Market Position: Case Study of Seagate Technology

Market Position: Case Study of Seagate Technology

(2065 words)

In the hard drive market, Seagate maintains 34.3 percent share which is expected to increase throughout 2007 (2006).  Its closest rival is Western Digital capturing 19.9 percent of the market. Seagate Technology is the leading independent maker of hard drives that are used to store data in computers ranging from desktops to data centers of corporate networks and the Internet (2006).  Such stability and growth would not be possible without proper treatment on marketing issues.  Segmentation is a means to dodge dominant companies in a particular customer need by dividing the market into smaller and more homogenous groups where dominant companies fail to properly address their needs, there is still room for improvement and the market is too large for profits to be sufficient for less dominant companies

(1991).  Once the market is segmented, targeting is the next process by which a company has to decide about the quantity and groups marketing efforts will be applied (2000).  Positioning is most useful when a company has several target markets and maintaining product concept in the customer minds becomes challenging.  Market position comes from the idea that the company’s range of products and specific segments can occupy a clear, distinctive and desirable place against competition ().

 

Segmentation, Targeting and Positioning Strategies

Seventy percent of Seagate’s sales are derived from computer manufacturers like HP, Dell, EMC, IBM and Sun Microsystems while the remaining is completed through distributor and retailer sales (2006).  Although it does not operate online selling directly to retail customers, it has business partners such as Amazon, Best Buy and Dell to deliver such service (2006).  It also has a few sales offices in major countries such as US, UK, Canada, Middle East, Japan and Australia.  It maintains a website that educates the market about the products, provide some advertising-oriented stories and direct the location of authorized distributors and retailers.  Its line of storage products is compatible to the needs of computers in any enterprise and home as well as upgrade requirement of notebooks, consumer electronics and retail solutions.

 

Seagate is currently focusing its segmentation strategy towards the best growth and profit potentials.  This is eminent in its development and success in selling and being a pioneer manufacturer of the newest hard disk technology in the market called perpendicular recording technology (2006).  The growth market strategy to segmentation can contribute to the continuous leadership of Seagate (2000) especially the fact that a research confirmed that the technology transition will take 50%-75% of all Seagate shipments in 2007.  It use of technology will also have 40% annual usage growth and competitors that are too slow in adapting the manufacturing and distribution system necessary to produce the product will be squeezed out of the market.  Perhaps, in the IT industry, static and decline market strategies () to segmentation are uncommon due to rapid changes in technology and Seagate is a true leader to implement this caution through its resources, operations and strategies.

 

 

The targeting strategy used by Seagate is the differentiated strategy (1999).  The company has multiple target markets each applied with appropriate marketing mix (e.g. product, price, place, promotion) to adapt with each segment needs (see Appendix 1). Differentiated strategy caused Seagate to incur greater costs on marketing because it will have to use unique resources to satisfy unique segment needs.  For example, promotions required by Dell and other manufacturing firms would be likely related to cost-based opportunity while retail customers would prefer the product warranty because of lack of technological knowledge.  As a result, Seagate looses the chance for economies of scale, say, for concentrating on product information and durability.  On the other hand, it can raise the company’s effectiveness by sufficing customer needs with appropriate marketing mix.  For example, retail customer would perceive that Seagate protects their interests and would result for the latter to enjoy customer loyalty and marketing based on word-of-mouth.  However, focusing on product features can be undermined by large and key buyers as they can easily switch with Seagate’s competitors if the company would fail to exceed the “gross” value their product mix.

 

The core positioning used by Seagate is the functional concept.  The concept posits that the product is designed to solve problems of consumers based on externally-stimulated factors (2000).  The perpendicular recording technology is a new storage technique that align memory bits vertically for more spacious settings that longitudinal present in traditional drives do not have (2006).  Hence, Seagate technology provides more data that can be saved into computers and other electronic devises without loosing computing efficiency and reliability.  The competitive advantage that companies need as well as efficiencies individual people demands to save costs and time at work are the direct problems that the technology solves.  In addition, the company is known for innovation.  This can relax other customer needs (e.g. price, promotions, etc.) in favor of the level of innovation the company can offer.  As a result, innovative image brings the company cost-savings from too much advertising costs not only because its customers are already knowledge of the functionality and reliability of its products but also the purchase is critical to customer success and satisfaction.

 

 

Differentiation Strategy of McDonald’s

The company derives its income from restaurant operations, vast real estate holding and retail sales merchandise.  Such business portfolio is quite successful because it results to continued increase in revenues.  In addition, the rigid franchising selection scheme supports the company’s policy in choosing the best income-generating constituents under its umbrella.  Franchising procedures emphasizes the ability of the prospect to stand in its own financial resources without support for the company.  This produces a stable interest expense obligation.  In addition, the company is also the one who will select the location and provide training for the prospective franchisees.  This tactic serves as a balance to mitigate the financial pressure passed to franchisees.  In effect, the company incurred the most operating expenses far above the franchisees.

