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Atlantic Computer: A Bundle of Pricing Options

Autor:   •  December 9, 2015  •  Case Study  •  578 Words (3 Pages)  •  3,302 Views

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Case Analysis Note PGP/19/Section F

Atlantic Computer: A Bundle of Pricing Options  

Students:
Arjit G - #307
Manisha C - #317                                                                                              Professor:
Rachit K - #327                                                                                                  Joffi Thomas
Indu Priya S - #337
Sisir VS - #347
Vinoth Kumar N - #357

 

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Atlantic Computer’s new server –the Tronn had been developed to specifically meet an emerging U.S. marketplace opportunity. The performance of this server increases 4 times with the use of their new software called PESA. The combination of Tronn with the PESA tool, named as the ‘Atlantic Bundle’ is to be priced before SME trade show by following any one of the four choices as detailed below:

Option

Pricing

Features and Analysis

1

Status quo pricing

Price Tronn at $2000

Offer PESA free of charge and incur a loss of $20,00,000 spent on PESA software development cost

2

Competition Pricing

1 Atlantic bundle = 4 Zink servers
Price of 1 Zink server = $1700

Price of 1 Atlantic bundle = 4*1700= $6800

3

Cost plus pricing

Cost of 1 Tronn Server= $ 1538

Cost of developing PESA= $2000000

Cost of 1 Zink server = $ 1214
Total no of Tronn servers sold in 3 years= 2000+6300+12880= 21180

No of PESA loaded servers sold= 10590

PESA development cost per unit = 2000000/10590= $189
Price without PESA (30% markup)=
$ 2000

Price with PESA(30% markup) = $ 2245

4

Value-in-use pricing

(conservatism approach is used)

Cost information

2 Tronn servers + PESA ($)

4 Zink servers ($)

Price

4000

6800

Electricity

500

1000

Application software cost

1500

3000

Total

6000

10800

Annual Saving on using 2 Atlantic bundles = $4800
50% of saving = $2400 (cost sharing by consumer and producer)

Price of Atlantic Bundle = $6400



Pricing strategy for Day TraderJournal.com, HGIDMM and Look Sharp Advertising
We recommend Value-in-use pricing as it the best fit model for all their server need and requirements

Recommendation for Cadena’s sales force:
Emphasize on Performance boost up with use of PESA software tool
Emphasize on the lower acquisition and possession costs
Ensure excellent after sales service for customers

Ontario Zink management team’s likely step to Atlantic Bundle’s threat and Atlantic’s probable response:
1. Ontario may slash the price of Zink
Minimum Price = $ 1214
Using competition pricing, Atlantic can prove that 1 Atlantic bundle= Price of 4 Zink servers i.e. $ 4865
which is greater than Atlantic Bundle’s price of $ 2245
2. Ontario may come up with their own version of PESA software tool
Atlantic will enjoy the first mover and pioneer advantage. Since their software development cost will be recovered in three years, they can start providing PESA for free thereafter.

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