Brand Extension Marketing Plan

Kaplan University
Graduate School of Business and Management Brand Extension Marketing Plan

Thomas N. Bailey GB530 5/31/2011

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Solid State Drive by Western Digital Corporation 1.0 EXECUTIVE SUMMARY Western Digital Corporation (WDC) is the second largest computer hard disk drive (HDD) and solid state drive (SSD) manufacturer in the world for internal, external, portable and shared storage applications. WDC also pursues opportunities in the many new roles for digital content in peoples daily lives at home, including software and applications for handheld devices, television and other home entertainment devices. WDC was founded in 1970, and is recognized as the leading drive manufacturer in terms of quality, speed, customer value creation, and consistent innovation. In 2010, WDC introduced a new line of solid state drive, the SiliconEdge Blue SSD. Just as WDs HDDs are designed for capacities, burst speed, low cost, quality and reliability, the SiliconEdge Blue SSDs are engineered withinnovative features, low power consumption, high level of tolerance to shock and vibration and world class technical support. The SiliconEdge Blue SSD is a first consumer-oriented SSD thatasserts fast read/write speeds and high SSD capacities. The SiliconEdge Blue SSD makes an ideal storage solution for read-intensive applications requiring high performance and plugand-play compatibility. The SiliconEdge Blue SSDs are available in 64 GB, 128 GB and 256 GB capacities. The drives feature Multi-Level Cell (MLC) flash, custom TRIM support, SATA II interface, and 3-year warranty.SiliconEdge Blue has lower power consumption than WDs competitors drives. The Key Customers for the SSDs will be those mainstream consumers that want fast boot-up and applications access time; those in the market for mid-range to high-end desktop PCs and laptops, the gamers, and the enterprises. The customer value proposition is a fast access time and features rich solid state drives that are highly reliable and low power consumption. Customer needs for the SiliconEdge Blue SSDs include durable, high quality, reliable drives that will last a long time or even outperform the life expectancy of the product. Customers also need quality customer service and reliable exchange and repair programs. SiliconEdge Blue SSD will come with 3 years warranty and back by WDs world-class technical support. With a Manufacturer Suggested Retail Price (MSRP) of $279 for 64 GB, $529 for 128 GB, and $999 for 256 GB, Western Digital Corporation expects to sell 150,000 SSDs (60,000 drives with 64 GB capacity, 40,000 drives with 128 GB capacity, and 50,000 drives with 256 GB capacity) in the first year. Sales are projected to grow 3% and 5% in the second year for mainstream consumer and enterprise, respectively. For year three through five, each of those year, the SiliconEdge Blue SSDs are expected to grow at rate of 8% and 10% for mainstream consumer and enterprise, respectively. By year three the estimated sales of SiliconEdge Blue SSDs is over $109 million. WDC has a total manufacturing and marketing cost of $179 per drive with 64 GB capacity, Page 1 of 31

Brand Extension Marketing Plan 2 $300 per drive with 128 GB capacity, and $760 per drive with 256 GB capacity. In order to break even based on sales, marketing, and other expense, WDC will have to sell 100,000 drives with 64 GB capacity and 43,669 drives with 128 GB capacity. Based on the aggressive market growth goals, WDC should achieve their break-even point by Q2 of 2011. From the beginning (year one), WDC made a small profit of $1.95 million for the 256 GB capacity drives. In order to have a successful product launch for the SiliconEdge Blue SSD, the drive must be promoted as a product for the mainstream consumer and enterprise in need of fast boot-up and applications access time, coupled with low power consumption and high reliability. Utilizing strategic partnerships with Original Equipment Manufacturers (OEMs), Original Design Manufacturers (ODMs), distributors and retailerswill be important to penetrate the market, especially the enterprise market. The product must be reliable with no defects to ensure the quality and reliability of the product. The SiliconEdge Blue SSD must be properly priced for the targeted market and must properly be promoted above the competition.

2.0 SITUATION ANALYSIS Western Digital Corporation has introduced its latest Solid State Drive (SSD) in the form of the SiliconEdge Blue SSD, making it the first consumer-oriented SSD from the company which boasts fast read/write speeds and high SSD capacities. The SiliconEdge Blue SSD makes an ideal storage solution for read-intensive applications requiring high performance and plug-and-play compatibility. Western Digital Corporation provides products and services for people and organizations that collect,manage and use digital information with wide array of high-performance hard drives and solid state drives that keep users' data accessible and secure from loss. 2.1 Market Summary y The WDC SiliconEdge Blue SSD is the first SSD product to be marketed for the mainstream consumer. They are targeted for those consumers who want fast boot-up and applications access; those in the market for mid-range to high-end desktop PCs, laptops, and gamers. A survey conducted by StorageSearch.com reveals that 76% of SDD buyers cited application speedup as the number 1 reason they use SSD. The number 2 reason given was environment is unsuitable for HDD cited by 31% of SSD buyers. The International Data Corporation (IDC), a premier global provider of market intelligence, advisory services, and events for the information technology telecommunications and consumer technology markets, is predicting tangible levels of growth within the solid state drive (SSD) market until at least 2013. The prediction was made after IDC figures revealed that SSD shipments exceeded 11 million units in 2009, which represents a 14% year-on-year increase.The market

