Computron Inc. Case

Q1 How off the beaten track(predicate) does Zimmermann eat to cut the damage to claim a chance? The apostrophize of a 1000X calculator for the European commercialize usu ally consists of the represent to manu bear downure ($768000), the overheads, a markup of 33 1/3% ($256000) that includes the realize, enquiry and development and exchange expenses in add-on to these fortunes, there atomic number 18 battery-acid and adroitness woos ($67200) and finally the logical implication art ($153600).Computron Inc. has previously assembled and manucircumstanceured its convergences in the US and shipped ready unspoileds to Europe, thereof having to chide the genuine US damage in sound out to cover the expenses of the nett component of the monetary value, the import duty.Given that the federation has do a strategic decision to pretend a milling autory in capital of Kentucky that would cover the assembling and manufacturing services for the European groceryplace, that consists of 15 countries, and given that the opening of this newly constructed eagerness is the 15th of September 2006 it is core groupual to assume that the manufacturing and assembly of the 1000X data processor for Koning & Cie, AG, if the parliamentary law is made, would win place at the topical anesthetic facility in Germ some(prenominal), kinda than in the US. This factor eliminates the expenses related to import duty ($ 153600) as well as significantly adulterates the deportee courts.Moreover, k flating that the corporations policy has never permitted decrease the markup sh ar in the European commercialise and that Konings vice president in burster of purchasing is not in privilege of purchasing any equipment that has a monetary value of more than 20% mel natural depressioneder than the concluding foretell subtracting the import duty from the authorized price of ($1244800) would b the kickoff step in reducing the sign price to $1091200. The treas ure is 4. 1% highschooler therefore $1046400, what would be the exact maximum price mentioned by Konings official.If we do not bribe into canvassation the potential for court diminution from condensed transportation costs in pitch to make up for the dismission in beforehand tax boodle from 17% to 6% in the last year comp bed with the one before, the price should stay put at $1091200. However, if the financial federal agency permits a set ahead decrease in price, the price should be cuted to $1046400, which is exactly 20% higher indeed the final bid of competition ($872000). This value should be final, because if Zimmermann allow for be tempted to elevate reduce the price in assemble to get the order, there is a very(prenominal) high risk of loosing on the jut of banner product.Koning has made orders from Computron before and therefore they atomic number 18 well cognisant of the flexibility, accuracy and overall high grapheme of its products. Submitting th e bid of $1046400, exactly 20% more therefore the net bid, would see compliance with the nodes cipher and thus allow for give a certain favorability to Computron, strengthening the already real customer blood with Koning and ensuring future contracts for products and services. Q2 What is constructed by bidding low? According to a reliable trade source, Koning has a centre of four different offers otherwise than Computron.These are the four main competitors, third of which unneurotic with Computron itself, own 80% of the gross gross sales events agreements in the German Market. Since the original price, which Compuron is get outing to offer, is 43% higher than the lowest bid, theres a big chance Computron loses the sale. The fact that Koning is an already acquired customer of Computron is a major(ip) strength in terms of loving the sale. If Computron offers the lowest bid, Koning will definitely consider their bid. It is simpler for Konigs to mound with a comp any they had purchased from already.Koning grant survived that Computrons products are flexible, accurate and of a high tint from their previous purchases. Bidding lower then the benchmark of a lowest bidder confident(p) 20%, could possibly ensure getting the order, as well potentially maximize the marketplace share of Computron in the long-run. Furthermore, commonsensible price is an important factor for Koning in acquiring this position product and thus bidding low could be a favorable factor in this crabbed spatial relation if we do not take into account the fact that Computron is already a market allow forer, so aiming to maximize their market share should not be of particular focus.The focus should be mainly on maximizing the levels of trust and loyalty with the customers. Q3 What is doomed by bidding low? Zimmermann has work out a price of $ 1,244,800 with respect to markup costs, factory cost, 17. 5% of import duty and transportation & installation costs. The mar kup cost in European market was fixed for Computron at 33 1/3%. Considering the fact that sale in 2005-06 was 6% comparison to the 17% the year before, the company aims to increase the sales and profit for their current year. Meaning, Computron would preferably ncrease markup cost in order to increase advantageousness & sales. Although to drive home a higher adventure of making the sale to Koning, they confirm to reduce the price and recalculate their costs by much less than 43% of the lowest bid. This leads to Computron having to decrease markup cost, or eliminate other cost from the final offer to Konigs. The reducing of markup cost will leave the company facing cash loss comparing to the amount theyre paying for selling & administrative expenses, and the price their offering. Computron are investing 8% of the total markup cost in R&D.Research & Development has an effect on Computrons position in the German Market, whereas they have highest percentage of digital put to work control computer sales. Although, the company will have to invest less in R&D in order to pr level(p)t profit loss for reducing their price bid to Koning. Computron will go behind again in sales by offering low price, as it would be one of the biggest sales of the year, Computron would definitely increase their profit if they succeed making the sale with their desired price. Having to reduce the price will put Computron behind in their aim of increasing profitability.Furthermore, the lowest bid is 872,000, its too low for Computron regarding their transportation cost, and markup costs. Its not an option for them to lower their price to that price. Even if they manage to reduce their costs enough to reach a kindred price, it will affect Computrons fo fill-in image. As mentioned, they have a penny-pinching reputation of quality and flexibility. Finally, if Computron reduce their price, itll be harder for them to have higher bids later in Germany, and particularly with Koning, whi ch have unsloped experience with Computron.Q4 What is gained by bidding high? Computrons position in the market and relationship with Koning seems strong. The price Computron s offering represents the cost world implemented to provide high quality product that exceeds the customer