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Page 6 of 7 Niche Cost Leader (Low Technology)
Strategy
A Niche Cost Leader Strategy concentrates primarily on the Low End segment of the market. Competitive advantage is gained by keeping R&D costs, production costs, and raw materials costs to a minimum, enabling the company to compete on the basis of price. Prices are below average. Automation levels are increased to improve margins and to offset second shift/overtime costs.
Mission Statement
Reliable products for low technology customers: our brands offer value. Our primary stakeholders are bondholders, stockholders, customers, and management.
Tactics
• Research & Development: We will concentrate our existing product line in the Low Tech segment, initiating projects as necessary to prevent total obsolescence. We will also introduce at least one new product to our Low Tech customers.
• Marketing: Initially we will attempt to keep pace with the awareness and accessibility of our competitors' products. After we establish our cost leadership position we will revisit our situation to decide whether sales and promotion budgets should be reduced or if we should continue to match our competitors. Our prices will be lower than average.
• Production: We will significantly increase automation levels on our products. We will prefer second shift/overtime to capacity expansions.
• Finance: We will finance our investments primarily through long-term bond issues, supplementing with stock offerings on an as needed basis. When our cash position allows, we will establish a dividend policy and begin to retire stock. We are not adverse to leverage, and expect to keep debt/equity between 2.0 and 3.0. We measure performance in terms of ROS, stock price, and ROE.
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