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Brand Extension Marketing Plan 3 watcher added that shipment levels will achieve a compound growth rate of 54% over the 2008-to-2013 forecast period. The market for SSD with SATA interface is rising. For SSD the balance of three basic spheres is kept: low-order model for notebooks, elder models for superlight notebook and high end server solutions. If in the first case the small overall sizes and mass are necessary to users, then in the second the speed and light weight are more important, and in the third case the speed is placed over all. In the segment of consumer electronics SSD will replace classical flash-disks and small hard disks. For the removable devices, the reliability of SSD is attractive. Notebook and hyperfine notebook will actively use solid-state disks; therefore, this factor will increase the realization volumes of SSD. Server systems, where the high transmission speed is claimed, will also pass to the use of SSD. An increase in the SSD popularity will support demand for NANDmemory at the high level. The SSD market is in the midst of its first wave and it wont stop there. The second wave of the SSD market in 2013 to 2019 will see SSD being at the center of a new data driven economy in which solid state storage becomes the prime lever of information systems, instead of microprocessors and operating systems, as the digital hardware market progresses on the roadmap to the petabyte SSD.
y

For projecting revenues of the WDC SiliconEdge Blue SSD, a growth model based off of the three geographical segments was used. The Asian segment is to contribute to a significantly higher percentage of net revenue than any other segment. The emerging economies in the Americas segment such as Brazil will exhibit large Internet and PC growth, results in very high growth rate. The European segment will struggle in terms of growth as countries recover from the debt crisis and will face a slower recovery than other geographical segments. WDC expects U.S. growth to be slower than many countries within the Americas segment; however, slow growth will be partially offset by emerging market growth. Based on geographic growth rate trend, Asias percentage of net revenue will increase from 53% in 2010 to close to 70% of net revenue by 2020. 2.1.1 Market Demographics
y

Demographics: Prior to WDC SiliconEdge Blue SSD, the target demographics for solid state drives have been the business enterprise segment. Until now, SSDs are unaffordable for the mainstream consumers. The introduction of SiliconEdge Blue SSD mainstream consumers has change all that due to its affordability. At the low end of the spectrum, mainstream consumer solid-state drives could soar as a result of the popularity of netbooks and light weight laptops. Netbooks make sense for adults who want access to online services via a cheap, portable, lightweight device and for children who are clamoring for their Page 3 of 31

Brand Extension Marketing Plan 4 first computer. The introduction of iPad by Apple, Inc. also signals the maturity and popularity of SSD in mainstream consumers.
y

Geographic: WDC is a global corporation and its products are used in many computing applications. Mainstream consumer SSD is still in its infancy but even so, the market share has already reflected the global sales of the product. 57% of the SSD sales to date is in USA, with 18% in EU, 15% in Asia, and 10% in Middle East. Behavioral Factors (Psychographics and Lifestyle considerations): With its unique features and performance, SSDs have already gained significant momentum in global market. Today global leading players have understood the underlying benefits and ultimate contribution of this technology and have come up with great seriousness to provide this technology a wide platform. Psychological concept applied to consumers purchasing patterns suggests that consumers are more likely to purchase products based on the perceived differences between products, as in the case between SSD and HDD, than they are to purchase based on the attributes of one product brand or another. Together with promoting, pricing and advertising, packaging is one of the main marketing strategies used by companies in order to sell their products. Other behavior factors that reflect the lifestyle of the SSD users are cost and reputation of the company. Since the price-per-gigabyte of mainstream consumer SSD is still high, the buyers of SSDs are those with money, those that want fast access time, and the gamers. Reputation on reliability is also critical behavior factor. Companies with reputation for quality drives like WDC will reap the benefits from the consumers that other companies may not enjoy.

2.1.2 Market Needs Because enterprise-grade solid state storage (SSS) accesses data directly from Random-Access Memory (RAM) or Flash chips, it can achieveinput and output data rates far greater than conventional magnetic storage devices such as hard disk drives(HDD). SSS products are available in a number of form factors (shapes and sizes) and solution types implemented at different points in the data path.Up to now, vendors offer SSS products in the size and shape of add-in cards that plug into server motherboards, HDD form factor modules inserted into existing servers andstorage arrays, and stand-alone systems intended to be rack mounted alongside other storage media in a data center. More recently, NAND Flash-based SSS has been introduced into themarketplace as manufacturers have learned to make it reliable and fast enough to meet enterprise needs. The introduction of SiliconEdge Blue SSD will be the first consumer-oriented SSD. Page 4 of 31

