Name :- Aman Deep

Roll No :- 2019GMPE0506, IIM, Indore

Case Title :- Atlantic Computer :- A
bundle of Pricing Options

Page 1 of 5
Objective of the Case :-

1. To develop the Price Strategy for the “Atlantic Bundle” which is a combination of The new
Tronn server and the PESA software tool.
2. Chalk out plan for Cadena – How to get the divisional sales force to charge for the PESA.
3. To anticipate the competitor reaction about the threat posed by Atlantic Bundle.

Brief Company & Product Profile :-

 Atlantic computer is a large manufacturer of server and other high-tech product

 The new product Tronn is developed to meet an emerging U.S market opportunity.
 PESA -Performance Enhancing Server Accelerator will allow the Troon to perform upto four
time faster than its standard speed.
 It is designed to make frequently requested information extremely accessible.
 There are mainly two market segments in the server industry.
 a). High Performance Server with projected growth of 3% annually.
 b). Basic Server with projected growth of 36% annually.
 Major Competitor – Ontario Computer Inc. with 50% market share in basic server.
 Name of the server – Zink
 Zink performance is almost equivalent to Atlantic Troon
 Ontario Computer Business Model – Operational Excellence
 PESA’s beta field test result
 Atlantic low end server to perform upto 4 times faster than their standard
speed when loaded with PESA software tool.

Key Buying Criteria

 Minimizing Initial purchase cost and subsequent possession cost

Pricing Option Available :-

a). Status-quo pricing

b). Competition based pricing

c). Cost plus pricing

d). Value in pricing

Pricing Strategy -1 - Status-quo pricing –

To provide Software Tool to customers for free

Unit Price of Tronn (Basic ) Server = $ 2000

Thus price of Atlantic Bundle = Tronn Price + Free software tool

= $ 2000 only

Considering this option then there will be complete loss of PESA software development cost to the
tune of $20,00,000

Not an optimum option.

Page 2 of 5
Pricing Strategy -2 - Competition based pricing –

 As per PESA’s beta field test result

Atlantic low end server to perform up-to 4 times faster than Zink standard speed when loaded

with PESA software tool.

1 No of Atlantic Bundle = 4 Zink’s server

Given Zink (basic) price = $ 1700

So Atlantic Bundleprice = $ 1700 x 4 Times = $ 6800

This price will be exorbitantly high for the prospective customers and the projection will not
match actual figures of sales. So, this is not an optimum option also.

Pricing Strategy -3– Cost Plus pricing –

Year 2001 Year 2002 Year 2003 Total Value

Given Market Volume in
50000 70000 92000
Numbers

Market Share of Atlantic -% 4% 9% 14%

Total Sales in Numbers 2000 6300 12880 21180

Sales with PESA (as given 50

1000 3150 6440 10590
-50 share)

Actual Cost of Tronn Basic

1538
Server - $ (Given)

Cost of PESA per server (

Total PESA Cost / cost per 2000000 / 1538 189
server)
Total Actual Cost of Tronn
1538 + 189 1727
Basic Server - $
Mark Up (Given -30%) 1727 * 30% 518
Grand Total Actual Cost of
Tronn Basic Server 1727 + 518 2245
inclusive of PESA - $
Grand Total Actual Cost of
1538 + 30 % of 1538
Tronn Basic Server 1999
(Cost of PESA per server not included)
exclusive of PESA - $
Considering the saving and low contribution (based on the sales price and cost = 2245 -1538 = $ 707
) this method of pricing is not recommended

Page 3 of 5
Pricing Strategy -4–Value Inpricing –

 Consideration of the PESA’s beta field test result

 Atlantic low end server to perform upto 4 times faster than their standard
speed when loaded with PESA software tool.

Value In Use Pricing Option -1

Description Unit For Tronn For Zink
Price of Tronn Basic Server - $ (Given) $ 2000 1700
No of Server for Both No 1 4
Total Cost - $ = A $ 2000 6800
Electricity Cost - $ $ 250
Cost of Software License -$ $ 750
Total Cost - $ = B $ 1000 4000
Grand Total = A + B $ 3000 10800
Saving Value -$ $ 7800
Final Price for Customer - $ (
$ 5900
Total Price + 50 % value of saving)

If two number of Atlantic low end server to perform upto 4 times faster than their standard speed
when loaded with PESA software tool.

Value In Use Pricing Option -2

Description Unit For Tronn For Zink

Price of Tronn Basic Server - $ (Given) $ 2000 1700

No of Server for Both No 2 4

Total Cost - $ = A $ 4000 6800

Electricity Cost - $ $ 250

Cost of Software License -$ $ 750

Total Cost - $ = B $ 2000 4000

Grand Total = A + B $ 6000 10800

Saving Value -$ $ 4800

Final Price for Customer - $ (
$ 6400
Total Price + 50 % value of saving)
Cost of labor equal in both case

Considering the saving and contribution (based on the sales price and cost = 4800 -1538 = $3262)
this method of pricing is recommended

Page 4 of 5
Objective – 2

Chalk out plan for Cadena – How to get the divisional sales force to charge for the PESA

a). The sale team must given the training to describe the full benefits of the software tools and their
benefits to the customers.

b). Major emphasis on the lowerInitial purchase cost and subsequent possession cost

c). Promotion of excellent after sale service for all customers.

Objective – 3

To anticipate the competitor reaction about the threat posed by Atlantic Bundle.

 Major Competitor – Ontario Computer Inc. with 50% market share in basic server.
 Name of the server – Zink
 Zink performance is almost equivalent to Atlantic Troon
 Ontario Computer Business Model – Operational Excellence

a). Competitor - Ontario Computer Inc. might reduce the existing price of their server

b). Competitor - Ontario Computer Inc. might come up with the similar product

Page 5 of 5