Atlantic Computers Case Analysis Essay

1. Stick with company usage by charging only for hardw ar and give the PESA software product product slit limitedneous for free. As can be seen in Exhibit 2, there is a noticeable difference between canonical servers running with and without the PESA software. This difference would put up directly to those customers in the file-sharing exertion and web-server segments of the food marketplace. Currently, as the Tronn would be competing directly with the vie companys Zink server, which is equipment casualtyd at $1,700 as opposed to the Tronns $2,000, customers would assume that the Zink is better jimmy as it be less, patronage the occurrence that the m geniustary value shows a 40% mark-up oer Tronns 30% mark-up. By offering the PESA software tool as part of the overall package, Tronn could add a value advantage over Zink, as they do not offer a software tool which enhances the fareance of the server.However, as aforementi unmatchabled, the customers using the basic ser vers would benefit around from the PESA software, rather than the high-performance servers. check to Exhibit 1, the legal age of units sold are those of the high-performance servers. 2. Charge a price equal to what the customer would pay for intravenous feeding Ontario Zink servers. The case states that Ontarios Zink servers dominate the basic server segment, and therefore the introduction of the Tronn server would crocked that the two companies would be competing directly against one an opposite. Further, Ontario holds a supply-chain advantage over Atlantic, in that they ensure that their products are widely available to all consumers, e.g. the majority of their sales are generated online.However, when loaded with the PESA software, Tronns servers run at an force of 4 times faster than their standard speed. The option suggests that the Tronn, when loaded with the PESA software, should be valued at quatern times as frequently as the Zink server, as it would be performing at the same standard. This would price the Tronn at $6,800. fleck a price this high would indeed generate revenue, it must(prenominal) be makeed that the Tronn is a newfound product entering the market. Without appropriate marketing, the consumer would be un sensible of the benefits of using the Tronn and consequently would opt for the much cheaper option, Zink. This outline is called skimming. In order to be successful, Atlantic would have to ensure that consumers are aware of the significant product differentiation between the Tronn and the Zink servers (i.e. The PESA software).3. Charge a price based on a indeterminate approach to pricing PESA (based on software tools development costs). As stated above, the cost-plus approach is Atlantics standard pricing strategy. In the case, Atlantic is said to have merchandise restraints and therefore will only be able to produce a certain total of Tronn servers in the beside term. For example, if Atlantic can sell all of its proje cted units in the start three years, they are looking at selling 212,000 units in total. In the archetypal year, the percentage of market share rises by 4%, meaning that the total number of Tronn servers sold was 2,000.In the second year, the percentage rises by 9%, giving a total of 6,300 servers sold. In the third year, this raises to 14% and 12,880 servers sold. Of these 21,180 servers, assume that only half are loaded with PESA software, giving us 10,590 servers with the software in total over the three years.The development costs of the PESA software totalled $2,000,000,000. In order to cover the development costs of the software in the first three years, Atlantic would have to price the software at $189. If we assume the Tronn server without the software costs $1,538 to produce, and the PESA is to be include in the sales price, we are looking at a $1,727 production cost. Adding a mark-up of 30%, the sales price of the Tronn and PESA (Atlantic bundle) would be $2,245.10. 4. Charge a price based on value-in-pricing.In order to calculate a total bringings price, it is necessary to determine the calculations of a few other items. Also, in these calculations, we will assume that the Tronn server is valued at $2,000. Firstly, considering that one Tronn server loaded with the PESA software is performs to the same standard as four Zink servers, it can be said that a saving of $1,600 per annum can be had by purchase just one Tronn as opposed to 4 Zink servers. Secondly, annual electricity savings are equal to $250. Third, the cost of application software licenses is equal to $750 per year. Finally, if a server administrator earns $80,000 per year and the number of servers one can manage is 40, labour cost savings are $2,000 per year. The total savings can be added to achieve $4,600 per year.In a quick summary of the above, the following can be noted * In resource 1, the price of the Tronn and PESA software tool would be $2,000. * In Option 2, the price of t he Tronn and PESA software tool would be $6,800. * In Option 3, the price of the Tronn and PESA software tool would be $2,245.10. * In Option 4, the savings of purchase the Tronn and PESA software tool would be $4,600. I believe that Option 1 would not be an intelligent strategy for Jowers to use. Without charging for the PESA software, the company will recollect themselves struggling to pay off the costs of developing the tool in the first place.This means they would have to sell more units in the first three years than what they originally projected, giving the company unrealistic sales assumptions and in my opinion, they would ultimately suffer profit losses. I also consider Option 2 to be a bad choice of strategy. While one Tronn server, in conjunction with the PESA tool can indeed perform to the power of four Zink servers, it would be foolish to price the Tronn at the tantamount(predicate) of this. A price of $6,800 for just one server is too much for a consumer to consider paying, especially for a product that is new into an already established market. Serious marketing and clear differentiation would be undeniable to ensure the success of this strategy, both of which can be very long and costly.While Option 4 shows a significant number in savings, I would recommend that Option 3, the cost-plus pricing strategy be used in launching the Atlantic Bundle into the basic-server consumer market. As stated in the case, Atlantic Computers is already a strong player in the high performance servers segment, but due to the consistent growth of the internet, the new market of basic servers is emerging. Jowers discovered that one of the main reasons that Atlantic succeeded in the high performance severs market was by product differentiation.This is a heroic factor in the Tronns appeal to the basic server segment, as it also comes with the PESA software tool, something that Zink computers does not have. However, Ontario Computers competes mainly on price, due to the fact that they are able to sell their products online and therefore cut costs in other areas. Despite this, I believe that with Atlantic emerging into the market with a superior product, they will be able to compete successfully. fit in to Atlantic Computers general consensus, they do not usually charge extra for software tools. However, the importance of the PESA tool must be made know to the sales force.Firstly, without charging extra for the tool, the company will struggle to generate sufficient revenue in the first three years to pay of the development costs of the product. Furthermore, Jowers followed the status quo and used cost-plus pricing to determine the value of the software, and after adding that cost onto the production costs of the Tronn itself and also adding a 30% mark-up, the total bundle only cost $245.10 more than the Tronn would cost on its own.Emphasis should also be put on the fact that one Tronn server loaded with the PESA software tool, which was value d at $2,245.10, performed to the equivalency of four basic Zink servers, which in total would be valued at $6,800. This shows a $4554.90 saving for customers who choose to purchase the Atlantic Bundle over the required four Zink servers for the same performance. With Jowers given the opportunity to talk with prospective buyers at the mickle show, he will also have the chance to explain the features and benefits of purchasing the Atlantic Bundle himself as well as obtaining firsthand consumer feedback on the products.According to the case, the CEO of Ontario Computers states, Our business model is not to be the jumper cable innovator on product technology. Rather, our business model is to provide lead story technology to customers via the most flexible and innovative supply chain strategy possible. The company achieved this by managing to cut their costs through distributing their products online and thus were able to offer their product for a much cheaper price than Atlantic Comp uters.In retaliation to the introduction of the Tronn in the market, Ontario Computer will most likely continue to base their business model on practicable excellence and continue to search for ways to compete on price. other consequence could be the company developing a software tool of their own to compete directly with the PESA tool. If this was to happen, it could pose a threat to Atlantic Computers in that Ontario would still most likely be capable of competing on price, giving them the competitive advantage. However, if Atlantic manages to establish their brand before their rival gets a chance to retaliate, they should have no problem holding onto their market share and consumer segment.