Application Automatic Feed Survives Through Ingenuity 
The strong dollar of the late 1990s and early 2000s set off a small revolution in factories across America. Consider Automatic Feed Co. Located in Napoleon, Ohio, it makes machinery used in auto plants. To cope with the strong dollar, it undertook the most extensive product redesign in its 52-year history. Its aim was to neutralize the cost advantages its foreign competitors enjoyed because of their weak home currencies. The company redesigned its machines to make them easier and less expensive to build and also modernized its production system to reduce the costs of manufacturing. By 2002, the production overhaul and redesign efforts had cut production costs by 20%. At the same time, Automatic Feed developed new software that allowed customers to track the productivity of a particular machine on a manufacturing line and to pinpoint exactly where a problem is when a line breaks down. By quickly flagging the source of a problem and displaying a digital rendering of it on a computer monitor, the software saves time and cost for customers. This ingenious software reduces the price elasticity of demand for the company’s offerings, thereby making it less subject to currency risk.
Companies can also differentiate their product offerings by adding service features that customers value. For this to be a viable strategy, the premium customers are prepared to pay for this differentiation must exceed the cost of adding these service features.