Brand Extension Marketing Plan 5 Theirfast read/write speeds and high SSD capacities making them an ideal storage solution for read-intensive applications requiring high performance and plug-and-play compatibility. 2.1.3 Market Trends Solid state data storage is gaining significant acceptance today. Storage based on Ram-Access Memory (RAM) and Flash chips instead of mechanical hard disk drives is earning much greater attention by meeting the market requirements for reliability, performance, and cost more effectively than ever before. Additionally, the surge in consumer electronics sales has increased awareness of Flash in particular and solid state storage (SSS) solutions in general. This technology is finding new ways of providing cost effective solutions in a wide range of commercial and governmental information systems. With SSDs, capacity affects performance. The greater the capacity, the better the performance.That's because SSDs are built with multiple parallel input/output (I/O) channels from the drive's controller chip to the NAND flash chips that store data. Generally, the greater the number of NAND flash chips, the greater the number of parallel channels or bandwidth to access the data on those flash chips. Price for nonvolatile memory, such as the NAND flash used in SSDs, has remained flat or increased slightly over the 2009, and adoption has likewise been relatively flat. The trend for SSD application is in portable devices, such as MP3 players and smartphones. SSDs have also been marketed for medium to higher end laptops and netbooks, such as the Lenovo X300, Apple Mac Air, Sony VAIO X, and Dell Adamo XPS. Another trend for SSD application is in enterprise uses as server and storage. They are used in cache server because SSD has lower latency than HDD; for streaming video because SSD has sustained performance for stable service; and as storage because SSD has high input and output per second (IOPS) and bandwidth, and lower power consumption. The last trend for SSD application is in data center. The three major benefits of SSD in datacenter are less power, less cooling, and less space. This is because SSD consumes less power due to no mechanical part; SSD emits lower heat because of no moving part; and SSD outperforms HDD over 100 times. 2.1.4 Market Growth Hard disk-drive manufacturers repositioned themselves in the Great Recession, managing to show growth in 2009.The market grew nearly 11% on a unit basis in 2009 and is slated to grow another 11% in 2010, according to industry analysis. Desktop PC sales were stronger than many industry executives and analysts had expected as the fourth quarter saw a big rush to Page 5 of 31

Brand Extension Marketing Plan 6 desktop PCs. There was strength in China. Full-size desktop PCs are a status symbol in that nation, as compared with smaller notebooks or netbooks. Shipments also are continuing to rise for external drives used for the storage of gaming, music and movies.The market for 2009 was about product mix. Seagate(STX) leads in the desktop and the enterprise markets, which were down for 2009, while Western Digital(WDC) has focused on non-desktop applications, primarily the 2.5-inch form factor for mobile and CE, which are up in 2009. Table 2.1.4-1 Market Activity Q1 09 Q2 09 Q3 09 38 40.6 46.3 31.6 40 44.1 Q1 08 Q2 08 Q3 08 43 43 48 34.5 36.6 39.4

Millions of Units Seagate WD Millions of Units Seagate WD

Q4 09 49.9 49.5 Q4 08 37 35.5

Total 2009 174.8 165.2 Total 2008 171 146

Seagate ended the year as the market leader again, with shipments of 174.8 million drives, slightly ahead of Western Digital which shipped 165.2 million drives. Seagate and Western Digital also benefited from paring costs in the downturn, helping to make the profit turnaround so dramatic. As shown in Table 2.1.4-1, Seagate increased shipments by 2.2% year over year while Western Digital increased shipments 13.1%. Since total shipments for the hard-disk industry increased nearly 11%, Seagate lost share while Western Digital increased share. The 1.8-inch form factor drives used in the smallest mobile devices took the greatest hit. Shipments dropped in half to less than 11 million units, as solid state drives (SSDs) using NAND flash have taken over the sector. WDs hard drives are used in desktop computers, notebook computers, and enterprise applications, such as servers, workstations, network attached storage, storage area networks and video surveillance equipment.Additionally, its hard drives are used in CE applications, such as digital video recorders (DVRs), and satellite and cable set-top boxes (STBs). WD also sells its hard drives as stand-alone storage products and integrates them into finished enclosures, embedding application software and offering the products as WD-branded external storage appliances. For the Q4 2010, Western Digital market share by units shipped vaulted to a 49% of HDD/SSD manufacturing market share, an impressive number. Enterprise solid state drive (SSD) sales will grow by almost 90 percent a year between nowand 2015. The prediction covers flash-based solid-state drives (SSDs) in enterprise servers and SANs(storage area networks). The main forecasts are that the Page 6 of 31

