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Case Study : Computron
Transcript of Case Study : Computron
American Company which proposes digital process control computers
Europe, a strategic
Production in the U.S.A., shipments to Europe for installation
New factory in Germany
Can deliver 15 countries around Europe
Lower price without the high importation fees
König's call for tender
4 main competitors
Computron's offer : 40% higher than the less expensive offer
König can deal with us thanks to our quality products, but will not accept our offer if it exceeds 20% more than the cheapest bid.
Breakdown of computer costs
Factory costs $384,000
+ 33 ⅓% markup on costs* $128,000
Quoted U.S. Price $512,000
Import Duty** $76,800
Transportation and installation $33,600
Total "normal" price $622,400
Activity and organisation :
* (margin, R&D, selling and admin. disbursements)
** 15% of U.S. Price
The new plant avoids paying importation duty:
$622,400 - $76,800 = $545,600
=> Still $25,600 too expensive
We have to cut in our markup on costs :
$128,000 - $25,600 = $102,400 or 27% markup on costs
=> But the American CEO does not want it : Never been done in Europe. But since it has already been done several times in the U.S. to drop to 20%, we can do it now.
If we lose the contract :
- The factory will be laid off after two to three months of production for inventory and training of employees
- Computron will lose an important customer
If we win :
- It will develop our plant's activity and raise our revenue by 25%
Conclusion : Thomas Zimmerman, European Sales Manager, has to face the CEO...