Atlantic Computer - Business Case

1307 Words Nov 9th, 2012 6 Pages
Atlantic Computer – Business case

Case introduction
Atlantic Computer is a manufacturer of servers and other high-tech products. Following the growth of the internet there has been an increase of demand for cheaper, Basic Segment Servers. Atlantic Computer, currently having a 20% market share in the High Performance Server market, has decided to expand their product range and enter the Basic Segment market. Their response to the projected 36% compound annual growth in demand for Basic Servers has come in the form of the “Atlantic Bundle”. A Basic Segment server, called “Tronn”, with an innovative software tool. “Performance Enhancing Service Accelerator”, or PESA, which would allow the Tronn to perform up to four times faster than its
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| Disadvantages: pricing can be swayed by changes in electricity or license prices, decreasing the strength of the savings sharing. |

In order to calculate the total potential revenue, we use the total potential sales in three years of 21.180, again assuming that all customers are seeking a four basic server package. In order to make number more realistic, we shall also make use of the 50% attach rate as used in the cost-plus approach. Note: this is however still a fictional number to illustrate the differences in profit margins.

| Total Revenue | Cost price & investment | Total profit | Status-quo pricing | $ 42.360.000,- | $ 34.574.840,- | $ 7.785.160,- | Competition-based pricing | $ 72.012.000,- | $ 34.574.840,- | $ 37.437.160,- | Cost-plus pricing | $ 47.551.218,- | $ 34.574.840,- | $ 12.976.378,- | Value-in-use pricing | $ 67.776.000,- | $ 34.574.840,- | $ 33.201.160,- |

Customer profile is a SME that provides training information and tips to prospective day traders. Their revenue comes from selling advertising space on their website. Their requirements are a minimization of acquisition costs, minimization of possession costs and a large capacity for processing information requests.

First we determine whether PESA would be a significant improvement, making use of the figures in Exhibit 2. As the web server hosting performance goes up by roughly 409%, and this being

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