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Assume you are a producer of a staple consumer product (a staple product is one that is used by most people and for which consumption does not vary much with changes in income, like basic tools, picture frames, and personal care products). You are in a very competitive industry and are in the middle of a strategy discussion.
Tom: Our competitors have much higher quality than we have. As a result, they can charge a higher price. We could produce the same quality if we invested in new machinery. We would also have to ramp up our marketing to convince our customers that we have improved quality.
Susan: ACME, the huge national company will always beat us on cost. Their quality is not very good but they are able to supply Walmart and Target with store brand merchandise.
Tom: I suggest we aim for the middle market with our own brand - average quality at an average price.
Required:
How would you respond to Tom? Is "middle market with our own brand - average quality at an average price" a good strategy? Why or why not?
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