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Computron Case Analysis

American company Computron is trying to win a bid to supply their 1000x computer to German chemical company Konig. To do so, Computron must lower their bid to 20% above their competitor's price of $218,000 due to their computer costing $311,200 which is 43% higher. Computron is considering building a factory in Europe to reduce import duties and costs to lower their price for the bid. Their best option is to manufacture the 1000x in their new Frankfurt factory to eliminate import costs and transportation expenses and allow them to offer a price 20% above their competitor.

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2K views

Computron Case Analysis

American company Computron is trying to win a bid to supply their 1000x computer to German chemical company Konig. To do so, Computron must lower their bid to 20% above their competitor's price of $218,000 due to their computer costing $311,200 which is 43% higher. Computron is considering building a factory in Europe to reduce import duties and costs to lower their price for the bid. Their best option is to manufacture the 1000x in their new Frankfurt factory to eliminate import costs and transportation expenses and allow them to offer a price 20% above their competitor.

Uploaded by

Sasha Chest
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case study

«Computron»

Prepared by:

Batyuk Artem

Date 23.11.2020

Moscow 2020
Summary.

American blue-chip company, called Computron, which deals with construction of


high-quality digital computers, is trying to win the tender to supply its 1000x
computer to German chemical company Konig. Computron is hardly a stranger to
European market and has already supplied Konig with several computers. In order
to reduce import duties and compensate its high markup, Computron is going to
build a factory in Europe. It won’t be easy to win the future tender, due to the fact
that 1000x costs $311,200, which is 43% higher of competitors price. To win a
contract, computron’s bid must be only 20% higher of the lowest bid

Problem.

Computron has to win the bid to continue its internationalization.

Cast of characters.

Institutions:

Computron Inc. – is an American company, which produces digital computers. Its


main product – 1000x computer designed specifically for process control
applications. Computron is building new factory in Europe. Its 100x costs $311,2k
with a markup of 33%.

Konig&Cie., Ag – is the largest manufacturer and processor of basic chemicals and


chemical products in West Germany. Computron’s largest European customer.

Ruhr Maschinenfabrik, AG – is a very aggressive German company, which has


developed special computer only for Konig bid. Principal Computron’s competitor.
Planned price is about $218k

EDAG – is a new company which has developed a general-purpose computer of


comparable quality to the Computron 1000x.
Digitex, GmbH – is a subsidiary of an American firm, which may be a real
competitor to computron, but only in the long-term, due to its technological origin
(USA is a tech hub)

People:

Thomas Zimmermann – manager of the Computron’s European sales division,


responsible for setting price for Konig’s bid

Chronology.

1975: Quite rapid growth of the market for digital process control computers.

1976: Computron opened a European sales office in Paris. During its first 6
months, the European sales office did $1100000 worth of business.

1977-1978: European sales office did $5000000 for the year . Computron’s overall
PBT represented 6% of sales.

Today, July,1978: Zimmerman is trying to decide what price to submit on his


bid(to Konig) to sell Computron.

01.08.78: deadline for submission bids to Konig.

15.09.78: scheduled opening of a Computron’s plant in Frankfurt.

Issues.

1. Headquarters does not have intention to reduce relatively high markup


2. Konig is interested only in dependability and a reasonable price. They
don’t need all the features of Computron’s 1000x
3. Ruhr Maschinenfabrik, AG, has created specific computer, which meets
all Konig’s requirements.
4.

Options.
1. Option: Lower markup, by reducing R&D and sales expenses in order to win
the bid

Advantages: a. winning the contract


b. new plant will not be sitting idly.
c. higher profits before taxes.
d. further increase of a European market share.

Disadvantages: a. loss of blue-chip reputation.


b. lowering company’s quality image.

2. Option: Manufacturing of a new general-use computer to meet Konig’s


proposal
Advantages: a. saving company’s quality image.
b. expansion of production.
c. attraction of more clients.
Disadvantages: a. costs associated with manufacturing of new product are
high
b. Computron will not meet the deadline
c. lowering of new plant productivity
3. Option: manufacturing 1000x in Frankfurt, with elimination of import
duty and reducing transportation and installation costs to set a price 20%
higher than lowest bid.
Advantages: a. saving company’s quality image.
b. winning the contract.
c. further increase of a European market share.
d. obtaining loyal customer.
Disadvantages
There are no explicit disadvantages

Recommendations.
1000x manufactured in Frankfurt price will be approximately $311200-
$40000=$271200 (without import duty and transportation)

Winning contract is $272500 ($218000 : 0,8). Therefore, the price will be


acceptable to Konig. Hence, the third option will be preferable. Winning the
contract is a crucial task not only for European office, but also for the whole
company. To implement the third option as quickly as possible, headquarters must
hire team in Frankfurt.

Plan of action.

1. Employ team in the plant, start training them


2. Introduction Computron’s price to Konig.
3. Due to Computron’s credibility and past relations, Konig accepts price
4. Search for similar customers as Konig in England and Sweden
5. Construction of a plant in England.
6. Buy a money bag.

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