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ATLANTIC COMPUTER PGPM912 – Div B – Group 3 Sandeep Bharihoke


M. Farhan Khan Munish Kumar Piyush Audichya Madhuparna Das Ritesh
Ranjan Vijay Aggarwal Atlantic Computer Analysis-Group3 MARKETING
-1 CASE ANALYSIS
2. 2. Case Analysis • Atlantic Computer is a manufacturer of servers and
high-tech products. • Currently there 2 market segments: Traditional
and Basic server markets. • Atlantic is a market leader in traditional
market with its product Radia, which is a premier product. • Basic
market is a new market and is a fast growing one. • For basic market,
Atlantic has developed a server Tronn. Also Atlantic has developed a
software tool PESA, Performance Enhancing Server Accelerator.
Atlantic Computer Analysis- Group3
3. 3. Case Analysis. Contd… • PESA enhances the Tronn server’s speed by
4 times from its normal speed. • Atlantic’s main competitor in basic
market segment is Ontario, which commands 50% market share with its
product Zinc. Atlantic Computer Analysis- Group3
4. 4. Objective • The pricing strategy for the Atlantic bundle, which is
Tronn server with PESA tool, need to be determined. • There are 4
options available. 1. Atlantic Computers can stay with the status quo
and provide PESA as free with Tronn server. 2. It can choose
competitive based pricing, which is charging customer to 4 times
Ontario Zinc servers. 3. Arrive at price by cost-plus pricing. 4. Arrive at
price based on value-in use pricing. • Also other questions regarding
product’s target market, competitor’s and customer’s reaction need to
be answered. Atlantic Computer Analysis- Group3
5. 5. Option-1 • This option include charging for Tronn server only and give
PESA tool for free. • Cost Of Atlantic bundle = $2,000 • Atlantic will have
to forego the amount of R&D investments done in PESA software here.
This amounts to $20,00,000. Atlantic Computer Analysis-Group3
6. 6. Option 2 • Competition based pricing. • Conservatively 2 Tronn
servers should be equal to 4 Zinc servers. Aggressively 1 Tronn server
will be equal to 4 Zinc servers. • Price of 4 Zinc server = 1700*4 =
$6,800 Atlantic Computer Analysis- Group3 Conservative Aggressive
Price of Atlantic Bundle $3,400 $6,800
7. 7. Option 3 • Cost-plus pricing. • Expected sales in 3
years=(4*50000+9*70000+14*92000)/100 • Cost of Tronn server =
$1,538 Atlantic Computer Analysis- Group3 Value Remarks Expected
sales for Tronn servers(units) 21180 Expected number of PESA
installations 10590 (50% of 21180) Cost of PESA per installation 189
(2,000,000/10590) Total cost of Atlantic bundle 1727 1538+189 30%
mark-up 518.1 0.3*1727 Final cost 2245.1 1727+518.1
8. 8. Option 4 • Value-in use pricing. • Conservatively 2 Tronn servers +
PESA is equivalent to 4 Zinc servers. Atlantic Computer Analysis-
Group3 2 Tronn Server 4 Zinc server Remarks Price of Servers 4000
6800 Electricity 500 1000 $250 per server S/w licenses cost 1500 3000
$750 per server Total cost 6000 10800 Savings by Tronn 4800 0 10800-
6000 50% of saving 2400 0 50-50 cost sharing Final cost for Atlantic
bundle 6400 10800 4000+2400
9. 9. Pricing - Recommendation • Though the most profitable option looks
to be option2(competition-based pricing), we recommend Atlantic to go
for option 4(value-in pricing). • Reasons to opt for value-in pricing are
listed below. 1. Atlantic computer can show more value to customers by
showing them the monetary benefits. 2. If sales increase then Atlantic
will also gain by 50-50 profit sharing. 3. Also opting for price-war may
not be an good option for Atlantic because the cost of Tronn itself is
$1538 while Ontario sells the Zinc at $1700. Atlantic need to factor the
cost of PESA as well. So if Ontario lowers the price then it will be
difficult for Atlantic to survive. Atlantic Computer Analysis- Group3
10. 10. Pricing-Recommendation. Contd… • Though the value-in pricing
looks to be most beneficial to both customers and Atlantic, there are
certain challenges. – Salespeople need to be convinced about this
because their 30% of pay comes from sales and value-in pricing is lower
priced than other parts. – Sales people need to be trained to describe
the value to customers properly. Atlantic Computer Analysis- Group3
Pricing Method Expected Sale Revenues($) Costs Profit Status-Quo
21,180 $18,287,420 $2,416,030 $2,416,030 Comp-Based 21,180
$36,006,000 $18,287,420 $17,242,030 Cost-Plus 21,180 $23,785,140
$18,287,420 $5,021,170 Value-In 21,180 $33,888,000 $18,287,420
$15,124,030
11. 11. Other Questions • Which market should be targeted? – Atlantic
should target market that do web hosting and file sharing. These
companies can achieve the maximum benefit from PESA software.
Showing the pricing benefit to these customers will be most beneficial
for Atlantic as well and these companies can become attractive
customers. • How will Ontario’s top management likely to respond? – In
the short run they may not respond as the market share of Atlantic will
be very small 4%. But as the market share for Atlantic grows, Ontario
may react by lowering prices. Atlantic may need to compromise on the
50-50 profit sharing to show the pricing difference if needed. Atlantic
Computer Analysis- Group3

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