Brand Extension Marketing Plan 7 market for enterprise SSDs willgrow from 150,000 units in 2010 to over 4.1 million units in 2015, representing an averageannual growth of nearly 90 percent. Enterprise SSD revenues, which should reach $510m in 2010, will grow at a 55% average annual rate to reach $3.8bn by 2015. There will be a steep price decline in the SSDmarket driven by NAND price falls and a move from singlelevel cell (SLC) to multi-level cell(MLC) flash, driven by a maturing of SSD controller technology. The large DRAM bufferseen in current enterprise SSDs and the common over-provisioning will both shrink, furtherreducing costs. Serial Attached SCSI interface SSDs will out-ship Fiber Channel interface ones beforePeripheral Component Interconnect Express drives take over. SSD use in enterprises will transition from transaction processing applications to largeinternet systems. 2.2 SWOT Analysis 2.2.1 Strengths y Strong financial performance: Western digital has recorded strong financial performance over the past few years. The companys total revenue has grown at a compounded annual growth rate of 19% to reach $5,468 million in fiscal 2007 from $2,719 million in fiscal 2003. Western Digitals operating income increased from $187 million in fiscal 2003 to $415 million in fiscal 2007, representing a Compound Annual Growth Rate (CAGR) of 22%. The companys net income increased from $182 million in fiscal 2003 to $564 million in fiscal 2007, growing at a CAGR of 33%. Western Digital recordedbetter operating and net income margins over its competitors. In fiscal 2007, the company recorded operatingand net income margin of 7.6% and 10.3%. In the same fiscal year, Toshiba, a competitor of the companyrecorded operating and net income margin of 3.6% and 2.2%. Similarly, Fujitsu, another competitor of thecompany, recorded operating and net income margin of 3.6% and 2.3% in fiscal 2007. The companys cash from operating activities has increased from $101 million in fiscal 2003 to $402 millionin fiscal 2007, representing a CAGR of 41% for the five year period. Western Digital has also recordedcomparatively higher returns than its competitors. In fiscal 2007, the company recorded Return OnAssets(ROA), Return On Equity (ROE), and return on capital employed of 22.6%, 39.3%, and 23.4%, respectively.For the same fiscal year, Toshiba and Fujitsu recorded ROA, ROE, Return On Capital (ROC) of 2.6%, 13%, and 8.3% and 2.6%, 10.9%, and 8.5%, respectively. Strong revenue growth and cash flows

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Brand Extension Marketing Plan 8 indicate better financial position, andhelps the company build investor confidence. y Broad product portfolio: Western Digital is a provider of hard drives for various markets like desktop, mobile, enterprise, and consumer electronics. The companys offerings for the desktop users include popular drives like WD Caviar 7,200 RPM drives, available in both Enhanced Integrated Drive Electronics (EIDE) and Serial Advanced Technology Attachment (SATA) interfaces. 10,000 Revolution Per Minute (RPM) WD Raptor X is the only hard drive in the world that has a seethrough window. WD Scorpio hard drives form the high performance drives in the mobile line. In the enterprise storage segment, Western Digital offers WD Raptor, the worlds only 10,000-RPM SATAhard drives. The WD RE enterprise series and WD Raptor offer high performance, reliability and capacity fornetwork attached storage devices, storage area networks, workstations, medical imaging, gaming andvideo/broadcast applications. In the consumer electronics devices, Western Digital products include video-streaming drives catering to the users of digital video recorders requiring large capacity for video streaming ofTV shows and movies. Broad product portfolio provides cross selling opportunities and insulates the companyfrom decline in demand in any particular segment. y Other strengths of Western Digital Corporation are:vertical integration that decreases supplier costs and offsetsAverage Sales Price (ASP) decreases; substantial market share growth through acquisitions; decrease Cost of Goods Sold (COGS) through vertical integration and economies of scale; and constantly improves product lines in terms of innovation and performance.

2.2.2 Weaknesses y Customer concentration: Western Digital generates significant amounts of revenues from a limited number of customers. In the fiscal 2007, the company generated more than 10% of its total revenues from Dell, its single largest customer. During 2007, 2006 and 2005, Dell accounted for 10%, 12%, and 16%, respectively, of the companys total revenue. In fiscal 2007, Western Digital recorded 47% of its total revenues from top 10 customers. Dependence on limited number of customers for large proportion of its revenues increases the business risk of the company. Loss of significant customers would not only affect the companys results of operation but also its market share.