 

Despite a rigid and systematic franchisee selection, it paid off for the company because since 1992, cash inflows from franchisees

 

contributed at least 60% of the total revenues of the company.  This is far behind the contribution of the company-operations (at least 20%) and

 

affiliate results (at least 10%).  Such is an indication that the approach to franchisees is effective.  From the franchisees, the company gets a

 

monthly franchise fee and rental on properties.  Both are compulsory including the latter because the company owns most of the properties (e.g.

 

land and building) in which franchisees are doing their day-to-day operations.  This is compatible with the standardized/ integrated global

 

operations and ownership of real estate holdings.

 

However, there are some indications of loopholes.  Net income continued to plummet even though all three core businesses are

 

contributing their share in an increasing phase.  The bottleneck of which is that non-operating expense continued to increase since 2001.  Since

 

these are activities that are not directly contributing to the improvement of operations, it indicates inability to prioritize activities and evaluate

 

their effectiveness based on the bottom-line.  There can be too much focus on real estate that had resulted to excessive sales and advertising

 

fees or commissions to sales representatives and valuators.  The financial difficulty is demonstrated through mitigating current expenses as

 

shown by continued to decline in tax payments since 2000.

 

In the failure of the company to enhance the bottom-line, per common share net income including the diluted figures continued to surge since 2000.  The expenses incurred in company-operated restaurants are far above the expenses in franchises.  Due to this, the company fails to maximize the potential of its franchisees in limiting its company-operated expenses.  There can be too much training costs due to high turnover of the company.  The company is announced to have one of the industry’s performers who has very high employee turnover.  As a result, direct costs (e.g. training) and indirect costs (e.g. lost of sales due to unfamiliarity) both affects the profit and efficiency potential of franchisees.  The latter is suggested as the company’s slow service in drive- through window is trailing behind other brands (e.g. Wendy’s, KFC, Burger King, Taco Bell, etc.).             

 

Evaluation of “Plan to Win” Strategy

“Plan to Win” focuses on key drivers to success such as people, products, place, promotions and price which is intended to lay the pipeline for innovation, increase sales and endure profitable growth.  It is also supplemented by a company-wide call to focus on core business as the company sold its stakes in pizza, non-McDonalds brand and Pret a Manger in Japan.  With focus on five key success indicators, the company intends to increase their customer-orientation and focus on marketing strategies.  However, even though “Plan to Win” has its share of valuable benefits, marketing and financial information/ results imply strategic problems.

 

The plan intends to situate its people and staffing during peak periods, giving training and rewards as well as implementing training under

 

e-learning for cost effectiveness.  However, as quality is much necessary to improve drive-through efficiency and prevent loosing sales than

 

quantity, the first execution factor is tarnished.  The second one may not be possible as net income is in continued decrease.  However, the third

 

factor may be probable because long-term investments continued to increase since 2000 which can include information technology.  The cost

 

effectiveness of the latter, however, is eminent but there is a lack of marketing and financial information for to its support.

 

 

With regards to product improvement, it received focus within the plan which produced more varied products as a response based to

 

changing customer preferences.  However, as non-operating expenses and company-owed restaurant expenses rise, the fruit of the former

 

effort will not emanate in the bottom-line.  Its limitation is also showed as the amount of end-inventories increased since 1998 which means that

 

new product variations are yet to be permanently suited in the market.  In the contrary, goodwill is increasing which can indicate that the market

 

appreciate the effort of the company in improving its products.

 

 

The increase in goodwill can also serve as the basis in admitting that the endeavor to also improve the place like renovating rebuilding and even relocating to provide modern, family-oriented and relevant restaurants is quite effective.  The market appreciates how the company took consideration with value-added services.  However, the cost of acquisition and maintenance of buildings and other properties is adversely affected by increasing depreciation and amortization since 1998.  This shows that the market emphasis of the company has some setback for its financial results.  Long-term debt has also increased since 1998 that may have used to support this strategy.  However, increasing interests from this item should be supported by increasing net income.

 

The Role of Relationship Marketing

Relationship marketing (RM) is the source of marketing partnerships, strategic alliances and networks which are methods that enable independent strategies of individual entities to benefit from other benefits brought about by collaboration with other (2000).  For Seagate, RM can bring the company in a more formidable leadership position in a fast-changing IT environment.  Although it is an innovator, absence of RM can result to hostile competition from several companies that may lead to loyalty demise of its large and small customers.  The core idea behind RM is building rapport with customers () that can lead to customer retention.  Such set-up lead to long-term and loyal customers which are found to be less costly, have willingness to pay premium price of the product and also willingness to engage in word-of-mouth referrals to prospective customers (2002).  For example, the provision of Seagate’s website for marketing communication to manufacturing companies, distributors and resellers can be perceived by such clients as a way of providing excellent service leading to continuous patronage.  The same effect is true to individual customer’s provision of hard drive education tutorial and distributor referral.  However, there are pitfalls in RM and these are much related to implementation rather than RM strategy itself.  One example is the lack of resources and deviation of corporate strategy that makes company efforts to understand RM in the point of view of customers difficult or impossible ( 2002 ).  Without such understanding customers may not appreciate the feat and even treat it as completely negative campaigns.  For example, it is indicated that catalogs and direct marketing were favorable to customers but e-mail messages are viewed less favorably ( 2002 ).  Without understanding of customer needs and preference, the communication requirement of RM cannot be met.