Atlantic Computers: Case Analysis
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
Add margin 30%=189+30% = 245.5
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
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
Add margin 30%=189+30% = 245.5
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