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Brand Extension Marketing Plan 9 y Declining research and development (R&D) investment: The R&D investments of Western Digital have been declining over the past few years. Though the companys investment in R&D in absolute terms has increased from $135 million in fiscal 2003 to $306 million in fiscal 2007, its R&D spend as a percentage of total revenues has declined from 6.6% in 2004 to 5.6% in fiscal 2007. By contrast, Seagate, a competitor of the company spent 8.7% of the total revenue as R&D investment. Toshiba, another competitor of the company, has recorded slightly higher investments of around 6% of the total revenues as R&D spends. Declining investment in R&D indicates lower attention towards development of technology and newproducts, which is likely to have an adverse impact on the future competitiveness of the company. Lack ofcompetitiveness would adversely affect the business operation and market share of Western Digital. y Weak internal controls: The Companys involvement in certain litigations indicates instances of weak internal controls. In fiscal 2006, the company initiated a review of historical stock option grants, which brought out several derivative actions file on behalf of the company. These actions were against certain current and former directors and executives of the company with the company as a nominal defendant. These actions claim violation of certain sections like 10(b), 14(a) and 20(a) of the Securities Exchange Act, accounting, breach of fiduciary duty and/or aiding and abetting, constructive fraud, waste of corporate assets, unjust enrichment, rescission, breach of contract, violation of the California Corporations Code, abuse of control, gross mismanagement, and constructive trust in connection with the companys option granting practices. These complaints seek monetary damages and reforms to the companys governance.Weak internal controls would affect the investor confidence on the company. Other weaknesses of Western Digital Corporation are: decreasing ASPs possibly effecting margins; international tax holidays and tax incentives are expiring in 2020; risk exposure due to selling only hard drives; and dependence on Original Equipment Manufacturer (OEM) performance for a large percentage of revenue.

2.2.3 Opportunities y Strategic acquisition: Western Digital has made a significant acquisition in the recent period. The company acquired Komag, a manufacturer of hard drives, in September 2007. The company has strategic intention of integrating its research and development activities in the US and its manufacturing facilities in Malaysia and Thailand with those of its new partner, creating an improved value chain and cost effective model. Page 9 of 31

Brand Extension Marketing Plan 10 Through the acquisition of Komag, the company is also planning to integrate media in the hard drives. Successful integration of the acquisition would enable the company create effective supply chain and strengthen its revenue streams. y New facilities: Western Digital is planning to expand its facilities in the US. In October 2007, the company signed a multi-year lease for its planned hard drive design center in Longmont, Colorado. The company is working towards making the center operational. Through the new facility, the company is planning to ensure continued growth in its engineering capabilities. Expanding design centers enables the company to focus more on the new technologies and enhance its product offerings. New products: Western Digital has launched several new products in the recent period. In November 2007, the company announced its new environmentally friendly, GreenPower family of WD enterprise hard drive products. The WD RE2 GreenPower (GP) hard drive is in capacities of 500 gigabytes (GB), 750 GB and one terabyte (TB), and provides cost savings to the organizations dealing with large data. This new drive caters to the information technology challenges like total available drive slots, maximum capacity, and available power and budget. These products have power saving as their primary focus and deliver 40% savings in hard drive power consumption. In September 2007, the company launched My Book, external storage solutions to suite specific users. Thesesolutions were made available in My Book Home, My Book Office, and My Book Essential Editions incapacities ranging from 320 GB to 1 TB. Earlier the company has released MY Book storage appliances incapacities of 2TB in view of increasing digital content. New products launches would provide the companywith opportunities to add new customers and enhance its market share. y Other opportunities for Western Digital Corporation are: increasing internet use in emerging markets; increasing growth in the consumer segment; strengthening of U.S. and international economies increasing PC and hard drive demand; surpassing Seagate in market share to be the worlds largest HDD manufacturer; and major economic growth in Latin America, China, and India.

2.2.4 Threats y Intense competition: Western Digital operates in intensely competitive technology equipment markets. In the hard drive industry, suppliers compete for sale of HDDs to limited number of large customers. Most of the products in the industry are highly substitutable as they are used in Page 10 of 31

Brand Extension Marketing Plan 11 compliance with certain technical standards. High substitutability poses difficulties in product differentiation. Hard drive manufacturers compete on the basis of product quality, reliability, storage capacity, unit price,product performance, production volume capabilities, delivery capability, leadership in time-to-market,timeto-volume and time-to-quality, and service and support.The companys products are differentiated basedon operational excellence, high product quality and reliability, and designing and incorporating into harddrives desirable product performance attributes rather than on storage capacity, buffer size or time-to-market.Some of the hard drive manufacturers with whom the company competes include ExcelStor Technology,Samsung Electronics Incorporated, Fujitsu Limited, Seagate Technology, Hitachi Global StorageTechnologies, and Toshiba Corporation. Increasing competition lowers the prices and affects the profitabilityand market share of the company. y Declining average selling prices: The hard drive industry has been experiencing declining average selling prices over the past few years. Prices of the hard drives are increasing owing to various factors like decreasing production costs, liquidation of excess inventories and attempts to gain market share. Average selling prices (ASP) also decline when there is a shift in the mix of product sales, and sales of lower priced products increase relative to those of higher priced products. Continued decline in the industry ASPs would lead to the same in the companys ASPs, affecting its operating profits. Patents: Western Digital is dependent on numerous copyrights, trademarks, patents and related commitments to protect its intellectual property rights. In spite of the careful procedures and ownership of several US and international patents, the company is involved in intellectual property related litigations. For instance in January 2007, Texas based StorMedia filed a complaint against the company and several other drive manufacturers alleging infringement of a patent (US Patent No. 6,805,891). Western Digital answered the complaint denying allegations and asserting affirmative defenses, and has also filed counterclaims against StorMedia. Such litigations would impose financial obligations on the company. Any unfavorable outcomes in the patent related litigations claiming damages would adversely affect the reputation and financial position of the company. Other threats to Western Digital Corporation are: falling behind competitors in product innovation; weakening economies decreasing demand for personal computers and peripherals; international currency fluctuations; further weakening in the consumer space; and continuing shifts in OEM demand patterns. Page 11 of 31

