Interactive Computer Systems Business Case Study

Interactive Computer Systems Business Case Study

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. This made the

European subsidiaries furious as they started losing the sales volume.

At the same time, the U.S markets were performing really well. Both

groups stated that they followed the corporate pricing guidelines in

order for them to accomplish the 15% profit margin.

Comprehensive Analysis of Alternative Decisions

The marketing manager of Interactive Computer Systems, Peter Mark

became aware of the pricing use of model 2000 between the U.S and

European subsidiaries. The European and the U.S markets provided him

with the suggestions. The U.S market explained that due to the intense