Computron Case Aalysis

1 Problem identifying.

The Computron Inc. - Thomas Zimmerman, Manager of European Sales Division, facing a problem of pricing 1000X medium-sized computer for bid submission in order to win the competition for Germany's largest chemical company Konig & Cie. Zimmerman has to make a decision what price to bid on competition when knowing that his own company's priority is 33,3% markup and that competitors are willing to bid far more lower bids in order to win Konig's competition.

2 Situation Analysis (Data)

Opened in winter 1992, Computron specialized on manufacturing medium-sized computers price of which measured from 160,000$ to 1.2 million $. Computron's first six month of European sales office did only 2,200,000 $ in whole Europe, though in 95-96 however sales increased to 10 million, 24% (2,400,000$) of which came to Germany alone. Other countries shared 22% - England, 18% - Sweden - and remaining 36% other countries in total.

450% growth of business in 4 years led US headquarters, to build a plant in Frankfurt for further lowering the unit cost by dropping the import duty (15% of quoted US price) and shipping costs.

Current Breakdown of Computer Costs

Factory Cost 384,000$

33.3% markup cost 128,000$

Quotes US Price 512,000$

Import Duty 15% 76000

Transportation and installation 33600

Total "normal" price 622,400

The plant would serve all European Union and was scheduled to open on September 15, 1996. Ultimately computers completely manufactured in Germany would be entirely free rom import duty.

Although Computron had always concentrated on being the quality, blue-chip company in its segment of the digital computer industry, Konig did not focus too much on quality and flexibility and the company was planning to scrap the computer or convert for other users in four to five years. Also Zimmerman also estimated that during next year or two Konig would need another $2,000,000 worth of digital computer equipment. That said konig was therefore a key and the largest customer for Zimmerman.

3 main competitors

* Ruhr Maschinenfabrik, - Main competitor - Most likely to bid 436,000

* Elektronische Datenverarbeitungsanlagen - A real long-range threat - possibly to bid at cost

* Digitex, GmbH - More less threat then above two - most likely to bid half of Computron's normal price

These 3 companies, plus