Atlantic Computer Case Study

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Atlantic Computer developed a product, the “Atlantic Bundle”, to meet an emerging basic server market. The Atlantic Bundle is a Tronn server coupled with the Performance Enhancing Server Accelerator software tool “PESA”. Atlantic Computer must decide on the pricing strategy.
Situational Analysis
The external analysis is as follows:
• Customers: The first customer identified has a primary need to host websites, “Web Server” customer. The second customer identified has a primary need for file servers that help layout designers share graphic, text, and layouts, “File Sharing” customer. Customers in these segments appear to be the ones that will benefit the most from the PESA tool.
• Competition: The primary competition
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Alternative Courses of Action
Free PESA Software with Purchase. Rather than regarding the PESA R&D as a sunk cost, I chose to distribute the costs to every server. The price under this route was determined to be $2,122 (see Appendix B). The primary drawback is that a customer who would have normally purchased the Tronn without the software would be charged a higher price ($2,122 vs. $2,000). Continuing with the tradition and norm of free software, staff would not have to be retrained and customers will not feel alienated. Furthermore, the one-bundle price could easily be transitioned to on-line sales, and the low price will increase market share. The “free” software could create an illusion of low perceived value. Finally, the lower price will result in lower profit margins, and it does not take into consideration the value advantage received by the customer.
Competition Based Pricing. The price under this route was determined to be $3,400 (see Appendix C). Under this route, the company will earn more profit per bundle sold. Additionally, minimal effort is required to determine the price. However, the competition based pricing creates indifference between the “Atlantic Bundle” and its competition. The higher price will also reduce market share and could stir a pricing war.
Cost-Plus. The price under this route was determined to be $2,245 (see Appendix D). Atlantic would gain market share under this route as the price is low

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