Harvard Business School
9-597-063
Rev. November 14, 1997
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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.
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Kšnig had invited four other computer manufacturers to submit bids for the contract. A reliable trade source in ZimmermannÕs opinion
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In the 1995-1996 fiscal year, however, sales increased sharply, totaling $10,000,000 for the year. 1 ComputronÕs total worldwide sales that year were roughly $88,000,000. Of the European countries, Germany constituted one of ComputronÕs most important markets, having contributed
$2,400,000, or 24%, of the European sales total in 1995-1996. England and Sweden were also important, having contributed 22% and 18% respectively. The remaining 36% of sales was spread throughout the rest of Europe.
Computron computers sold to European customers were manufactured and assembled in the
United States and shipped to Europe for installation. Because of their external manufacture these computers were subject to an import duty, which varied from country to country. The German tariff on computers of the type was 17´ % of the U.S. sales price.
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Prompted primarily by a desire to reduce this import duty, Computron began constructing a plant in Frankfurt. It would serve all 15 countries in the European Community and was scheduled to open September 15, 1996. Initially it was to be used only for assembly of 1000X computers. This would lower the German import duty to 15%. Ultimately the company planned to use the plant to fabricate component parts as well. Computers completely manufactured in Germany would be entirely free from import duty.
Company Pricing Policy
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The new plant was to occupy 10,000 square feet and employ 20 to 30 people in the first year.
Its initial
(Again, so far, remember that pricing in this case is set at the marginal cost level.)
b. Look at the Tariff Chart on page A57 of the Appendix. At their peak in 1828, tariff duties on imported goods amounted to 60 percent of their value. In 1996, that tariff rate amounted to only about 5 percent. The authors say
Production operations played a huge role on whether to allow more production in North America, or more in Europe-Africa. After many decisions, we begun to notice that North America, and Europe-Africa were our main consumers and had stronger demands for our products, we suddenly realized that we should offer the other more compensation to raise the production. We than decided to offer Asia-Pacific, and Latin America a larger discounts, and longer return dates, to increase the demands.
would affect the imports allowed in each state. For example, if Italy were to import their vehicles
The Computron, Inc. is facing problems regarding pricing the bid for Computron 1000X, future functioning of Frankfurt plant, impact on production due to current market breakdown.
This would allow people in the United States to export the goods they produce more easily due to them being relatively cheaper in comparison to their past price.
In this case, you will be able to cover all of your fixed costs only by changing of sales mix, without changing the prices. Please keep in mind that you have some more variable operating costs, not covered by this calculation (see Table on p. 2). They can amount to more than $1,000, if you add depreciation for equipment and truck.
considers any price between full production cost and 150% of full production cost to be within its
Thomas Connors will bid for Southern Valley Authority to sell capacitor. The market of it is already matured and price has been eroded (Margin of the price that won the last bid is only $0.02). 85% of customer in the market is price oriented, SVA as well. The product is hard to differentiate.
plants in order to stimulate downstream business. This was the case in Brazil, where the government
“Made in America” vehicle by a German leader. So Apart from its franchise-expansion mission, it
To calculate optimal pricing I used MC outlined in the case as based on volume of drives produced weekly. Fixed costs of plant and equipment were not included in this analysis although are later evaluated for breakeven time frame.
According to reuters.com, Spotify earned a massive 435 million euros in 2012 when it expanded to new markets.
The task force is considering a variety of options for its analysis. One option is to keep the global network with its current structure and capabilities. Other options include shutting down some plants or limiting the capability of some plants to producing only one chemical. Closing down a plant eliminates all variable costs and saves 80 percent of the annual fixed costs (the remaining 20 percent accounts for costs that are incurred related to the plant shutdown). Similarly, if a plant is limited to producing only one chemical, the plant saves 80 percent of the fixed cost associated with that particular chemical. The two options being seriously considered are shutting the Japanese plant and limiting the German plant to a single chemical.
Another alternative should be to create a plant in Europe so now they don’t have top ay all the taxes they have to pay so they can export their products, in that way they will be able to give better prices to their clients, and they will supposed to have a better service and more quality because they where the pioneers in those products.