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Atlantic Computer Inc
Case Analysis
BBM, NMP Term III
Group 4
Argha Ray - 15
Chakra Dhar Kundu - 22
Khushal Malik - 28
Sanjay Kumar Prasad – 45
Context
• Atlantic Computer is the largest player in the overall Computer Industry.
• Competes in following Product segments



High Performance Servers
Basic Servers

• Offers following products
 Radia (High Performance Servers)
 Tronn (Basic Servers)

• Facing Pricing Dilemma on Tronn servers
• Entry into Basic Server Market with Tronn will pit it directly against Ontario’s
Zink.
Jason’s Dilemma:
In the context of direct competition with Basic Server market leader Ontario,
the following questions are staring at Atlantic’s product pricing team
•
•
•
•

Bundle or Unbundle Tronn and PESA
Maintain Cost Plus pricing
Go for Competitive Pricing targeting Zink
Shift market paradigm with Value Pricing

Additional considerations included
• Market Share
• Find Resonating Focus with Customers
• Recover PESA’s R&D cost
Market Segmentation:
• Demographics
 Company Size: Small and Medium Business

• Operating Variables:
 Company Technology: Inexperienced
 Company Capabilities: Small Players
• Purchasing Approaches:
 Purchasing Criteria: Cost and Product Support
Based on above segmentation Atlantic must target Tronn in only the
Basic Server category which has uses in File Sharing and Web Servers.
Yardsticks:

• Tronn is in the beginning of its Product Life Cycle.

• Basic Server Market is an emerging new market, with possibility of Market
Development among Inexperienced Generalist’s customers.
• Ontario has already achieved economies of scale, hence difficult to compete on price.
• Traditional view of Software Tools as freebies with Server.
Top Line Revenue for 3 Years:
Year 1
Year 2
Year 3
Total Market in Units
50000
70000
92000
Market Share in Units
500
700
920
Sale Price per Server
3500
3500
3500
Cost Per Server
1538
1538
1538
Contribution Margin per Unit
1962
1962
1962
Total Contrinution Margin
981000 1373400 1805040
R&D for PESA
2000000
Payback Period
2 Yrs

• Atlantic is able to recover PESA R&D cost within two years, as evident from above
table.
• Initial Acquisition Cost is comparable with Ontario, when One Tronn is compared with
Two Zink.
• Only 1% market share considered for Price Calculation.
Distinctive Value Proposition:
Tronn + PESA (One Server) Zink (Two Server)
Unit Cost
3500
1700
Equivalent Unit Cost
3500
3400
Electricity
250
500
License
750
1500
Unit Administrator Cost
2000
2000
Equivalent Administrator Cost
2000
4000
Total Unit Cost
6500
9400
Savings
2900
•

Annual Maintenance Cost is significantly less for Tronn.

•

Total Cost of Ownership is less than Zink.

•

This POD can be reason enough to convince SME customers.
Decision:
• Don’t leave money on the table.
• Cost Plus pricing doesn't make sense as SME customers will not have
enough clout to ask for Cost Audit.
• Sell Tronn and PESA as system with adequate after sales support.
• Don’t compete on price with Ontario.
• To get approval on pricing, specially Matzer, keep products bundled for
now.
• Engage in Value pricing.
• Convince customers using Value Equation.

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Atlantic Computer Inc

  • 1. Atlantic Computer Inc Case Analysis BBM, NMP Term III Group 4 Argha Ray - 15 Chakra Dhar Kundu - 22 Khushal Malik - 28 Sanjay Kumar Prasad – 45
  • 2. Context • Atlantic Computer is the largest player in the overall Computer Industry. • Competes in following Product segments   High Performance Servers Basic Servers • Offers following products  Radia (High Performance Servers)  Tronn (Basic Servers) • Facing Pricing Dilemma on Tronn servers • Entry into Basic Server Market with Tronn will pit it directly against Ontario’s Zink.
  • 3. Jason’s Dilemma: In the context of direct competition with Basic Server market leader Ontario, the following questions are staring at Atlantic’s product pricing team • • • • Bundle or Unbundle Tronn and PESA Maintain Cost Plus pricing Go for Competitive Pricing targeting Zink Shift market paradigm with Value Pricing Additional considerations included • Market Share • Find Resonating Focus with Customers • Recover PESA’s R&D cost
  • 4. Market Segmentation: • Demographics  Company Size: Small and Medium Business • Operating Variables:  Company Technology: Inexperienced  Company Capabilities: Small Players • Purchasing Approaches:  Purchasing Criteria: Cost and Product Support Based on above segmentation Atlantic must target Tronn in only the Basic Server category which has uses in File Sharing and Web Servers.
  • 5. Yardsticks: • Tronn is in the beginning of its Product Life Cycle. • Basic Server Market is an emerging new market, with possibility of Market Development among Inexperienced Generalist’s customers. • Ontario has already achieved economies of scale, hence difficult to compete on price. • Traditional view of Software Tools as freebies with Server.
  • 6. Top Line Revenue for 3 Years: Year 1 Year 2 Year 3 Total Market in Units 50000 70000 92000 Market Share in Units 500 700 920 Sale Price per Server 3500 3500 3500 Cost Per Server 1538 1538 1538 Contribution Margin per Unit 1962 1962 1962 Total Contrinution Margin 981000 1373400 1805040 R&D for PESA 2000000 Payback Period 2 Yrs • Atlantic is able to recover PESA R&D cost within two years, as evident from above table. • Initial Acquisition Cost is comparable with Ontario, when One Tronn is compared with Two Zink. • Only 1% market share considered for Price Calculation.
  • 7. Distinctive Value Proposition: Tronn + PESA (One Server) Zink (Two Server) Unit Cost 3500 1700 Equivalent Unit Cost 3500 3400 Electricity 250 500 License 750 1500 Unit Administrator Cost 2000 2000 Equivalent Administrator Cost 2000 4000 Total Unit Cost 6500 9400 Savings 2900 • Annual Maintenance Cost is significantly less for Tronn. • Total Cost of Ownership is less than Zink. • This POD can be reason enough to convince SME customers.
  • 8. Decision: • Don’t leave money on the table. • Cost Plus pricing doesn't make sense as SME customers will not have enough clout to ask for Cost Audit. • Sell Tronn and PESA as system with adequate after sales support. • Don’t compete on price with Ontario. • To get approval on pricing, specially Matzer, keep products bundled for now. • Engage in Value pricing. • Convince customers using Value Equation.