Atlantic Computers: Case Analysis

Topics: Price, Competition, Cost-plus pricing Pages: 2 (336 words) Published: September 2, 2011
CASE ANALYSIS: ATLANTIC COMPUTERS-A BUNDLE OF PRICING OPTIONS SUBMITTED BY: KRITIKA JAIN PG20112055

Atlantic computers are the largest manufacturer of servers and other high tech products with a 20% market revenue share in the segment. The company plans to launch a basic server TRONN and software PESA due to growth in demand for basic servers. Important Details

* competitor: ONTARIO ZINK
* CAGR: 3%(BS segment)
* TRONN along with PESA works FOUR times more efficiently. * Value of 2 TRONNs = Value of 4 ZINKs
Four types of pricing strategies:
* Competition based pricing
* Cost plus pricing
* Charging only for TRON
* Value in use pricing
RECOMMENDATION:
The company should adopt COST PLUS PRICING with a price of \$2245.5 because: * Charging for PESA would increase its value and act as a key feature * Although revenues will not be the highest, but the possibility is that the customers might not be willing to pay a very high price as in case of value in use. * It has a 30% margin which means that the company will surely make 30% profit

CALCULATING PRICE IN EACH MODEL(* all calculations done based on assumptions and figures given in case) MARKET SHARE
| 2001| 2002| 2003| Total|
Basic server| 50000| 70000| 92000| 212000|
Market share| 4%| 9%| 14%| |
Share | 2000| 6300| 12880| 21180|

1. Competition based pricing
Price for 2 TRONN = 2 * \$2000 = \$4000
Price for 4 ZINK = 4 * \$1700 = \$6800
Acc to competition based pricing,
Price for 2 TRONN= \$6800
Price for 1 TRONN= \$ 3400

2. Charging only for TRONN
Price for 1 TRONN= \$2000

3. Cost Plus Pricing
total market share for 3 years= 21180
volume of market share with PESA (50%)= 10590
R&D costs = \$2000000
Per unit cost of PESA= \$2000000/10590 = \$189
Total price per unit of TRONN&PESA= \$2000+245.5= \$2245.5

4. Value in use pricing
Savings to CONSUMER (per unit)
On cost of TRON against ZINK=...