Atlantic Computer Essay

463 WordsMay 6, 20122 Pages
Atlantic Computer, Inc is a manufacturer that had been developing and selling high-end performance servers over 30 years. The company has a large place in the server market with Radia over 30 years. Also, high performance server and basic server constitute the server market and Atlantic has 20% market share in high performance server market. After all, the company decided to enter basic server market and the expected demand was 50.000 units in 2001. So, Atlantic had entered the market with Tronn, a new basic server and they created software, called PESA which makes Tronn’s performance four times faster. Their aim was to sell Tronn&PESA together as a bundle. As a result, Jowers, the manager, had to decide a new pricing strategy. There were four pricing strategies which were status quo, competitive pricing, cost-plus pricing and value in use pricing. For status quo pricing, price will be charged by only the hardware and PESA will be given as software for free. This strategy should not be used by Jowers because the cost of developing PESA is two million and it will be given for free to the customers. Also, since Tronn had been competiting with Zink, the cost of Tronn server shouldn’t be higher than Zink’s server cost. The revenue is $21.800.000 and the profit is 2.892.580 For competitive pricing, the price will be close to four Ontario Zink servers. The price of one Zink’s server is $1700. However, one Tronn’s server price is 6800. Since, the price is too high, it is hard to convince customers to choose Tronn. The revenue is $36.006.000 and the profit is 17.718.580.For cost-plus pricing, the margin would be added on the product’s cost. The average cost of PESA is equal to $95,2 and the average cost of Tronn with PESA is equal to $1633. The profit margin was 30%. So, the price of Tronn and PESA will be $2123. So, the price is higher than Zink’s server price again. The

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