Atlantic Computer: a Bundle of Pricing Options

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Atlantic Computer: A bundle of Pricing Options

Problem Statement:
The key problem that Atlantic Computers are facing is the increasing market segment of Basic Servers, that is dominated by Ontario due to their pricing advantage. Due to this, Atlantic Computers are required to review their pricing and marketing strategy in order to stay competitive.

Situation Analysis:
Atlantic Computer, Inc., is the largest player in the overall computer industry and have been competing in the server market for 30 years. Up until now their main customers were large enterprises, buying their high-end performance servers, called Radia. However, through the rapid growth of the Internet a new segment as emerged for Basic Servers. This segment is expected to trigger a 36 % annual growth rate through 2003, compared to the High Performance Server segment, inducing only 3 % growth annually. Therefore it is important for Atlantic Computer, Inc., to adapt to their environment and the future to meet the increase in demand of Basic Servers, caused by the increasing need of basic computing capabilities by companies. These needs include performing simple, repeatable tasks, such as showing website information on the Internet. This segment of Basic Servers has long been dominated by Ontario Computer, Inc., who has concentrated solely on the low-end server market with its Zink product line. Through their operational excellence, Ontario has been able to cut several nonvalue-added costs and, therefore, have a pricing advantage over Atlantic Computer. Atlantics advantage, competing against Ontario’s Zink link with their Tronn software, was their PESA software tools that significantly increase the speed of the servers. Business customers of Atlantic Computers would receive the same level of performance by buying one Tronn loaded with the PESA, compared to buying four basic servers from Ontario. Therefore Atlantic Computers are faced with a several decision to gain a competitive...
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