4 Computron
Harvard Business School
9-597-063
Rev. November 14, 1997
DO
Computron, Inc. (1996)
In July 1996, Thomas Zimmermann, manager of the European Sales Division of Computron, was trying to decide what price to submit on his bid to sell a Computron 1000X digital computer to
Kšnig & Cie., AG, GermanyÕs largest chemical company. If Zimmermann followed ComputronÕs standard pricing policy of adding a 33 1 3 % markup to factory costs and then including transportation costs and import duty, his bid would amount to $622,400; he feared, however that this would not be low enough to win the contract for Computron.
NO
Kšnig had invited four other computer manufacturers to submit bids for the contract. A reliable trade source in ZimmermannÕs opinion indicated that at least one of these competitors was planning to name a price in the neighborhood of $436,000. This would make ComputronÕs normal price of $622,400 higher by $186,400, or approximately 43%. In conversations he had had with
KšnigÕs vice president in charge of purchasing, Zimmermann was led to believe that Computron would have a chance of winning the contract only if its bid was no more than 20% higher than the lowest bid.
T
Since Kšnig was ComputronÕs most important German customer, Zimmermann was particularly concerned over this contract and was wondering what strategy to employ in pricing his bid. Background on Computron and Its Products
CO
Computron was an American firm that had, in the winter of 1992, opened a European sales office in Paris with Thomas Zimmermann as its manager. The companyÕs main product, both in the
United States and Europe, was the 1000X computer, a medium-sized digital computer designed specifically for process control applications.
PY
In the mid-1990s the market for digital process control computers was growing quite rapidly.
These were substantially different from computers used for data processing and engineering calculation. They were generally produced by specialized companies, not
9-597-063
Rev. November 14, 1997
DO
Computron, Inc. (1996)
In July 1996, Thomas Zimmermann, manager of the European Sales Division of Computron, was trying to decide what price to submit on his bid to sell a Computron 1000X digital computer to
Kšnig & Cie., AG, GermanyÕs largest chemical company. If Zimmermann followed ComputronÕs standard pricing policy of adding a 33 1 3 % markup to factory costs and then including transportation costs and import duty, his bid would amount to $622,400; he feared, however that this would not be low enough to win the contract for Computron.
NO
Kšnig had invited four other computer manufacturers to submit bids for the contract. A reliable trade source in ZimmermannÕs opinion indicated that at least one of these competitors was planning to name a price in the neighborhood of $436,000. This would make ComputronÕs normal price of $622,400 higher by $186,400, or approximately 43%. In conversations he had had with
KšnigÕs vice president in charge of purchasing, Zimmermann was led to believe that Computron would have a chance of winning the contract only if its bid was no more than 20% higher than the lowest bid.
T
Since Kšnig was ComputronÕs most important German customer, Zimmermann was particularly concerned over this contract and was wondering what strategy to employ in pricing his bid. Background on Computron and Its Products
CO
Computron was an American firm that had, in the winter of 1992, opened a European sales office in Paris with Thomas Zimmermann as its manager. The companyÕs main product, both in the
United States and Europe, was the 1000X computer, a medium-sized digital computer designed specifically for process control applications.
PY
In the mid-1990s the market for digital process control computers was growing quite rapidly.
These were substantially different from computers used for data processing and engineering calculation. They were generally produced by specialized companies, not