Computron Inc. Case Study

Computron Inc.

1. What are the consideration affecting the price strategy of Computron? What is the relative of these considerations? What are the international marketing implications?

Some key factors which Computron has to take into consideration in determining the pricing strategy of 1000X digital computers in order to propose bidding for Konig are listed below:

1. The price which competitors are most likely to charge.

2. The future prospect of pricing in the long run such as future pricing of the digital computer to sale to Konig, future pricing for the other customers in the European market. In addition, Konig might negotiate to lower the price of the other product purchased from Computron or previously purchased from Computron as well. If the price was set too low, it will determine the price of Computron in the European market in the future, the company may not be able to increase the price back.

3. Positioning of the product since Computron currently set the position of their digital computer with high quality, reliable with premium price. If Computron lowers the price too much, it might affect their brand positioning.

4. The profit requirement of the company i.e. the 33.3% mark up? Can it be lowered? What’s the acceptable level?

5. The capacity of the new plant in Germany. What’s the capacity? Would it be possible to generate the high volume product and sale with economies of scale instead by taking advantage of the tax exemption?

The pricing strategy will affect Computron future business (profit and market share) in Germany, including the other customers around Europe. Future price and profitability of Computron in Germany and in Europe is the relative consideration.

2. How is the purchasing vice president of Konig likely to think about the problem?

The purchasing president of Konig could have looked at this problem from a pure cost perspective when making a purchasing decision. The purchasing manager was trying to leverage the sales opportunities by trying to drive the cost down and use this approach as a mechanism to set the future price of digital computers purchased. Since the digital computer is a customized product (not commodity product), which requires precision, dependability then it may not be possible to get the same level of quality of product with too low price. There is some risk in reliability and quality of the product if the purchasing uses only the price to determine in making the decision. However, there is some ethical concern as well if the purchasing manager discloses too much information of the competitor prices. It seems like the purchasing manager is trying to get Computron product (good quality) with the same level of price with competitors who had just entering the special computer product (Ruhr sold a medium quality general purpose computer before and it was then developing a special computer for Konig bid). There is some risk in quality and reliability of the product from Ruhr, that’s why the purchasing manager is trying to share this information with Computron since Konig actually would like to get the product from Computron.

3. How do you appraise the decision of different competitors on the bid?

Ruhr Maschinenfabrik Ag

Ruhr is likely to maintain the aggressive pricing strategy and undercutting the prices of Konig since their manufacturing base is in German, thus they can take the advantage of no tax import duty to bid with a lower price than Computron. Although Ruhr had sold a medium quality general purpose computer before,