atlantic
Atlantic Computers
As Jason Jowers, product manager at Atlantic Computers, I am responsible for developing the pricing strategy of the new Atlantic Bundle. Atlantic Computers is a large manufacturer of servers and other high tech products. In our server industry, there are two main market segments and until now our company has only focused on one. The largest market segment is devoted to the high performance servers that traditionally are meant to run complex application such as scientific models, creating custom graphics, and handle supply chain management applications. Atlantic Computers has been a strong player in this segment of the market capturing 20% of the revenue market share. The other segment in the industry, which has emerged with the growth of Internet, is the basic server market that represents approximately 20% of the demand for servers in 2001 and will grow to 30% in the next three years. The main player in this segment is Ontario that represents 50% of the market shares. Atlantic Computers has not been present in this segment of the industry but wants to enter this part of the business with its new product the “Atlantic Bundle”. The R&D team has developed a new basic server “Tronn” combined with a software tool called “PESA” that enable the server to perform up to four times faster than the competition’s products. The development costs for the “PESA” software amount to $2 000 000. The task of devising a pricing strategy that would allow us to compete directly with Ontario has fallen to me and I must chose which strategy is the best for Atlantic Computers. I have come up with four different options and a recommendation for your review. Also, I have included my thoughts on how senior management is likely to react as well as our customers and direct competitor.
Option 1: Stick with the company tradition by charging only for the hardware and give the PESA software tool for free.
Under this option the price of the Atlantic Bundle
As Jason Jowers, product manager at Atlantic Computers, I am responsible for developing the pricing strategy of the new Atlantic Bundle. Atlantic Computers is a large manufacturer of servers and other high tech products. In our server industry, there are two main market segments and until now our company has only focused on one. The largest market segment is devoted to the high performance servers that traditionally are meant to run complex application such as scientific models, creating custom graphics, and handle supply chain management applications. Atlantic Computers has been a strong player in this segment of the market capturing 20% of the revenue market share. The other segment in the industry, which has emerged with the growth of Internet, is the basic server market that represents approximately 20% of the demand for servers in 2001 and will grow to 30% in the next three years. The main player in this segment is Ontario that represents 50% of the market shares. Atlantic Computers has not been present in this segment of the industry but wants to enter this part of the business with its new product the “Atlantic Bundle”. The R&D team has developed a new basic server “Tronn” combined with a software tool called “PESA” that enable the server to perform up to four times faster than the competition’s products. The development costs for the “PESA” software amount to $2 000 000. The task of devising a pricing strategy that would allow us to compete directly with Ontario has fallen to me and I must chose which strategy is the best for Atlantic Computers. I have come up with four different options and a recommendation for your review. Also, I have included my thoughts on how senior management is likely to react as well as our customers and direct competitor.
Option 1: Stick with the company tradition by charging only for the hardware and give the PESA software tool for free.
Under this option the price of the Atlantic Bundle