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4 Computron

Decent Essays

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 …show more content…

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

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