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Atlantic Computer Case Study

Group Anurag Mehra Rohit Agarwal Mrinal Thakur Mihika Yadav Gunreet kaur Sharanya G S Pradyoth C John
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Objective :
To enter into the high growth basic server segment (CAGR 36%) and compete successfully against Ontarios Zink.
- Increase market share in basic server segment.

Problem :
Develop a pricing strategy for the Atlantic bundle before the SME trade show.
To determine the businesses that are most likely to benefit. To determine how customers and competitors will react.

Company Overview
Atlantic Computers is a manufacturer of servers and other high-tech products. Jason Jowers joined the company four months back and he is responsible for the pricing strategy of Atlantic Bundle (A package of the Tronn server and PESA software tool).

The Tronn was developed mainly to cater to the emerging US market for basic webservers.
The Performance Enhancing Server Accelerator (PESA) would allow Tronn to perform four times faster than its usual speed for frequently requested information. Two market segments - High Performance and Basic Servers. Atlantic has 20% market share in High Performance Servers. Radia has been its premier product for over 30 years. Atlantic has decided to introduce TRONN( basic server) in the market by 2000 with the belief that it wont be seen as a substitute of the High Performance Servers.
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Advantages of PESA & Tronn


PESA will increase TRONNs speed by 4 times. Need to purchase fewer servers. Lower annual electricity bill. Lower software license fees. Lower labour cost. Customers in the web server and file sharing application segments would be benefited the most.
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Market Segments High Performance Servers


Segment size is largest. Projected demand 1st year 200,000 units Projected demand 2nd year 205,000 units Projected demand 3rd year 210,500 units Atlantic Market Share 20 %

Basic Servers
Projected demand 1st year 50,000 units Projected demand 2nd year 70,000 units Projected demand 3rd year 92,000 units Ontario Market Share 50 % (Zink)

Competitors Ontario Computers Inc. Currently claims 50% revenue market share in the basic server market. Majority sales were generated online. Drove out many non value-added costs and therefore competes largely on price. Ontarios Zink servers performed at approximately the same level as Atlantics TRONN.
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Test Results from PESA Software on various Application types


Application Tested High Performance Graphics Applications Enterprise Applications E-mail Applications File Sharing Web Servers TRONN with PESA 180 280 264 341 812 2222 TRONN without PESA 187 281 254 300 404 542 Effect Of PESA Benefited ?

96.25 % 99.65% 103.9% 113.6% 200.9% 409.9%

No No Yes (slightly) Yes (slightly) Yes (2 times) Yes (4 times)


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Four Alternative Pricing Strategies


Alternative
Status Quo Pricing

NPV
56,84,844

Price per server


2,000

Competition based pricing


Cost plus pricing

8,55,27,382
38,79,360

6,800
2,245

Value-in-use pricing

2,56,45,479

3,200

Conclusion
We would select the Value-in-use pricing strategy since the NPV is high and the cost per server is reasonable. Though the NPV for competitive pricing strategy is highest, we cannot charge such a high price from the customers as it is not an industry norm.
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