Seagate Technologies operates in a highly competitive, price-sensitive, and growing industry for disk drives. Competitors include a number of direct, indirect, foreign, and domestic competitors including, but not limited to Quantum, Western Digital, IBM, Toshiba, and NEC.
To compete, Seagate’s maintains low prices and introduces new cost-effective products that are equal to or better than the competition. To support such a strategy, Seagate invests heavily in R&D, maintains strong supplier relationships, and utilizes vertical integration combined with high-volume, low-cost manufacturing. Vertical integration allows Seagate to quickly turnaround and manufacture new products. Seagate’s manufacturing approach of high-volume and low-cost is supported by operating at near-full capacity, by major capital investments to meet capacity, and by locating its facilities strategically in low labor costs areas along the Far East.
While Seagate has an average annual growth rate of 15%, operations in the low cost, high-volume environment for disk drives has its risks. These include: 1. Fierce Competition: Not meeting customer demands would cause customers to switchover. Additionally, there is potential for many new entrants into the market. Seagate mitigates this risk by differentiating its products with a greater energy saving and greater read speed for disk drives. 2. Capacity Risk: If Seagate cannot produce enough of one component, then production of its entire disk drives will be limited. Seagate mitigates this risk by planning its productions schedule months ahead of time, by shipping capital equipment from its other facilities to meet production schedules, and by investing in new equipment. 3. Demand Forecast Risk: Seagate’s plan to create production schedules months ahead of time instead of adjusting monthly increases creates major fluctuations in demand. This presents Seagate with demand uncertainty. Seagate reduces this risk by having...
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