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Growth and competitiveness of Established Companies Seagate Technology

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Captured half of the market for small disk drives by 1982. By 1984, sales has reached $344m ... escape from autocracy. Empowering nine senior vice presidents ... – PowerPoint PPT presentation

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Title: Growth and competitiveness of Established Companies Seagate Technology


1
Growth and competitiveness of Established
CompaniesSeagate Technology
  • 2001. 12. 21
  • Kyeong-Nam Yeon

2
Seagates Background
  • founded in 1979 by Alan Shugart
  • First product 5.25 inch hard disk
  • Captured half of the market for small disk drives
    by 1982
  • By 1984, sales has reached 344m
  • Dependent on IBM 1/3 of the companys shipment
    to IBM
  • In 1984, dwindled PC demand causing IBM to reduce
    orders and demand lower prices
  • Disagreement over the move to the 3.5 inch form
    factor
  • Favored by Finis and marketing side but opposed
    by many in engineering
  • Finis Conner left Seagate to start Conner
    Peripherals company

3
1983-1991 The Mitchell Years
  • In 1983 Mitchell replaced Shugart as president
  • Management style centralized decision-making and
    aggressive sales tactics
  • High volume production strategy to get costs down
  • Vertical integration employed 40,000 people
    worldwide to make many of the components
  • Relocated manufacturing operations overseas where
    labor costs were lower
  • Experienced a significant rise in sales by 1987
  • Was driven by the rapid growth in the market for
    hard drives in desktop computers

4
1991-1998 The Shugart years
  • Environmental change disk drive industry in
    state of transition
  • 1n 1987, shift from 5.25-inch to 3.5-inch drives
  • Built-in hard drive
  • Price wra in PC ? resulted in significantly
    lowered margin
  • Seagates profits declined by 39 BY 1988
  • In 1991, Seagate suffered an 11m loss despite
    steady revenues of 2.67
  • Reengineering
  • escape from autocracy
  • Empowering nine senior vice presidents
  • Focusing on higher profit margins and specific
    markets
  • Highlighted the controlling technology

5
From 1998 Steve Luczo
  • Seagate posted a 530m loss in its fiscal year
  • Luczo was named president and COO
  • State of disk drive industry
  • Declining prices and customer consolidation
  • Declining price structure
  • Increased competition in high-end business

6
Luczos strategy
  • Time-to-market and technology leadership focus
  • Main objective going forward is to improve its
    time-to-market for all products, especially in
    the low-end or desk top market
  • Seagates traditional market strategy efficient
    manufacturing and huge volumes ? no longer
    sufficient ? technology provides a lower cost
    platform
  • Changing the emphasis on vertical integration
  • Encourages management to analyze each component
    process to determine if Seagate should be going
    it or if it should be outsourced
  • Outsourced 10-20 of its heads from outside
    suppliers ? take advantage of the leader in head
    technology, incorporating the latest technology
    into its products
  • Shift from a cost model to a gross margin model

7
Luczos strategy
  • Organizational structure
  • Seagate was organized along functional lines ?
    compartmentalized and inefficient long lead
    times and high cost
  • Implemented a cross-functional team
    organizational structure core team organization
    structure
  • focus on product excellence, not on functional
    excellence
  • Provides more accountability
  • Phase zero process lays out what the criteria
    for the drive are, what the schedules for the
    drives are and where the technology is going to
    come from
  • Technology
  • Give the responsibility of not only catching up
    to competitors technology but also surpassing it
    to CTO
  • mandate Advanced Concepts Laboratories to find
    technologies that will be important 3 to 5 years
    in the future
  • Launched a new research organization, Seagate
    Research
  • First research organization on disk drive except
    IBM
  • Focused on the materials, processes and
    technologiesthat will come to fruition at least 5
    year
  • Purchased Quinta Corporation to overcome
    superparamagnetic limit

8
Luczos strategy
  • Operations
  • Time-to-market model requires flexibility, the
    ability to change product mixes very fast and go
    to another product because a customer requested
    it
  • Set up a metric system to measure the companys
    ability to respond
  • Implemented relationship between operation and
    marketing
  • Master schedule in process belongs to marketing
    department
  • Envisioned consolidation of all assembly
    operations into a single, automated disk drive
    plant
  • Product design centers
  • Consolidated 5 U.S. design centers into three
  • Implemented consistent development methodology
  • People
  • A cyclical process of execution
  • Lower-level decision-making

9
Contemplating Seagates future
  • Shift to higher value-added storage such as
    network attached storage
  • Automation and commonality
  • Design engineering ? process engineering
  • Hardware ? Software

10
Implication
  • Change of industry environment
  • Seagates strategy to overcome crisis
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