16 Foundation® Computer Strategies - 16.5 Erie - Niche Cost Leader

16.5 Erie - Niche Cost Leader

The Erie computer team will adopt a Niche Cost Leader Strategy and concentrates primarily on the Low End segment. 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.

Vision Statement

Reliable products for low technology customers: Erie brands offer value. Our primary stakeholders are bondholders, stockholders, customers, and management.

Research and Development (R & D)

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

The Erie team will spend modestly on promoting and selling products in our targeted segment. 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.