Seagate Technology's global distribution strategy and local market partnerships

International Marketing

Strategic Management Analysis

The purpose of this work is to through strategic management analysis of Seagate Technology, a disc drive company and to take into consideration the implications of the statement made by Eric Johansson, President of Electrolux, "My strategy is to go global when I can and stay local when I must."

Due to the global economic downtown the marketing and management strategies of an organization hold even more importance in than ever in terms of ROI (Return on Investment) than when the markets are strong. Seagate Technology is the leader world wide in design, manufacturing and marketing of hard disc drives. Seagate provides products for a wide-range of Desktop, Enterprise, Computing and Consumer Electronics applications. The business model of Seagate leverages world-class manufacturing, technology and leadership to deliver quality and innovation as an industry leader to customer throughout the world.

Recent Strategies of Seagate Technology, Inc.

Seagate Technology announced in a February 1, 2005 News Release the appointment of three new North American distributors. The move is one, which is expected to further strengthen the company's position as the number one producer of hard drives worldwide. The terms of the agreement allow the three distributors to begin immediate shipping of products. The three new distributors are D&H, Condre and Computech International, Inc. (CTI). The news release states that: "By continuing to strengthen its customer partnerships through these carefully targeted distributorships, and by leveraging its technology ownership, innovation and unmatched operational excellence into the industry's broadest, most reliable product set featuring the world's most advanced technologies and interface leadership, Seagate continues to provide greater opportunities to more customers in more markets.

The new release further states that: "The authorization of these distributorships will enable Seagate to extend its reach with smaller resellers, who often prefer to purchase products locally. In addition, Condre, CTI and D&H all offer great flexibility in credit lines and payment terms. The ultimate goal is to provide the small- and medium-sized system builders, VARs and other resellers greater access to Seagate's technological leadership, innovation and best-in-class storage products." According to Don Kennedy, Seagate Vice-President - Sales: "Seagate has the broadest, most compelling set of storage solutions for our customers. Seagate has an ongoing commitment to building and maintaining channel integrity, and to helping our channel partners enhance their profitability while meeting the needs of their customers. The following Chart labeled Chart 1.0 shows by business the services or benefits that Condre, CTI and D&H bring to Seagate Technology, Inc. As well as the products of Seagate that the businesses will be offering.

Chart 1.0

Source: Seagate Technology Online New Release

Seagate Technology, Inc. Company Information & Data

Seagate was founded in 1979 and is identified on the New York Stock Exchange as STX. Seagate is the worldwide leader in the computer hard drives industry as well as the world's leading provider of Internet Infrastructure storage technology. Seagate has locations throughout the world with sites in California, Pennsylvania, Colorado, Minnesota, Northern Ireland, Singapore, Oklahoma, China, Malaysia, Thailand and the Netherlands. Seagate's major customers are original equipment manufacturers, distributors, resellers, dealer and system integrators.

Marketing in the Millennium- Industry and Market

Globalism was propelled by expansion in the marketplace during the 1980's, which transformed the market into the multinational enterprise or international business of today. During 2004, which was an election year the squeeze was being felt by the high-technology market with spending in the market reported to have dropped drastically last year. In a report stated is that; ":it Departments are under growing pressure to find the most cost-effective means to meet their escalating data storage requirements, including disc drive capacity and performance. " (Seagate Technology Paper) the report states further that, "Over the past two decades enterprise systems have achieved extraordinary gains in performance. Dramatic advances in processor speed, RAM size and RAM speed have combined to accelerate system performance to levels unthinkable just a few years ago. Such powerful hardware resources have made feasible software solutions with increasingly sophisticated and comprehensive capabilities enabling business productivity to climb at a remarkable rate." (Seagate Technology Paper) the report states that the aspect that has "lagged behind" is disc drive capacity, which is stated to have received "only modest gains." The report relates the fact that the 10K-RPM and 15K-RPM designed and manufactured, distributed and marketed by Seagate are the disc drives that "carry the highest reliability rating in the industry." (Seagate Technology Paper)

Core Competencies

Seagate states on its web page that, "Seagate has successfully relied on a strategy of ownership and vertical integration of key underlying technologies: designing, developing and producing the components that underpin its storage products, rather than relying solely on outside suppliers." Expertise in the following is required in order for Seagate or any other company to accomplish all of this:

Physics

Tribology

Aerodynamics

Fluid mechanics

Information theory

Magnetics

Process technology

Other numerous

The advantages gained due to this expertise at Seagate are: "enable advanced product lines with easier to use serial interfaces, increased areal density, new platforms and form factors to server a broader audience, and higher capacity to serve the market's insatiable need for storage." (Seagate Technology, Inc.)

Seagate states that the core of their success is the "advanced development of hard disc drive products." Seagate is indeed the market leader with its' products. Seagate further supplies the vast majority of its own components with Seagate products. Seagate's recording head operations has been recognized as being the largest and highest volume manufacturer of magnetic recording heads in the world.

Competitive Advantage

It is clear that Seagate's 10K-RPM and 15K-RPM disc drives have given Seagate the competitive advantage. The fact that Seagate designs, manufactures, distributes and markets this industry-leading product grants Seagate a great lead in the industry. The distinctive competencies of Seagate, product design and development, distributing and marketing as well as supplying of replacement part for its' own products give Seagate a distinct competitive advantage over rivals in the industry. Seagate claims that their competitive advantage is "People" in their statement that says as well that, "Successful individuals are the driving force behind successful enterprise."

Seagate Sustainable Profitability

Seagate Technology has a business that is "based on a balanced perspective between short- and long-term vision to grow the company, to increase earnings, and to enhance the corporate environment through investments that are profitable. (Seagate Technology, Inc. - Corporate Values) Seagate Technology has stated the company goals as follows:

Build a successful business model that encompasses the needs to our customers, shareholders and employees.

Provide a dynamic, responsive organization that ensures a rapid response to competition.

Invest in a balanced portfolio of short, medium and long-term business opportunities with measure risk.

Financials

2004 2003 2002 2001

Annual Sales ($mil)

Annual Net Income ($mil) 529.0 641.0 153.0 (522.0)

Growth Rates

Revenue (8.2%)

EPS (56.7%)

Dividend 71.4%

Return on Assets 7.5%

Return on Equity 15.8%

Hoover's Online states that Seagate Technology is 'very attractive' in terms of an investment to 'market leader investors' and attractive to 'growth at reasonable price investors as well as being attractive to balance investors.

Summary and Conclusion

Addressing the exact meaning behind the statement of Eric Johansson, President of Electrolux, "My strategy is to go global when I can and stay local when I must," one must look at the advantages of global enterprise in order to understand this statement in its' proper context and meaning. The stated advantage that is most applicable to this statement by Johansson is found in the global management strategic risk advantage. Due to diversification of macroeconomics in global business management, there is also diversification of the inherent risks in the global business environment. In other words while a business may decline in a market in one country, at the same moment the business may experience a decrease in another or perhaps several other countries. Therefore, to be a business on an international level offers a type of padding against sudden market declines that effectively destroy the business but instead there is a balance found within the business structure that survives the declines because those declines are offset by other increase of business in other markets throughout the world.