affects. By insisting on bidding at the normal price, the company is actually backdrop a standard on their product price and the input on its enactment. As mentioned, Computron is aiming to increase their profit on sales for the current year. Bidding high in the Konings sale will come on the company stabilizes quality and performance.Koning will have no doubts of the price reduction, where elimination of cost could be related to the performance of the machine, especially if the price is drastically reduced. Computron is affirming their quality by sticking to their highest bid, although competitors are offering 43% lower prices. Furthermore, by insuring the image of their superior product quality, sup ported by Konings opinion on their recent machines, will add up to Computron reputation, and stronger market position.If the root word of quality and performance was introduced to Konings properly, and the fact that they provide them with after sale service, could convince the Konings to choose Computron over the competitors. If Computron wins the sale, theyd reach their goal of increasing profit on sales. Selling to Koning with a high bid and their quality will lonesome(prenominal) provide the company with a stronger stigmatize image and customer loyalty and respect. Considering their past experience and the prove of new good investment by purchasing Computrons 1000X. Q5 That is happening in the market?It is predicted that the market will grow by 25% in the next several years. The market is valued at 16,000,000 dollars per year, of which Koning is a major part of, which leads to the conclusion that whoever seals deal, is potential to pass selling to Koning in the future. at that place value of new business to come around in the period 2005-2006 is estimated to be worth 5,200,000 dollars, which includes Koenig & Cie AG Frankfurt do$ 1,200,000 Dusseldorf Plant$ 1,000,000 Mannheim Plant$ 600,000 Central German big businessman commission$ 1,760,000.Deutsche Autowerke $ 640,000 $ 5,200,000 The European market is in fact not so active, as Koenig happens to be the only major vendee in the continent. Furthermore Computron hasnt been receiving any major orders from big companies for their products so far it has only been small businesses demanding Computrons computers. It seems all the big purchasers already have what they need, and are only interested in post-sales go/maintenance/updates. The submission deadline for Koenig is 1st, August, 2006. Q6 What is the competition doing?Ruhr Machinenfabrik AG are developing a computer specifically for Konings bid, and their set is well lower than that of Computrons 1000X. This is partly because they have an imp ort duty advantage as they are based in Germany, they need not to have this additional cost. This whence allows for a 17?% price differential. This reiterates the battleful nature of the firm. Up until now, they only employed in the sale of general-purpose computers. However, their get to increasing their market share is the likely explanation for such an aggressive reaction.Elektronische Datenverarbeitungsanlagen AG is seen as a long-range affright to Computron. They produce their product of a similar quality to that of Computron 1000X. In order to tighten their position they sold their first computer at a break-even cost, and ever since then they have been selling below Computrons price (by a differential of Computrons import duty subject). Digitex produce a product of only a clean quality compared to Computrons 1000X however uses a price cutting tactics/ sells at low cost (sometimes 50% below Computrons). solely the production is done in Germany.Their inferior quality ha s hindered their competitive capabilities. The rest of the competition is unlikely to cause any threat according to Zimmermanns point of view. Q7 What is Konings thinking about the situation? Konings invitation for bids was basically for the reason of deficient to pay a reasonable price along with high dependability of the machine. Since the machines are going to be used for quintette years preparation, these requirements would best suit what its be used for. Koning wants to credibly reduce the cost of machines used in discipline.It would be a good investment for the company to have five years training computers and soundless use it after for other duties, although the low price could be aimed to abandon the machine after. Requiring a machine specified for training wouldnt have the same specifications in the computers needed for the on-line process control. understandably the case showed the differentiation between having a flexible accurate machine, or a machine that is highl y dependent for training purposes. Koning looking at the situation from a perspective which he wants o gain the best opportunity on having the lowest price for a training machine, even if the quality wasnt as good as accurate machines needed. Koning already bought three machines from Computron, and are satisfied with the results of the machines performance and quality, and seems to agree the requirements needed for their plants. The company is most probably now aiming to invest less in the machines they want to purchase, which means having less concerns with the machine quality performance, as its not being used directly on their process. Q8 What is Zimmermanns position as manager of the European sales?Zimmermann is in a rather sticky situation because it is imperative that he seals the sale with Koenig who is their most important customer and satisfies the buyers demands. However at the same time he must comply with Computrons pricing guidelines. The pricing guidelines reinforce the customer perception of a high quality, superior and reliable product (diligence element). Furthermore a reduction in price in this case, will lead all future purchasers to believe that from now on, Computrons products are cheaper and will mechanically (wrongfully) anticipate lower prices from Computron in the future.There is no turning back. This situation is further accentuated with the factory construction in Germany. If the deal is not sealed, it is likely that that factory will remain idle for several months due(p) to lack of business. This will have a devastating impact on their snitch image. Lastly, and most importantly, they biggest strain placed on Zimmermann is from the competition. There are several competitors who have different advantages ranging from technological factors to pricing advantages. All want to make a sale just as bad. Zimmermann is going to have to address all of these, if hes to seal the deal.Q9 What should Zimermann do? * Price reduction $1046400 (8 5. 4% of the original price) * Offer the price reduction + claim Koning & Cie, AG of the local manufacturing and assembly facility local support (opening 16. 09. 06) * Focus on absolute necessity of getting the order long-term business relationship & added credibleness * Should NOT reduce the mark-up for European market (other customers will expect similar conditions with future orders) * Emphasize on Konings familiarity with the standards of Computrons products affirm the quality