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2.3 Competition The two largest and direct competitors to WDC are Seagate Technology, Inc. and Toshiba Corporation. There are also several other smaller competitors including Fujitsu Limited, Samsung Electronics Company Limited, and Sandisk Corporation. Seagate designs and manufactures HDDs for notebook computers, desktop computers, enterprise applications, and the consumer market. Seagates largest revenue driver comes from the enterprise segment, whereas Western Digitals revenues are mostly derived from the consumer electronics segment. Seagate is a pure-play competitor of Western Digital due to the markets they operate in, business growth strategies going forward, risk profile, and forward looking margin growth. Toshiba products play an active role, be it in computing, controlling, powering, or communicating -- transporting, cooking, playing, or even elevating. The company's portfolio includes personal and professional computers (notebook PCs, servers), telecommunications and medical equipment (mobile phones, X-ray machines), industrial machinery (power plant reactors, elevators), consumer appliances (microwaves, DVD players), electronic components (electron tubes, batteries), and semiconductors. Its portfolio also includes air traffic control and railway transportation systems. Customers outside Japan account for more than half of Toshiba's revenues. Western Digital hard drives have an excellent reputation in the storage industry.WDC HDDs are the first to use a new technique called perpendicular recording technology which essentially allows more data to be stored in a smaller space, a technology that allows HDD to increase storage space without increase the size of the HDD.These hard drives also sport advanced acoustic and power-conserving technologies. Another notable feature is called SecurePark which lodges the recording head off the platters when not in use, making the hard drive better able to resist shock during non-use and guaranteeing a longer reliable performance period due to less wear and stress on the head. These hard drives also have features that help protect the disk from vibrations and bumping while in use.Unnecessary moving of the drive head over the platters increases wear and tear on the drive causing the drive to fail faster. All WDC HDDs have been designed with features to eliminate this unnecessary wear on the drive, with an optimizing feature known as Native Command Queuing (NCQ). This technique increases the performance of SATA hard disks by allowing it to choose the most efficient sequence in which it will follow write and read commands. Consequently, this eliminates many unnecessary movements of the drive head, thereby prolonging the life and increasing performance of the hard drive. WDC Raptor line of hard disk drives is such a unique product in itself that there has been no direct competition for it. The first rule of any manufacturer should be, "Know thy market." This dictum applies not only to the market of today, but also knowing where the market is heading, and creating a product to greet them when they arrive.WD crafted responsive products

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Brand Extension Marketing Plan 13 to fit the needs of current and potential customers, and has seen these efforts pay off with new markets, valuable business partners and consistent revenue growth. In fact, the past year saw a refresh of WD's entire product line, resulting in new models in each market (desktop, consumer electronic, enterprise, mobile and branded products) and enabling the company to offer a product line that covers 90% of the available hard drive market. An illustration of the payoff of this market-responsive strategy can be seen in the fact that revenue from consumer electronics and mobile drives was up to more than a third from 25% one year earlier. New market growth for WD also occurred in a geographic sense, as revenues from fast-growing Asian markets rose for the first time to match those of the Americas (36% each). According to the 2010 fourth-quarter results, 42% of the quarter's revenue came from newer market sources. WD also reported strong year-over-year performance including 28% growth in revenue, 35% unit growth and 23% growth in net income. "The fourth quarter results are linked directly to the significant investments in technology and global infrastructure that WD has made over the last several years, both in traditional computing markets and in the newer consumer electronics markets for hard drives and solid state drives," said John Coyne, president and CEO, in a recent statement. "We continue to reinvest the strong cash flows from our ongoing business into current and future opportunities for data storage. Combined with our focus on customers, quality, reliability and execution, we believe this approach will enable us to continue delivering steady and outstanding financial performance." To counter Western Digital Corporation SiliconEdge Blue SSD, Seagate Technology, Inc. recently revealed its own SSD product, the Pulsar. However, the Pulsar is targeted at the enterprise segment because of its size and cost. Additionally, Seagate Technology, Inc. promoted the Pulsar as the enterprise solution instead of mainstream consumer market. The Pulsar will be targeted at four enterprise solid state storage markets, two are for high-end and mid-range external (networked) storage arrays; the third is for servers with direct-attached storage and entry-level Redundant Array of Independent Disks (RAID) controller; and the fourth is the high performance, I/O-intensive enterprise blade and general server application server. Seagate has been tight lips on the price of the Pulsar, but early indication is that $1,200 for 100 GB. 2.4 Product Offering Product/features/benefits: Western Digital is the first of the hard drive manufacturers to embrace SSD technology. Their new SiliconEdge Blue SSD is a mainstream SSD available in 64GB, 128GB and 256GB capacities, and claim 250MB/s sequential read and 170MB/s write speeds. Page 13 of 31

