Seagate Technology Case

1. What is Seagate’s corporate strategy and how does its manufacturing strategy and processes support it?

2. What are Seagate’s major risks? How does it manage those risks?

3. Critically evaluate Seagate’s product and process development strategy, which calls for development in its respective product/process centre in the US and then exporting the developed process to a site in the Far East for high-volume production.

Case Introduction: 'The Barracuda 9LP' & 'The Cheetah 9LP' are the two new high-end disk-drive products families that are scheduled to go into volume production in the first calendar quarter of 1998. The capital appropriation request called for $ 103 million capital investments in two final assembly facilities, one for the Barracuda and one for the Cheetah and one for joint test facility. The company's establishment and ongoing expansion of production facilities in Singapore, Thailand, Malaysia, China and Ireland are directed toward cost reduction.

Question 1 and 3:

Extensive Product Line: The Barracuda family of 3.5 inch drives was first introduced in 1992. At 7,200 rpm, the Barracuda had the highest rotation speed of any drives produced at that time. In fiscal year 1997, Seagate introduced two new products in the Barracuda family, the Barracuda 4LP and the Barracuda 4XL, with 4GB and 4.5GB respectively. The Barracuda 4XL, which began volume production during the fourth quarter of fiscal 1997, was designed to provide a balance of price and performance for the workstation market as it matures.

The Cheetah family of products came in later. In August 1996, the company announced the 3.5-inch Cheetah family - the world's first drives to offer rotation speeds of 10,000 rpm for increased data throughout and lower latency times. Volume production of the Cheetah 4LP and the Cheetah 9 began in the third and fourth quarters of fiscal 1997, respectively. Finally, the Elite product line covers the high end 5.25-inch market. In the third quarter of 1997, production started on the Elite 23.

Finally, Marathon and Medalist disk drive product lines are targeted for the personal mobile and desktop computing market, respectively, while the high-end workstation and server/multi user systems market is served with the Barracuda, Cheetah, and Elite product families.

Seagate' product line was diverse and included over 50 rigid disc drive models with from factors 2.5 to 5.25 inches and capacities from 1GB to 23 GB. It provides more than one product at some capacity points and differentiates products on a price to performance and form factor basis. Seagate typically devotes its resource to developing products with industries leading performance characteristics and to being among the first to introduce such products to market. The company continuously seeks to enhance its market presence in emerging segments of the rigid disc drive market by drawing on its established capabilities in high volume, low cost productions.

Cost Leadership: Continued focus on strategic relationships with vendors to get the best deal. Produce and sell its disk drives in significant volume, continue to lower manufacturing costs and carefully monitor inventory levels to reduce costs. Design and develop the processes in US and then transfer volume production of disk drives and related components between facilities, including transfer overseas to countries where labor costs and other manufacturing costs are significantly lower than in the U.S.

Scale and Integration: The primary driver of the Seagate's manufacturing strategy is high volume, low cost assembly and test. Further, vertical integration in the manufacturing of selected components has further helped control costs and quality. Focus on “Kaizen” or continuous improvement is further part of the manufacturing strategy. Seagate rapidly achieved high manufacturing yields in new production processes and obtained uninterrupted access to high quality components in required volumes at competitive prices.

Marketing and Promotions: Reducing production costs and fast time to market are key components of the production and corporate strategy. The company's entry and expansion of production facilities in several countries including Singapore, Thailand, Malaysia, China and Ireland are directed toward such cost reductions. The capital investment to build production capacity was significant and had two components. First, as expected, there were significant fixed costs, estimated at about $40 M, associated with designing, commissioning, and starting up the three new facilities. The second component was that the capital expense of building new capacity with the amount of capacity - larger production capacity required larger space requirements and tooling costs, leading to a linear increase in the capital expense.

Focus on requirements and customer needs:

The most important activity in the process is the identification of the requirements on the product portfolio. It was mandatory that the requirements be found both in the business strategy or corporate strategy, and in other functional strategies. Requirements put on the product portfolio consisted of among other range, mix and volumes of products.

New product proposals:

Generally, ideas for new products can arise in different way but at Seagate it is mostly driven by the unmet demand in the market. Extensive market research and analysis was also an important step of the product strategy.

Product Portfolio and development process:

The product development process was done such that any new line of products would not only meet the needs of the customers but also fit in the needs of the company, its products and its manufacturing. Seagate devoted significant resources to product engineering aimed at improving manufacturing processes, lowering manufacturing cost and increasing volume production. Seagate's process engineering groups are located with the disc drive development groups and the reliability engineering groups in many cities of U.S. and in Singapore.

When making decisions within the product development process it is important to have the product portfolio in mind and vice versa. Therefore, it is emphasized that the same group of managers handles both the product development process and the product portfolio.

Reengineering and Modelling:

New requirements and new features, manufacturing processes, customer needs on a product or family of products require a reengineering or else the product will become obsolete. Seagate's product life cycles of disc drives are short (high volume products introduced and sold for about 6 to 7 quarters.