Computron 1000x Essay

1329 Words Feb 5th, 2009 6 Pages
Executive summary

The Computron, Inc. is facing problems regarding pricing the bid for Computron 1000X, future functioning of Frankfurt plant, impact on production due to current market breakdown.

The main concern about Computron is that if the bid of 1000X should not higher than 20% of least bid to get the contract. It is strongly recommended to get the bid for functioning of new plant. Various issues regarding cutting down prices, bidding high or low and its pros-cons, current market situation and the competitors is discussed here.

Regarding the markup price, the top management is not allowing to go below 33.3%. Though some of the other options to be consider like on basis of past good relations with Konig explain them the
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German market to increase 25% ($1,300,000 worth of new business) for the next several years. Other than Germany, England (22% sales), Sweden(18%), other European country(36%) are also the best for the growth of Computron. This will be helpful to make the foundation firm of new plant and through bidding high Computron can maintain the image of its company and prove that quality is the most important factor when it comes to auction.

Recommendation

I suggest that Computron should go with the price cutting strategy and offer the bid as $ 400,000 (Option 1). As shown in exhibit 1, Computron is having highest cash equivalents, working capital than previous years. So, top management can be explained that Computron is capable to face the loss in the beginning. But finally by bidding low and gaining the contract it would make it possible and less risk to build new factory. Also it would help them pay for much of their overheads($600,000) for the factory. If possible to discuss with Konig Purchasing Vice President, we should discuss with him to understand more on the criteria and priority in making decision with regards to the special digital computer (cost, quality or support etc)'s bidding. Also enlighten future breakdown of new business that’ll help both Konig & other European market. (Exhibit 2)

This way it could maintain to keep the profit and establish good relationship with Konig which can be the foundation for the contract that's worth $ 700,000 in the

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