Tronn Server = Price of 4 Zink server / 2
    = 4*1700
    = (4*1700)/2
    = $6800
    = $3400
    Cost of 1 Tronn Server = $1538
    Cost of 1 Tronn Server = $1538
    Contribution per unit = $5262
    Contribution per unit = $1862
    Break Even Sales = 381 units
    Break Even Sales = 1075 units
    Cost-plus Pricing Approach
    Year Forecasted sale Percentage Forecasted sale Forcasted sale of
    in the year for share of Tronn of Tronn (with Tronn with PESA
    basic category (Atlantic and without PESA
    (industry figure) Computers) software)
    2001 50,000 units 4% 2,000 units 1,000 units
    2002 70,000 units 9% 6,300 units 3,150 units
    2003 92,000 units 14% 12,880 units 6,440 units
    Total 212,000 units 21,180 units 10,590 units
     Total R&D expense on PESA software = $2,000,000
     R&D expense per unit= ($2,000,000/10,590units)= $189
     Total Cost per Unit= $1,538+ $189= $1,727
     Markup= 30%= $518
     Total Price= $2,245
     Contribution= $2245- $1538= $707
     Units required to be sold for break-even= 2,829
    Value-in-use pricing
    SL Particulars 2 Tronn Server 4 Zinc Server
    No
    1 Original Selling Price $ 4000 $6800
    2 Operational $ 500 $ 1000
    Expenses(Electricity)
    3 Software License Cost $ 1500 $ 3000
    4 Total Operational Expenses $ 2000 $ 4000
    5 Saving Achieved $ 4800
    6 50 % Sharing of savings $ 2400
    7 New Selling Price ( Original $ 4400
    Selling Price of 1 server +
    50% Sharing)
    8 Contribution per unit (S.P – = $ 4400 – $1538
    V.C) = $ 2862
    9 Break-Even Units 697
    10 Break-Even Time < 1 year
    Comparison of Alternatives
    Option Selling Cost Contributi Total Fixed Cost Profit Break- Year
    Price on Per Unit Contribution even of
    units Break
    -
    even
    1 $2,000 $1,538 $462 $4,892,580 $2,000,000 $289,2580 4,329 2003
    2 (Alt1) $,3400 $1,538 $1,862 $19,718,580 $2,000,000 $17,718,580 1,075 2002

    2(Alt $,6800 $1,538 $5,262 $55,724,580 $2,000,000 $53,724,580 381 2001


    2)

    3 $,2245 $1,538 $707 $7,487,130 $2,000,000 $5,487,130 2,829 2002


    4 $,4400 $1,538 $2,862 $30,308,580 $2,000,000 $28,308,580 697 2001
    Recommendations

     Atlantic should prefer Value-In-use Pricing approach as Break even is


    achieved within one year of launch and huge profit is obtained. Also the
    price is comparable to current market standards.
     PESA software is a patented software so if competitors are to compete on
    same efficiency they have to come up with a new software like this and it
    will take a long time
    “
    Thank You
    Achyut Murarka
    ”
    Anurag Lohokna
    Himanshu Dixit
    Apoorva Chaudhary
    Anubhav Rana
    Aashna Srivatsava
    Harshit Sharma
    Usaid Md.

    You might also like