ATLANTIC COMPUTER

1. Introduction and Problem Definition
Jason Jowers, a newly minted MBA, had joined Atlantic Computer just four months ago as the youngest product manager. He would be responsible for developing the pricing strategy for the "Atlantic Bundle" (i.e., the new Tronn server and the PESA software tool), which had been developed specifically to meet an emerging basic server market, a new market to the company. But it had to compete with Zink server of Ontario Computer, its major rival in this market. 2. Situation analysis * External Analysis
Since the basic server market had 36% compound annual growth rate through 2003, significantly higher than around 3% of high performance market, Atlantic Computer decided to penetrate the basic server market with its "Atlantic Bundle". But Atlantic Computer had no competitive market share in the basic market and had to fight against a strong competitor Ontario Computer which only focused on the basic server market with 50% revenue market share. In addition, for the business model of Ontario Computer that possessed “the most flexible and innovative supply chain strategy” was based on operational excellence, the company had been able to drive out many non-value-added costs and compete largely on price. For example, its major sales were generated online, saving lots of selling expenses.
However, Atlantic Computer had already been a strong player with 20% of the revenue market share in high performance market, the largest market in servers industry and had also been the largest player in the overall server industry for 30 years, thus Atlantic Computer was able to support its competition in the new basic market with its financial advantages, technical advantages and any relevant successful experience derived from the high performance market. What’s more, Atlantic Computer didn’t need to be worried that its