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The drives feature MLC flash, custom TRIM (TRIM is not an acronym; it is a command name. A TRIM command allows an operating system to inform a solid-state drive (SSD) which blocks of data are no longer considered in use and can be wiped internally) support, SATA II interface, 3-year warranty, and an impressive 130,000 hours testing in the Western Digital R&D labs. Western Digital SiliconEdge Blue SSD specifications are identified below: y y y y y y y y y y Interface Burst Speed: 3.0Gb/s Maximum Read Transfer Rate: Up to 250 MB/s (250MB/s sustained) Maximum Write Transfer Rate: Up to 170 MB/s (140MB/s sustained) 4KB Random Read IOPS: Up to 5000 IOPS 4KB Random Write IOPS: Up to 5000 IOPS Service Life: 5.0 Years (with 42.1GB written per day on 256GB model) MTBF (hours): 1,400,000 Error Rate: < 1 in 10 15 bits read Dimensions: (LxWxH) 3.9 x 2.75 x 0.4" Warranty: 3 Years

Solid state drives have several advantages over the magnetic hard drives. The majority of this comes from the fact that the drive does not have any moving parts. While a traditional drive has drive motors to spin up the magnetic platters and the drive heads, all the storage on a solid state drive is handled by flash memory chips. This provides three distinct advantages: y y y Less Power Usage Faster Data Access Higher Reliability

The power usage is a key role for the use of solid state drives in portable computers. Because there is no power draw for the motors, the drive uses far less energy than the regular hard drive. Now, the industry has taken steps to address this with drive spin downs and the development of hybrid hard drives, but both of these still use more power. The solid state drive will consistently draw less power than the traditional and hybrid hard drive. Faster data access will make a number of people happy. Since the drive doesn't have to spin up the drive platter or move drive heads, the data can be read from the drive near instantly. In a recent demo of two similar equipped notebook computers, Fujitsu was able to demonstrate a roughly 20% speed increase in the booting of Windows XP on a SSD over a standard hard drive. Reliability is also a key factor for portable drives. Hard drive platters are very fragile and sensitive materials. Even small jarring movements from an impact can cause the drive to be completely unreadable. Since the SSD stores all its data in memory chips, there are fewer moving parts to be damaged in any sort of impact. Page 14 of 31

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Brand Equity Model: The hard drive industry is a highly competitive high-technology commodity marketplace. Similar to general commodities, hard drives are highly substitutable due to the industry mandate of technical form, fit, and function standards. Hard drive manufacturers compete on the basis of product quality and reliability, storage capacity, unit price, product performance, production volume capabilities, and ease of doing business. The relative importance of these factors varies among different customer and market segments. WDC believes that it is generally competitive in all of these factors. WDC believes that in a high-technology commodity business, it cannot differentiate its product based on attributes such as storage capacity; therefore, WDC differentiates itself by emphasizing rapid response with its OEM and distribution customers and brand equity with its end users. Rapid response requires accelerated design cycles, customer delivery and production flexibility which contribute to customer satisfaction. Brand equity is a relatively new area for the hard drive industry. However, as data storage has become strategically critical for all computer end users, the Company believes that trust in a manufacturer's reputation has become a key in the selection of a component, particularly within such a rapidly changing technology environment. 2.5 Keys to Success The factors that will determine the success of SiliconEdge Blue SSD are to continue efforts to reduce cost per gigabyte, to increase the storage space without substantially increase the price of the drive, to continue differentiating WDC brand from the competitors brands, and to continue increasing reliability. Cost per gigabyte is important to mainstream consumers but it is also important to business enterprises. Affordability is the key here, as mainstream consumers do not have the resources to buy expensive drives. Storage space is important too because many todays programs are so large. For example, a full Microsoft Windows 7 Ultimate edition with Microsoft Office 2010 Professional will required 25 GB of space. WDC has differentiated itself from its competitors in several areas such as SecurePark and Native Command Queueing (NCQ) and to be successful, WDC must continue to be innovative. Although SSD is highly reliable due to no mechanical moving parts, WDC must continue striving to improve all of its products reliability. 2.6 Critical Issues One of the data storage industry's longtime leaders, Western Digital Corporation has leveraged its core strengths in becoming a leading Internet solutions company. Western Digital is providing services and products to manage, store and communicate both digital content and network intelligence. The Company remains an industry-leading designer and manufacturer of hard drives and solid state drives for desktop computers and home entertainment applications. Through its Connex subsidiary, Western Digital delivers enterprise-class storage functionality for the department and mid-sized business markets, including storage management software, network attached storage and storage area networks. Page 15 of 31

