Overview

Atlantic Computer is a strong player with 20% market share

Pricing Strategy

Option 1: Status-quo pricing

This particular strategy has the potential to target maximum customer as

Atlantic Computer ensuring high performance of the server with minimal cost
giving PESA free. So total cost of PESA R&D will also be considered in total cost
which is not realising any profit.
Price
Tronn ( Basic) + PESA
2000
(Free)
Total Revenue
Total Cost
Profit
42360000
24027200
18332800
2. Competitive Based pricing
Price for Tronn is charged is equal to 4 Zink server as follows:
1 Tronn +PESA = 4 Zink server
Tronn + PESA

Total Revenue
144024000

Price
6800

Total Cost
22027200

Profit Analysis
Profit
121996800

Option 3: Cost Plus Pricing Approach

The Cost plus pricing approach takes into consideration all the costs incurred in
the manufacturing of a unit of a product, and then arrive at a price of the product
after marking it up by a desirable margin.
Development cost of the PESA Software = $20,00,000 (from Exhibit 3)
Cost of a single Tronn Server = $1,538 (from Exhibit 3)
Market Demands
Atlantics Estimated Share

2001
50,000 units
4% of 50,000
= 2,000 units

2002
70,000 units
9% of 70,000
= 6,300 units

2003
92,000 units
14% of 92,000
= 12,880 units

No. of PESA sold

(at 50% attach rate)

X 2,000
= 1,000 units

X 6,300
= 3,150 units

X 12,880
= 6,440 units

Total No. of estimated sale of PESA = (1,000 + 3,150 + 6,440) units = 10,590
units
Cost of PESA per unit server =

$ 20,00,000
10,590

= $188.86 $189

Thus, Cost of an Atlantic Bundle = Cost of Tronn + Cost of PESA = $1,538 + $189
= $1,727
With a 30% Mark-up, Cost of an Atlantic Bundle = $2,245
Total Revenue
47549100

Total Cost
22027200

Profit Analysis
Profit
25521900

Option 4: Value-in-use Pricing Approach

Considering 1 Tronn with a PESA software is equivalent to 4 Zink Servers, the use
of an Atlantic Bundle would give:
Electricity Savings = $250 X 3 = $750
Savings of Application software license = $750 X 3 = $2,250
Savings on cost of the server = ($1,700 X 4) $2,000 = $4,800
Total Savings = ($750 + $2,250 + $4,800) = $7,800
Assuming 50-50 sharing of savings gain with customer, Cost of an Atlantic
Bundle = $3,900
Total Revenue
82602000

Total Cost
22027200

Profit Analysis
Profit
60574800

Antaltic Computor should go for option 4 for the price strategy as it can show
better benefits and correlate with customers by showing benefits in terms of
money. The additional advantage with this option is that as the sales volume
increases company will also be benefited by 50-50 sharing.
Company should target the customers who are involved in File sharing and Web
service e.g running websites, as per exhibit 2, company will benefit more with
these customers.
Considering the fact that sales force is hardware-oriented, sales force need to be
trained for the advantage of PESA software. Also the training should also include
to convey the benefits of software to customers.