Atlantic Computer Case: Some Suggestions and Notes a.

For cost-plus pricing: Exhibit 3 provides only the cost per server (since not all servers will have Pesa attached). The development cost for Pesa is noted as $2 MM in that exhibit and that can be used for estimation of costs/ price / break-even. Note: Make sure to consider information in Footnote 5. b. For Value-in-use pricing: In addition to the value in use savings after purchase (labor, electricity, etc), there is also an immediate hardware cost saving that should also figure in. I use the estimate of 2 Tronn with Pesa attached versus 4 competitors' servers as the benchmark to come up with savings. Note: We used exactly the same method in the first computation in Marketing Math that was done in class since I knew we had this case coming up. In that case, I suggested pricing at maximum value; in this case the company wants to split value 50-50. c. Price elasticity: As the case notes, the market is experiencing a high rate of growth, the product appears to be a necessary expense for customers, and Atlantic has a capacity constraint. Given all this, we are assuming a relatively inelastic demand curve within the ranges of prices under consideration. As a result, rather than price driving potential market share, we are taking the predicted market shares for Atlantic Computer with Pesa attached as given regardless of price points for the periods under consideration (footnote 5). However, even if demand is not affected by price right away, the business situation depicted in the case presents many near-term and long-term challenges to changing the pricing logic and price points. So, as always, the strategic analysis is critical not just the numbers.