ATLANTIC COMPUTERFIN (4)

8/8/2019 ATLANTIC COMPUTERFIN (4)

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ATLANTICCOMPUTERS

RAMPRASAD.M

DINESH.RDINA MICHELESOUNDARPREM KARTHIK

VIJAY MANICKAM


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GENESIS

A small computer business in the

Daytona Beach area since 1993

Manufacturer of Servers and High techproducts

Two types of servers High performanceand Basic servers


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CHARACTERS

NAME POSITION HELD

CHRIS MATZER HEAD,SERVER DIVISION

EMILY JONES DIRECTOR, R&D

HARRY FOWLER DIRECTOR,NEW PRODUCTMARKETING

JANSON JOWERS YOUNG PRODUCTMANAGER

JAIRO CADENA DIRECTOR,SALES


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Atlantic Ontario

Tronn---Basic server

Tronn with PESA performance equalto four basic servers

Business model-providing leading

technology via themost flexible andinnovative supplychain strategy

Zink---Basic server

Zink- performancelower relatively

Business model-operational

excellence driveout non value-added costs


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Situation faced by

Jason JowersCompeting against Ontario computers - The marketleader.

Pricing strategy for Atlantic Bundle particularly at atime when software tools like PESA are expected Free

To figure out prospective clients

Assess the reaction from stakeholders on proposedpricing of Tronn.


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MARKET ANALYSIS USING5C

s


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CUSTOMERS

Organisations that need basic

computing capability to perform

simple and repeatable tasks Potential market of 50000 units by 2001

and a 36% C.A.G through 2003

Small and Medium enterprise solutions Those who see value in the software tools

rather than as just part of a server


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Company

Largest player in the overallcomputer industry.

Reputation of providing high qualityand highly reliable products.

Focus on customer intimacy andproduct differentiation


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Competitors

Ontario computers Zink -current market share of

50% in the basic servermarket

Online sales

Other small vendors


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Context

The Emergence of Internet has paved

way for the Basic server segment

Considerable market potential forthe near future

Basic server and High performance server

are not considered to be substitutes


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Pricing strategies

Status-quopricing

Competitorpricing

Cost-plus

pricing

Value-in-

use pricing


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STATUS QUO PRICING

Giving PESA free of cost

Profit per server =$273.75

Net profit (for 3 years) = $28926585

ITEM COST (in $) PRICE(in $)

Tronn SERVER 1538 2000

PESA 2000000 0


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COMPETITION-BASED

PRICING

ITEM COST (in $) PRICE(in $)

ZINK 1214 1700

4 ZINK SERVERS 4856 6800

4 Zink servers = 1 Atlantic bundle

Profit per server =$5073.85Net profit (for 3 years) = $53724758.5


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COST-PLUS PRICING

Cost of PESA = 200000/10590 = $188.85

Cost of Tronn + PESA = 1538 + 188.85 = $1726.85

Price of Tronn+PESA (30%markup above costs)= $2245


Net profit (for 3 years) = $5487208.5

ITEM SOLD 2001 2002 2003 TOTAL

BASIC SERVER 50000 70000 92000 212000

TRONN SERVER 2000 6300 12880 21180

TRONN SERVER

(with 50%

attach rate)

1000 3150 6440 10590


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VALUE-IN-USE PRICING

ITEM ELECTRICITY

CHARGE (in $)

APPLICATION

SOFTWARE

LICENCE

CHARGE(in $)

LABOR(in $) TOTAL(in $)

4 ZINK 1000 3000 8000 12000TRONN + PESA 250 750 2000 3000

Savings = $900050-50 sharing of the saving gain with customers = $4500Price of Tronn = $2000


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VALUE-IN-USE

PRICING

(CONTD.) Price of 4 Zink servers =$6800

Price of Tronn + PESA =$6500

Price Savings =$300

Total Savings= 9000+300 =$9300


Net profit (for 3 years) = $50547658.5


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PROFITCOMPARISON

Status-quopricing

Competition-based pricing

Cost-pluspricing

Value-in-use pricing

$28926585 $53724758.5 $5487208.5 $50547658.5


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MATZERs REACTION

Initial reaction expected to be

negative since it is against Industrypractice

He has to be convinced for leverage of

PESA development


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SALES FORCE

REACTION To convince sales force aboutvalue-in-use pricing

Offer commission based on sales Enlightenment about savings when

compared to Ontario

Price comparison - $6800(4 Zink servers) Vs

$6500(Tronn server)


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PRICING OUTCOMES

Daytraderjournal.com

MINIMIZE(ACQCOSTS,POSESSION

COST)

PROCESSINGMANYINFO REQUESTS

SATISFIED(TRONN)

Look sharpadvertising

MINIMISEPSSESSION CISTS

POST SALLESSUPPORT

INFO READILY AVBLTO EMPLOYEES

SATISFIED(TRONN)

HGIDMM

MAX COMP SPEED

OUTSTANDINGCUSTOMER SUPPORT

FLEXI PAY

SATISFIED(RADIA)


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COMPETITORS REACTION

REDUCE THE PRICE by $75

FREE SERVICE

DEVELOP SOFTWARE SIMILAR TO PESA

THEY MIGHT FOLLOW BUNDLE PRICING


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CUSTOMERS

REACTIONCustomers may not be willing to pay apremium for a similar low performance

server

Sales force has to convince the customer

that the price is justifiable in the long run

Atlantics servers gets edge than its

competitors as server intensive applicationsin the low processing segment is gainingimportance


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ATLANTIC COMPUTERFIN (4)

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