Case Analysis - Atlantic Computer – a Bundle of Pricing Options

Cost-plus pricing , Strategic management

Case Analysis - Atlantic Computer – A bundle of pricing options

Introduction – Atlantic computer is the largest player in the hi-tech IT hardware industry and a major player in the server market. Based on the fast growth of the internet and with it the proliferation of corporate websites and file sharing systems, huge demand is predicted in the basic server segment market over the next few years. In order to make the most of this opportunity, Atlantic has come put with a new product called Tronn, which when combined with the PESA software, would far outperform any of the comparable products available in the market. Atlantic now has to come up with an effective pricing strategy to successfully capitalize on this opportunity and at the same time overcome strong competition from Ontario Computers, the market leader in the basic server segment.

Pricing and positioning of the Atlantic bundle – To make an informed decision regarding the pricing decision the Atlantic bundle, below is an analysis that calculates the pricing of the Atlantic bundle based on the cost of each individual component that goes into the overall solution that the customer is looking for.

Apart from the onetime cost of procuring the server and the software licenses, the total cost of maintaining the server includes the cost for electricity, cost of the system administrator. Also all these costs are dependant of the total number of servers that are running in the organization. Based on exhibit 1 and 3, these costs are shown below

|Input information (From exhibit 1 and 3) | |Selling Price of 1 Atlantic Server |2000 | |Selling Price of 1 Ontario Server |1700 | |Development cost of PESA Software |2000000 | |Administrator Annual Cost for 40 basic servers |80000 | |Electricity cost per server...
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