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INTERACTIVE COMPUTER SYSTEMS CORP

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Introduction

INTERACTIVE COMPUTER SYSTEMS CORP Summary of Decision Situation Interactive Computer Systems was a multinational manufacturer of computer systems and equipment. The Company was primarily a U.S based corporation with the majority of its engineering and manufacturing facilities located in the eastern United States. The company was headquartered (parent company) in the U.S and worldwide offices referred as subsidiaries. For example, when a customer in France orders a system, the order is processed by the local European subsidiary. The order then is transmitted to U.S to have the system built. Upon the building of the system, the subsidiary buys it from the parent company at an inter-company discounted price. Furthermore, when a subsidiary sells the product, its selling price is based on interactive Computer System's U.S Master List Price uplifting it by the increased cost of doing business. The Master List Price is for standardized products only and subsidiary sets a local price for any specialized products. Each company was held responsible for achieving profit before tax of 15%. One of the specialized products, "model 2000", designed and manufactured in Europe was only offered in Europe. Due to the popularity of the product in Europe, the U.S customers demanded the product to be sold in the U.S. The product eventually became available in the U.S at a much lower price due to market conditions such as competition. Due to the lower prices in the U.S markets, the European customers started to order from the U.S offices. ...read more.

Middle

If the price is too high, the customers will purchase other brands and if the cost is too low, the profit margins will hurt and eventually can drive the product out of the market. According to Cianet.org and Cuntrywatch.com, the investment is greater in the computer industry in the U.S as opposed to the other countries. Which simply implies that the competition is much greater in the U.S than the European countries such as the United Kingdom, Germany, and France. The U.S holds great enterprises such as Lucent Technologies, Cisco Systems, Microsoft and IBM whereas the key enterprise in the United Kingdom is Royal Dutch/Shell, key enterprise in Germany is Deutsche Telekom and France Telecom in France. Almost each one of these enterprises has a market cap in USD in millions greater than any of the key enterprises found in the United Kingdom or France. Following is the market cap to compare U.S, Europe, Germany and France. On the basis of competition market prices for the same product may differ from county to country. The high competition mentioned above can significantly affect the prices (Jeannet). As a result of high competition in U.S, the prices are lower when compared to the European price. That is, the competition in Europe in the Computer industry is not as great and therefore they have better pricing flexibility. Furthermore, the income level of a country's population affects the amount of goods and services bought. ...read more.

Conclusion

Conclusion The overall goal of any global company is to minimize the price gap between various markets. In this case, Interactive Computer Systems was charging two different prices in two different markets. The price of model 2000 had a gap that needed to be minimized. Another major goal for any global company is profit maximization. For instance, customers' purchases are important to Interactive Computer Systems because they are the ones to increase sales. Internal management is important because they grant employee sale bonuses based on sales. Even though investors and creditors look at the Total Company profits, sales, etc. each one of Interactive Computer System's subsidiary contributes to the Profit and Loss Statement. Pricing is one of the most difficult tasks to determine for any global company. There are many factors that need to be considered including company's internal factors, market factors, and environmental factors. Some of the internal factors include profit and cost factors. For instance, Interactive Computer Systems should evaluate its costs and ensure that the costs don't exceed their profits. Market factors that affect pricing are income levels and competition. As previously mentioned above, Interactive Computer Systems should analyze its competitors on a regular basis and price their products according to the purchasing power in a particular country. The external factors are particularly important because they are more difficult to control. For instance exchange rate and inflation rates should be closely monitored. Interactive Computer Systems should continue to hedge the currency to avoid or minimize future risks and costs. ...read more.

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