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Assignment No.

2 A report on

Computron, Inc. (1996)

Submitted to

In partial fulfillment of the requirements of the course

Business Communication On 18/08/2011 By

Executive Summary:Computron is an American Company established in 1992. It had opened an office in Paris and thus planning to expand in Europe.

The main problem arises as konig & cie which is one of the most important clients of Computron had invited four other companies to submit bid for the contract. The computrons normal price being 43% higher than the lowest bid may become the main reason for losing the bid. Thus the report deals with different option the Computron can successfully apply to win the bid.




Letter of Transmittal:-

To:MR. Thomas Zimmermann Manager Computron Inc. From:XYZ Assistant Manager Sales division, Computron Inc.

Date: - 15 July, 1996 Subject: - report on pricing decision of Computron 1000x for konig & cie bid. Sir, I would like to take this opportunity to present the report which consists of analysis on action plan for future growth of Computron in Europe keeping in mind the present opportunity that lies in konig and cie. bid and evaluation of options available to win the bid against major competitor in European market. Yours sincerely XYZ Assistant Manager Sales division, Computron Inc.

Situation analysis:Computron is an American company which has its manufacturing unit in U.S. and is planning to expand its business in Europe for which it is building a plant in Frankfurt. The total sales of Computron in Europe are divided as follows:-

Breakdown of Computrons costs are as follows:Factory cost 33*1/3 mark up cost Import duty (15% of quoted U.S. Price Transportation and installation Total normal price $384,000 $128,000 $76,800 $33,600 $622,400

Market share of different companies are as follows:-

Also the President of Computron is not too keen on reducing the markup cost as he doesnt want to compromise on profit & quality. Even though there are instances where markup cost is 20%. Considering all these facts Computron need to come up with a price which will help it to win the bid keeping its future plan in consideration as they may not be able to change this price for further deals. Also the prices quoted by different companies are as follows:RMAG EDAG Digitex $436,000 $545,000 $311,200

But here we are not considering the bid given by Digitex as its quality is inferior to the Computron 1000x quality and also it has never been able to compete successfully against Computron. So we are taking the lowest bid as 436,000 therefore our price range is between $436,000- $523,200.

Problem Statement:To develop a strategy for further growth of Computron Inc. in Europe keeping in mind the present opportunities available especially koing & Co. bid.

Criteria of evaluation:1. Quality of the product 2. Competitive cost 3. Increasing market share in Europe.

Statement of options:1. To establish a manufacturing plant in Frankfurt so as to reduce import duty, transportation cost & developing cheaper option. 2. To reduce factory cost and markup cost while keeping the manufacturing unit in U.S and importing the manufactured product.

Evaluation of options:1. To establish a manufacturing plant in Frankfurt which will reduce import duty and transportation cost leads to development of a cheaper option. First of all when we consider the present scenario for the konig &cie. bid , the requirement of computer is for training purpose so the normal computer i.e. 1000x provided by Computron of higher quality would not be required and thus we can reduce on its features (for this order only). Thus reducing on its cost by $40,000. Establishing a manufacturing plant in Frankfurt will also help in reducing the import duty from 17% to 0% or $76,800, the same will again bring down the transportation cost as the plant is based in Germany. So we assume that transport and installation cost will come down to $3,600 i.e. reduction by $30,000. Therefore the total reduction is $146,400 which will lead to reduction in cost to $476,400. Here we are able to bring down the cost required range of price without compromising on the quality. 2. To reduce factory cost and markup cost by keeping manufacturing unit in U.S. In the 2nd option we are trying to reduce the normal price by reducing factory cost by 20% to get benefit of $ 76800 by automating the factory. Then we are reducing on markup by eliminating the R&D cost and reducing profit margin by 5%to gain $40960 & $25600 respectively. Thus bringing total cost down to $ 479,040 which is in the price range of our bid ($436000-$523000) Thus on cost criteria the option is valid but it will reduce on quality as company will lose its core competence and thus it may affect the market share.

Recommendation:Taking into consideration the evaluation for all the option available on the criteria of cost, quality and future of the company in Europe. We want to recommend the 1st option as installing a plant which will not affect the quality aspect as well as there is no reduction in markup cost. Also it was found that European market is expected to grow by 25% annually and konig and cie would continue to remain the most potential client in Germany and would need another $2000000 worth of digital computers so establishing a plant in Germany would be best option to fulfil their need and acquire more market share in Europe.

Action plan:1. To prepare a plan for automating the manufacturing plant and obtaining machinery to reduce factory cost. 2. Providing free installation and maintenance service after sale of the product. 3. To secure long-term interest of the company and thus betting on the quality of the product. 4. To prepare a plan for brand building of new product and focus on marketing of existing product.

Contingency plan:The contingency plan for the given recommendation even though the price quoted by us is quite low than the maximum price of range we considered even then if we need to reduce the cost the reduction may come from reducing R&D cost and factory cost in Frankfurt which will help in reducing the cost further, acquiring the market share and the bid too.

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