Atlantic Computer Case

Subject: Atlantic Computer Case

Issues

Atlantic Computer Inc., at one time was the largest player in the overall computer industry, however, recent events have the company facing a selection problem in terms of their pricing strategy for its new target market.

According to the case article, it is stated that “for more than 30 years, the Atlantic Computer has been selling its high-end performances servers, called Radia, to large enterprise customers.” Because of the top-notch products and its superb quality of customer services, Atlantic built up a great reputation among customers and other companies in the high performance server market.

In recent years, due to the development of the Internet, a growing trend of low-end, basic servers has entered into the marketplace. In order to enter and compete in this brand new market, Atlantic Computer stretched the division’s product line downward with the goal of introducing a model called the Tronn. Based on the article, “high performance servers and basic servers would not be viewed as substitutes by [Atlantic’s] customers.” Because of this, the goal of increasing bottom line profits remains the same, and the new product development will not contribute negatively.

Although Atlantic has a great brand image among customers, this is a new market segment for them and is thus very challenging. Ontario Computer Inc., a firm that concentrated its effort solely on the low-end server market with its Zink product line is considered as Atlantic’s biggest competitor. Based an internal analysis on Ontario, it showed that they currently claimed 50% revenue market share in the basic server market and the rest of the field was made up of many smaller vendors. In order to get a bigger product differentiation, and more importantly, to compete directly against Ontario, Atlantic Computer developed a new software tool, called “Performance Enhancing Server Accelerator”, or PESA, which would allow the Tronn to perform up to four times...