Atlantic Computer: A bundle of Pricing Options

Topics: Pricing, Marketing, Price Pages: 8 (1076 words) Published: December 3, 2013

Atlantic Computer: A bundle of
Pricing Options

Group 3
MBA Class of 2014
Alma Graduate School

 Overview
 Issues
 Analysis
 Recommendations
 Strategic Implications

Atlantic Computer has developed a new Tronn server
and PESA software tool known as Atlantic Bundle and
needs the right market price strategy for this product.
 The challenge is to attract customers and outcompete
direct and main competitors in terms of prices,
performance efficiency, reliability and quality.
 The main purpose and focus of this report is to provide
a solution to the above challenge by coming up with the
right pricing strategy.
 A detailed quantitative, qualitative and other factors such as competition and customer demand has been analyzed
in this report and recommendations have been proposed.

The Tronn server has been developed specifically to
meet an emerging U.S market place opportunity of
Basic Server users. Tronn computer is to be sold with
the specific PESA software to boost performance
 The basic market segment was dominated by the main
competitor, Ontario which claimed a revenue market
share of 50% with its product line, Zink
 Atlantic Company current policy is to give software to
customers for free upon purchase of servers
 However now a pricing strategy needs to be chosen

charge only for the hardware and give the PESA software tool for free
 charge a price equal to what the customer would pay for four Ontario Zink servers
 charge a price based on cost-plus approach for PESA
 charge a price based on value-in-use pricing.

Product and Bundle

Current product of Altantic is the Radia, which is a leading product in the high performance servers market.
Atlantic has developed a new server called Tronn and a
Performance Enhancing Server Accelerator, PESA, which will
enhance the Tronn server’s speed by 4 times its normal
The company aims to determine a pricing strategy for the
‘Atlantic bundle’ which is Tronn server plus PESA tool.


Atlantic‘s main competitor in the basic server market segment, Ontario’s Zink, performs at approximately the same level as Atlantic’s Tronn without PESA
Also, Ontario’s business model enabled the company to drive out non-value added cost which allowed it to competed fiercely on price.
Other competitors in the basic server market composed of
many small scale vendors.

Price Models
 Model-1: Status Quo based on free software with hardware  Model-2: Competitive pricing based on Zink’s price folded 4 times  Model-3: Cost-plus based on the COGS for hardware and software R&D spread over 3 years

 Model-4: Value in use approach based on sharing profit with customer
Break-Even Point
 For model-1 : 3rd Year, but selling 4,329 units would be tough  For model-2: 1st year, but price of $6800 is too high
 For model-3: 2nd year, with an attractive price of $2,244 giving 4 times performance than the nearest competitor priced at $1700  For model-4: 1st year, but a price of $3,500 would need justification and investment on advertisement and brochure


Market Research

2 markets segments: High
Performance and Basic
Atlantic captured 20%
revenue market share in the
High Performance segment
Basic segment demand
about 50,000 units, growth
rate of 36% through 2003
High Performance demand
200,000 units, growth rate
3% annually

Target Segment

Target Basic Server
Users for the Tronn
The targeted segment
used the server for
simple tasks like file
sharing and web servers
Business targeted will be
Small and Medium Size

Consumer behavior
 Consumers dedicate their basic servers to one
 Key buying criteria for consumers were minimizing...
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