company focused solely on producing and selling endoscopic surgical instruments.Largo management hoped that the new company would prosper without the distractions of other Largo businesses and capture market share of endoscopic instruments as quickly as possible. Since its inception just over six years ago,Meditech produced innovative,low-cost products. New products were brought to the market quickly and pushed by an aggressive sales force. Old products were updated with innovative features and presented to the market as new products.Consequently,the competition between Meditech and National Medical centered on the continuous development and introduction of new products by both companies.A dozen or more new products would typically be introduced by Meditech in any given year. While the development strategies were similar,the sales strategies differed dramatically National Medical concentrated on selling to surgeons.Meditech's sales force concentrated on selling to hospitals material managers as well as to surgeons.Material managers tended to be more concerned with cost and delivery performance.The surgeons,on the other hand,focused on product features.As the pressures increased on health care costs,the importance of the material manager's purchasing position also increased.Meditech was well positioned to take advantage of this important shift. The success of Meditech's strategy quickly became evident.Within six years,Meditech had captured the leading share in the endoscopic surgical instrument market.This was no small feat by any market's standards,but with surgical instruments this was especially impressive.Market share changes in the professional health care industry tended to take place gradually.Surgeons and doctors often held onto preferred manufacturers.Hospitals frequently used group purchasing organizations(GPOs)which took advantage of extended contracts with suppliers. The process of"converting"a hospital to a new supplier often took months of negotiation and convincing. Most endoscopic surgical instruments are small enough to fit into the palm of a surgeon's hand They are mechanical in nature,typically having several intricate mechanisms to provide the required functionality.Materials used to produce the instruments include plastic injection molded parts,metal blades,springs,etc.In all cases of use,surgeons use the instrument for one operation and then immediately dispose of it.Instruments are never re-sterilized and re-used for another patient.All in all,the Meditech product line consists of over 200 separate end- products. Distribution Meditech distributes all its goods from a central warehouse,using two primary channels, domestic dealers and international affiliates,to distribute its products from the central warehouse to end-customers (i.e.,hospitals).The first channel,for domestic sales only,uses domestic distributors,or dealers,to ship to hospitals.The dealers order and receive products from multiple manufacturers,including Meditech,typically stocking hundreds of different products. Stocked products range from commodity items,such as surgical gloves and aspirin,to endoscopic surgical instruments.By using dealers to supply products,hospitals do not need to order directly from manufacturers for their diverse needs.Additionally,since dealers maintain 2company focused solely on producing and selling endoscopic surgical instruments. Largo management hoped that the new company would prosper without the distractions of other Largo businesses and capture market share of endoscopic instruments as quickly as possible. Since its inception just over six years ago, Meditech produced innovative, low-cost products. New products were brought to the market quickly and pushed by an aggressive sales force. Old products were updated with innovative features and presented to the market as new products. Consequently, the competition between Meditech and National Medical centered on the continuous development and introduction of new products by both companies. A dozen or more new products would typically be introduced by Meditech in any given year. While the development strategies were similar, the sales strategies differed dramatically. National Medical concentrated on selling to surgeons. Meditech's sales force concentrated on selling to hospitals material managers as well as to surgeons. Material managers tended to be more concerned with cost and delivery performance. The surgeons, on the other hand, focused on product features. As the pressures increased on health care costs, the importance of the material manager's purchasing position also increased. Meditech was well positioned to take advantage of this important shift. The success of Meditech’s strategy quickly became evident. Within six years, Meditech had captured the leading share in the endoscopic surgical instrument market. This was no small feat by any market’s standards, but with surgical instruments this was especially impressive. Market share changes in the professional health care industry tended to take place gradually. Surgeons and doctors often held onto preferred manufacturers. Hospitals frequently used group purchasing organizations (GPOs) which took advantage of extended contracts with suppliers. The process of “converting” a hospital to a new supplier often took months of negotiation and convincing. Most endoscopic surgical instruments are small enough to fit into the palm of a surgeon's hand. They are mechanical in nature, typically having several intricate mechanisms to provide the required functionality. Materials used to produce the instruments include plastic injection￾molded parts, metal blades, springs, etc. In all cases of use, surgeons use the instrument for one operation and then immediately dispose of it. Instruments are never re-sterilized and re-used for another patient. All in all, the Meditech product line consists of over 200 separate end￾products. Distribution Meditech distributes all its goods from a central warehouse, using two primary channels, domestic dealers and international affiliates, to distribute its products from the central warehouse to end-customers (i.e., hospitals). The first channel, for domestic sales only, uses domestic distributors, or dealers, to ship to hospitals. The dealers order and receive products from multiple manufacturers, including Meditech, typically stocking hundreds of different products. Stocked products range from commodity items, such as surgical gloves and aspirin, to endoscopic surgical instruments. By using dealers to supply products, hospitals do not need to order directly from manufacturers for their diverse needs. Additionally, since dealers maintain 2