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Atlantic Computer

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Lisa Hipp

on 7 May 2013

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Transcript of Atlantic Computer

Alternative Solutions 0 + - = 9 8 7 1 2 3 4 5 6 c Management Team Jason Jowers
Joined Atlantic Computer 4
months ago (newly minted MBA)
Youngest Product Manager at
Atlantic Computer
In charge of developing pricing
strategy for the Atlantic Bundle Management Team Emily Jones
Director of
Atlantic's R&D team Introduction/Problem Definition Atlantic Computer, a large manufacturer of servers and other high-tech products

Atlantic Computers known for providing premium, high end servers

Atlantic Computers introducing Tronn, new basic server, which includes PESA software (Performance Enhancing Server Accelerator)

Jowers responsible for developing the pricing strategy for the ‘Atlantic Bundle’ (i.e. the new Tronn server plus the PESA software tool) SWOT Analysis Option 3 Charge a price based on a cost-plus approach to pricing PESA (based on software tool’s development costs) Option 1 Stick with company tradition by charging only for hardware and give the PESA software tool away for free Agenda Introduction/Problem Definition
SWOT Analysis
Situation Analysis (Internal/External)
Alternative Solutions
Recommended Solution
Conclusion Atlantic Computer Team: Drew Callahan, Matt Feldman, Lisa Hipp, Amanda Hurley, Adeeb Khan, Maureen McDonnell, Kyle Nynas Internal Situation
Strengths & Weaknesses Brand Image: Atlantic has a strong brand image and positive customer perception which was developed through providing ‘top-notch’ and reliable products and responsive post-sales assistance
Previous success: demonstrated through product differentiation
Size: Atlantic is the largest player in the overall computer industry (20% market share)
Saving to Customers: use of the Atlantic bundle will provide long term savings to customers in the form of ‘lower annual electricity charges, software licensing fees and labor costs’
Server reduction: ability to reduce customers’ purchase of 4 basic servers down to just 1 basic server
Marketing Team: seasoned members operate on traditional as opposed to innovative strategies; tendency to focus on details as opposed to the big picture; Jason Jowers (Team Lead) is inexperienced with server/pricing role
Sales Force: Atlantic’s sales force is not trained or knowledgeable in selling software (i.e. PESA)
Online Marketing/Sales: there was no mention of the existence of online selling ability for Atlantic, while Ontario does the majority of its sales online
Software Pricing: Atlantic has traditionally given away software for free so pricing the software into their bundle would go against their traditional pricing model
Implementation Costs: Atlantic will be unsure of how to price-in 'implementation issues that could possibly arise’ since it is entering an entirely new market External Situation
Opportunities & Threats Chris Matzer
20-year veteran in the computer business
Head of Atlantic's Server Division
Believes software tools should be provided to customers for free Harry Fowler
Director of New
Product Marketing
Jower's boss Jairo Cadena
Director of Sales Strengths Weaknesses Basic Server Growth: the basic server market is projected to grow at a 36% CAGR over the next three years while the high performance servers are only expected to grow 3% over the same time period
Atlantic Bundle: Package selling technique can give Atlantic a competitive advantage as it is a new model to the industry (1 basic server as opposed to 4)
Online Marketing/Sales: use of new online marketing techniques could help Atlantic break into the new market. By offering the Atlantic Bundle to these new ‘non-users,’ Atlantic may be able to capitalize as a disruptive technology
Trade Show: Opportunity to interface with new customers, receive feedback and potentially capture customers currently using other company’s server products
Development of low-end basic server: By entering this new market with a low-cost product Atlantic has the opportunity to compete against Ontario for the first time Opportunities Ontario’s Market Dominance: with 50% of the basic server market share, Ontario’s dominance may make it difficult for Atlantic to penetrate this new market
Supply Chain: Ontario has the ‘most flexible and innovative supply chain,’ proven operational excellence and competes largely on price which could be extremely difficult to compete against
Brand Loyalty: Competition: current basic server customers likely have brand loyalty to Ontario or other existing companies in the market
Market Straddling: Atlantic has always specialized in high performance servers so entering the basic server market may force them to straddle
Product Substitutes: if high performance servers and basic servers are in fact substitutes, success with Tronn may cannibalize Atlantic's existing and successful high performance part of the business
Competitor Retaliation: High likelihood for competitor retaliation from Ontario since basic servers are the only thing they focus on, and the single server model could be easily copied. Threats Recommended Solution
Lowest priced option

Does not take into account the entirety of the costs associated with the server
Fails to capture the total value of the product Option 2 Charge a price equal to what the customer would pay for four Ontario Zink servers
Based on the fact that customers would want one Atlantic server unit vs. four Ontario units
Delivers value in cost savings associated with having one server vs. four

Highest priced option
Customers might receive greater value in having the hardware of four servers
Should be a discount associated with the reduced material costs Does better job of factoring in the costs associated with the software development
More accurate representation of what Atlantic Computers is selling with the basic server
Forces the Atlantic Bundle, ensuring that the server is maximizing on its performance
Lower price than the sale of four Zink servers Option 4 Charge a price based on value-in-use pricing Focuses on the entirety of the customer’s costs associated with owning a server/s
Factors in electricity costs, licenses, labor and the software costs part of operating the product
Allows for a customer-oriented sales strategy that easily breaks down the case for the customers
Lower price than the sale of four Zink servers Pros Cons Pros Cons Pros Pros Option 4...Value-in-Use Pricing Cheaper than the costs of four Zink servers, while still delivering equal performance
Second-lowest with regards to the number of units required to breakeven
Second highest revenue of the four options
Provides a better foundation for a sales strategy
By factoring in the total costs of ownership, Atlantic Computer can develop a comprehensive sales strategy focused on the customer Recommended Solution Meeting between Jowers & Matzler Cons Conclusion Atlantic Computer has high brand image/reputation
Expansion into basic server market due to high growth/opportunity
Value-in-Use Pricing recommended solution for Atlantic Computer
Value-in-Use Pricing
Customer-focused strategy
Less expensive than four Zink servers
Factors in all operational costs
Breaks down costs for the customer (clear explanation of benefits) Second lowest price per unit profit ($707)
Second lowest revenue
Second highest breakeven point (units); harder to cover fixed costs Price over 2x higher than traditional approach
Customer confusion over software not included in pricing
Sales revenue, net income, and per unit profit is half as what four server Ontario approach Cons SME Trade Show Booth Atlantic Computer Option 1 Option 2 Option 3 Option 4 Questions?
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