16 Foundation® Computer Strategies - 16.3 Chester - Broad Cost Leader

16.3 Chester - Broad Cost Leader

The Chester computer team will adopt a Broad Cost Leader strategy, and will maintain a presence in both segments 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.

Vision Statement

Low priced products for the industry: our brands offer solid value. Our primary stakeholders are bondholders, customers, stockholders and management.

Research and Development (R & D)

We will keep our existing product line and introduce at least one new line, maintaining a presence in both segments. We'll work to keep our products up to date in each segment despite high automation levels, without sacrificing our cost/price advantage.

Marketing

The Chester team will spend modestly on promoting and selling products in our industry. Our prices will be lower than average.

Production

We will significantly increase automation levels on all products. However, because automation sets limits upon our ability to reposition products with R&D, we automate more in the slower moving Low End segments than in the fast moving High End. 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 market share, market cap, ROE, and profits.