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Presentation Note

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Submitted By chocob3by
Words 373
Pages 2
Problem Definition:
The company has to choose the right pricing strategy for the Atlantic bundle in order to maximize profit and market share as well as satisfy customers.

Here is the SWOT analysis for the company:
Strengths:
- Largest player in the overall computer industry with 20% market share of high --performance server market
-reputation for providing top-notch, high quality products and responsive post sales assistance
- huge loyal customers base in which many of them are large companies
- The new software tool –PESA, which allows performance up to 4 times faster (gain competitive advantage)
- high quality, responsive post-sales assistance

Weakness:
-entering a completely new market segment with the PESA tool
-Tronn has a higher cost per server than Zink (Exhibit 3), which is $1538 per Tronn serer & $1214 per Zink server
-Atlantic’s present sales force mind-set is based on hardware because they always give the software tool for free.
-No online sales
-Relied mainly on high-touch direct sales channel
-conservative management board, which is hard to innovate

Cost-plus approach
- From exhibit 1, projected market basic sales (in units) from 2001 to 2003 are 50,000, 70,000 and 92,000 respectively.
- Assume the company will be able to sell all of the Tronn servers it can produce
So multiple with the atlantic’s share, it has the total unit sale of 21,180.
Assume a 50% attach rate, which mean half of all their basic servers sold will be loaded with the PESA, it gives us a total unit of 10,590. Which mean the r&d cost per unit will be approximately $189. After that, we add this number with $1,528, which is the cost of producing Tronn, the total cost will be 1,726.86. With 30% markup over cost. the price of the bundle using this method will be 2,244.92, and the profit margin is 518.06.
Pros
Value advantage – price aggressively

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