Pricing Assignment
For this assignment, you will be using the "Atlantic Computer: A Bundle of Pricing Options" case information. In the case, Jason Jowers identifies four pricing options: status-quo, competition-based, cost-plus, and value-in-use (pp. 5-6 of the case). Jowers has also identified a potential new customer, DayTraderJournal.com (DTJ), that would provide a good illustration of the impact of these pricing options.
Your pricing assignment is to calculate the total priceJowers should charge DTJ for each option, using an Excel spreadsheet. Be sure to carefully consider all the information given you in the case, along with the class discussion, notes, and hints below, in calculating each option.
Hints:
• All your pricing should be in terms of what DTJ would pay in total. As part of this, you may have to calculate the individual prices first.
• Tronn is Atlantic's entry into the Basic Server market; Atlantic serves the High Performance market with their Radia model.
• Ontario's Zink is the primary competitor for this business.
• Conservatively, 2 Tronns with PESA equals 4 Zinks. Use this assumption in your calculations.
• Assume that Tronn's basic unit price is the direct and indirect cost of the Tronn plus the 30% profit margin, and does not include the cost of PESA.
• Footnote 5 on page 6 of the case includes valuable information for your cost-plus pricing analysis. Note that you will need to calculate the size of Atlantic's market over three years as part of calculating the cost of PESA. Total market size, Atlantic's assumed market share, attach rates (how many of the Basic they'll sell with PESA vs. without), profit margin, and PESA development costsare provided in the case/footnote.
• Footnote 6 on page 6 provides valuable information for calculating the value-in-use price. Note that the number of years you will be using is different than the cost-plus analysis.
• Your value-in-use calculation should start with the maximum you could charge DTJ for the hardware plus customer savings. In making a price recommendation, however, you may wish to consider sharing the savings and not charging DTJ the maximum value-in-use price.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.