ATLANTIC COMPUTERS

Submitted by:

Saravana Kumar

Riddhee Gosar

Navin Todur

Adil Naik

Mohammed Oovais

Introduction

• Atlantic Computer was the largest player in the computer industry

• It was the largest manufacturer of servers and high end products

• Its server division built a reputation for high quality and reliable products

• They developed the Atlantic Bundle (ie Tronn server and the PESA software tool)

• The software tool PESA would allow Tronn to perform upto four times faster than its standard speed

• It was specifically designed to make frequently requested information ie ( files and data) extremely accessible

• They catered to two main market segments:– High Performance Servers for complex appliations like SCM

and ERP– Basic Servers to perform simple repetitive tasks like computing

and showing websites info etc

Customers

• Daytraderjournal.com– Requirement: Web server

• Look Sharp Advertising– Requirement: File Server

• HGIDMM– Requirement: High performance server

Application Tronn with PESA

Tron without PESA Performance

High performance 180 187 96%Graphic Applications 280 281 100%

Enterprise Applications 264 254 104%

E-Mail Applications 341 300 114%File Sharing 812 404 201%Web Servers 2222 542 410%

Available options for pricing strategy

• Status quo pricing• Competition based pricing• Cost plus pricing• Value in use pricing

Status Quo

• $2000 per server– Profit 30% per serve

• Offer PESA free of charge• Loss of $20,00,000 spent on developing PESA• Product may seem equivalent to Ontario’s Zink, and will have to

compete for market share.• Not a very good option.

Competition based

• $3400 per server– Profit – 121%– Too high price than that of competitors.– Difficult to explain the increase in performance as compared to

increase in cost• Customers may not buy servers as per projection• Not a very good option.

Cost plus pricing

• $2246 per server– PESA charged at $246 per server– PESA development recovered– Zink can reduce the price of its servers to compete

Value in use

• $3200 per server– Profit – 108%– Value to the customer– Annual savings to customer $1200

• Atlantic Bundle needs to be projected as a new product with high value addition – one basic server with 4 times speed

• Additional savings can be shown to customers by comparing 4 Zink server costs with 1 Atlantic Bundle cost.

Pricing Adopted

• Value based pricing for customers with file sharing and web server and email application needs only.– High profit – Savings to the customer in terms

• Fewer servers purchased – Savings $1400/server purchased• Reduction in cost of applications – savings $750/server• Savings in power – $250/server

– We can reduce price to counter competition– It should be released as a server which is 4 times faster rather

than a server with a performance enhancement tool.• Competition Based pricing method will generate more profit per unit

than any other method; however, it will not allow Atlantic Computers to fully demonstrate, in monetary terms, the true value of the “Atlantic Bundle

Which market should be targeted ?

• Companies that do a lot of WEB HOSTING.– It is when the Tronn Server is acting as a web-server and coupled

with PESA that the “Atlantic Bundle” is capable of realizing its true potential of being 4 times as fast as the basic server.

• Those companies who do a lot of FILE SHARING would also benefit from the “Atlantic Bundle”– it would still enjoy an increase in performance equivalent to 2

basic servers

Cadena’s sales force Reaction

• Sales force to be trained for explaining the benefits to the customer and promote it as a separate product.

• Do not emphasis on the point of PESA as a performance booster given free rather promote it as a fast server

• 1 Tronn with PESA comparable to– 2 Zink’s for File Sharing Servers– 4 Zink’s for Web Servers

Customer Reaction

• At first, customers are likely to question Atlantic Computers’ reasoning for deviating from the tradition of providing performance enhancing/monitoring tools for free. This may be one of the more difficult tasks associated with pricing the “Atlantic Bundle.”

• Atlantic Computers will have to demonstrate to customers that the PESA software tool essentially doubles and possible quadruples the number of basic Tronn servers.

• They will need to emphasize that not only are they saving on the number of servers they will need to purchase, but they will also save on other costs.

• Atlantic Computers will also need to emphasize that it will continue to provide excellent service after purchase and provide customers with peace of mind.

Zink’s senior management reaction• Short run vs. Long Run • After the first year, it is projected that the “Atlantic Bundle” will

only take approximately 4% of the market share of the basic share market. It is unlikely that Ontario would be concerned at this time and would not take any steps to counter-act. It would take until at least the second year and likely the third year before Ontario would begin to take action. At this moment, Ontario’s reaction would be to lower prices in order to stop market loss.

• Of course, Ontario will only be able to lower prices for a short period of time before such actions begin to drastically decrease their profits. Ontario will likely begin to copy the PESA software and begin to include it in their Zink server packages. At this time, Atlantic Computers will have recouped much of the research and development costs associated with PESA and can begin to include the software as part of the “Atlantic Bundle” at no charge.

THANK YOU