Seagate Unfolds Strategy for Emerging Markets

One of Thailand's biggest electronics sectors is hard disk drive production. Last year's flood wreaked havoc on the industry's supply chain, especially in the case of top-tier players like Seagate Technology LLC (Nasdaq: STX) and Western Digital Corp. (WD) (NYSE: WDC).

In a previous blog, I highlighted some of the problems high-tech companies face in Thailand as a result of last year's flooding. (See: Thailand: When the Water Rushes In.) Seagate was not on the list of companies I visited during a media tour hosted this month by Thailand's Board of Investment. But I wanted to get the company's take on the flood, ask about lessons learned and the company's general impressions about doing business in this emerging Southeast Asian market. In an interview, Seagate's Dave Mosley, executive vice president of operations, discussed the disaster and his company's response.

Mosley also talked about Seagate's continued commitment to exploring business opportunities in emerging economies and expressed the conviction that many countries in Asia and South America will continue to drive growth for the entire electronics industry, hence his company's long-term investments in these regions. Here are excerpts from that discussion:

Baljko: Following the flooding, did Seagate consider relocating its facilities to less flood-prone areas of Thailand or to another country where you have existing operations?

Mosley: Seagate's pre-flood disaster planning processes and strategically placed facilities enabled the company to minimize disruption of product deliveries to our customers. While we are re-architecting and streamlining our global supply chain operations, we have no plans at this time to change the location of our major manufacturing facilities around the world.

In addition, we have taken a number of steps to further protect our facilities from potential future disasters. Couple this with the proactive planning that is ongoing with both our 3PL partners and our material suppliers, and we believe that Seagate will be well positioned to respond to future disruptive occurrences.

Baljko: Generally speaking, what are some of the challenges and opportunities of doing business in emerging markets?

Mosley: Seagate has a global leadership presence in the information storage industry. We are a major participant in all geographies. With the rapid expansion of the Asian economies, especially China and India, there is an enhanced focus on that part of the world. But the same can be said for other fast expanding economies such as in Brazil, Russia, and the Middle East.

Each of these geographic regions presents its own special issues that need to be addressed. Oftentimes, there are legal or customs issues that may be unique to a region. Again, in those cases we ask our partners to help us find the most optimal solution to the problem at hand. We also see that in faster growing economies, more so than in the more mature ones, changes in demand are more frequent and lead times may be shorter. That may require us to use more airfreight to satisfy customer demand requirements. At the same time, we see that in the more established markets demand is more predictable, making it amenable to alternative methods of product movement.

Ultimately, we have found that no one solution is appropriate for any region and that a full battery of logistics offerings must be available to our company at all times. That is why we are constantly focused on improving on what we call our "fast execution network," involving our customers and our logistics partners in evolutionary and revolutionary fulfillment change.

Baljko: Specifically regarding Thailand, what are the challenges and opportunities of doing business here?

Mosley: There are a number of reasons to locate some portion of our Asian manufacturing footprint in Thailand. In addition to a very dedicated workforce, along with the co-location of many suppliers, there is also the ease of moving freight into and out of the country. Both from a customs clearance perspective as well as from a cost perspective, there are many advantages to having Thailand be a major center of manufacturing expertise.

Also, as we saw last year, the Thai people are very resilient. They were able to overcome the negative effects of the flooding much faster than had been anticipated. Couple this with a government that is interested in improving the country's infrastructure and the productivity of its workforce, and you have an environment where common objectives can be focused on and realized.