DQ1 Atlantic Computers and DQ2 Mini-Case Snowboard Rental - Essay Example

DQ1 a) How can product/service differentiation provide a competitive advantage? Product and service differentiation can allow a company to achieve a competitive advantage by providing a product or service that is unique to the marketplace. Companies in the computer industry such as Apple have achieved tremendous levels of success by implementing a differentiation strategy. The Atlantic Bundle is a perfect product to use for a differentiation strategy. A company that gains a reputation for having products better than the competition is able to increase its brand value.

Companies that increase their brand value can charge a premium price for its products or services (Kotler, 2003). b) Are there strategies that may allow a competitor to compete effectively with Atlantic Computer? Competitors can use various strategies to compete against the Atlantic Bundle. One of the best strategies competitors can utilize is to create a substitute product that has the same functionality as the Atlantic Bundle. The competition’s product should be price at a lower price point.

Another strategy that can be effective to offset the Atlantic Bundle is to spend more money in advertising than Atlantic Computers. Companies should evaluate the return on investment of a marketing campaign (Frankenberger & Graham, 2004). c) Evaluate the four pricing options available to Atlantic Computer. What would be the most effective pricing strategy for Atlantic Computer? Why? The four pricing strategies the firm has identified are: Charge only for the hardware and give the PESE software for free Charge a price equal to what the company would pay for the Ontario Zink servers Charge a price on a cost-plus approach to pricing PESA Charge a price based on the value-in-use pricing Out of the four alternatives the option that the company should pursue is to charge a price based on the value-in-us pricing.

The reason that this is the best option is because the company should capitalize on the superior performance of the product. “The most important element of an effective market strategy is the ability to maximize and protect the price of the product” (Caltech, 2008). DQ2 a) Discuss the desired outcome when businesses revenue sharing as a marketing strategy. The desired outcome of a revenue sharing agreement is to minimize the acquisition price of the buyer and to optimize the revenue stream of the seller.

In the snow Snowboard Rental case study the owner was not interested at all in doing revenue sharing because his business is currently doing fine by purchasing the boards themselves. A person starting out a business with limited financial resources would probably be more interested in revenue sharing. Revenue sharing can often lead to a win-win scenario to both parties involved (Veen & Vnugopal, 2005). b) Evaluate whether or not revenue sharing is a viable solution for the challenges facing this entrepreneur.

The revenue sharing option is not a viable option for this entrepreneur because he is better off absorbing the cost of the damage to the boards during winter season. “Absorbing cost in accounting is a cost that is regarded an expense in the current fiscal period which results in reduced earnings” (Econtrader, 2011). The current setup of the owner is so profitable that he can afford to replace all boards and still make a profit. c) What other alternatives are available to this entrepreneur.

An alternative that the entrepreneur should consider is to change suppliers in order to reduce the acquisition costs of the boards. The business owner could also negotiate a credit line from the supplier. A credit line allows companies to acquire goods without the need of paying them by cash (Friegel, 2009). The company should try to negotiate a credit line that allows the firm to pay off the boards in 90 days. The 90 days would be sufficient time to recover the investment of the equipment through the daily rentals of boards.

References Caltech.edu (2008). Strategic Pricing. Retrieved February 7, 2012 from http://irc.caltech.edu/p-163-strategic-pricing.aspx Econtrader.com (2011). Absorbing cost. Retrieved February 7, 2012 from http://www.econtrader.com/what_is/absorbing_cost.htm Frankenberger, K., Graham, R. (2004). Should Firm Increase Advertising Expenditures During Recessions? Retrieved February 7, 2012 from http://www.premierguitar.com/About/pdf/Value_of_Advertising.pdf Friegel, J. (2009). The Benefits of a Line of Credit with the Right Bank.

The CPA Journal. Retrieved February 7, 2012 from http://www.nysscpa.org/cpajournal/2005/1005/perspectives/p16.htm Kotler, P. (2003). Marketing Management (11th ed.). New Jersey: Prentice Hall. Veen, J., Venugopal, V. (2005). Using revenue sharing to create win-win in the video rental supply chain. Journal or Operational Research Society, 56. p757-762. Retrieved February 7, 2012 from http://www.palgrave-journals.com/jors/journal/v56/n7/full/2601879a.html