Brand Extension Marketing Plan 16

Additionally, WDCs broad product portfolio provides cross selling opportunities and insulates the companyfrom decline in demand in any particular segment. The SiliconEdge Blue is fresh and just starting its lifecycle. With WD engineers there is no telling just how fast the drive can become or how much more space the drive can pack. WD's SiliconEdgeBlue solid-state storage product offer capacities and interface options to achieve extraordinary read speeds and resistance to shock and vibration. Uses range from sophisticated medical, military and aerospace installations to read-only applications in gaming. Solid-state products meet the performance, durability and lifecycle requirements of embedded computing and other demanding markets. A point of difference for WDC SiliconEdge Blue SSD that is different from WDCs top competitor the segment of customers the drive is marketed for. WDC SiliconEdge Blue SSD is targeted for the mainstream consumers segment, while the Seagate Pulsar SSD is targeted for the enterprise segment. Some other points of difference are cost, parts manufacturing, and reputation. Western Digital Corporation enjoys the loyalty of its customers due to its reputation for products quality and products reliability. A point of parity is a point of difference that Seagate Technology, Inc. has over Western Digital Corporation that WDC needs to counteract. This point of parity is due to WDCs strategy, to focus on the mainstream consumer as number 1, while Seagates strategy is to focus on enterprise consumers. WDCs recent purchase of Hitachi Global Storage Technologies would help it vault atop the market for hard drives and strengthen its operations. The Hitachi unit allows Western Digital to challenge Seagate for the more lucrative enterprise customers, which will result in increased competition. Hitachi will brings a stronger lineup for enterprise customers, as the enterprise HDD and SSD market garners significantly higher margins than the mainstream consumer segment, which makes the enterprise a fast-growing market for both HDD and SSD revenue. 3.0 MARKETING STRATEGY 3.1 Mission The fundamental goals of Western Digital Corporation is to continue to manufacture new models of quality hard disk drives and solid state drives, more refinement, more capacity, smaller forms, faster access time, more innovative technology, more efficiency, cooler, and less power consumption.Western Digital Corporation (WDC), one of the storage industrys pioneers and long-time leaders, provides products and services for people and organizations that collect, manage and use digital information. The company produces reliable, high-performance hard drives that keep users data accessible and secure from loss. WDC applies its storage expertise to consumer products for external, portable and shared storage applications.When it comes to data storage, Western Digital has drive. Its Mission is to

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Brand Extension Marketing Plan 17 provide customers with innovative technology and engineering that improves drives reliability, reduce costs and reduces environmental impact. Western Digital Corporation defines its business as the designer, developer, manufacturer and seller of hard disk and solid state drives. WDCs SiliconEdge Blue SSD is the first to be marketed for the mainstream consumers. Customer satisfaction with WDs broad product line, high quality and reliability, service excellence and overall value proposition continues to drive its business growth. Underpinning its value proposition is a business model based on a relentless focus on highly efcient operations, resulting in the hard drive industrys most competitive total cost structure. Western Digital prides in its products reliability and low cost per gigabyte. WDC applies the same model of commitments from its successful HDD product line to its SSD product line. WD SSDs feature sophisticated storage technologies engineered to solve the industry's toughest problems:
y y y y y

High performance and high reliability in any environment Ability to proactively forecast drive life to prevent unscheduled downtime Elimination of drive corruption from the effects of power anomalies Protection of application data and software IP Multi-year product lifecycle

These technologies enhance performance and reliability, guarantee long product life and provide the industry's lowest total cost of storage ownership. The fundamental goals are to supply affordable and reliable HDDs and SSDs for external, internal, portable and shared storage applications. WDC also will be focusing on capturing market share in the enterprise marketing segment. Its new Serial Attached SCSI (Small Computer SystemInterface) (SAS), plus the rugged design and large storage space is suitable for both mission-critical enterprise server and enterprise storage applications, aswell as data centers and large data arrays. 3.2 Objectives WDCs main marketing objectives are as follows: 1. Increase the market share in the enterprise marketing segment with innovative technology, quality, unique, high capacity, high speed, and reliable products. The goal is to capture 50% or higher of the market share in 3 years (market share in 2009 was 36%). 2. Increase the market share in the mainstream consumer by continuing to design, develop and manufacture hard disk and solid state drives for the desktop and mobile PC, enterprise, consumer electronics and external hard Page 17 of 31

Brand Extension Marketing Plan 18 drive markets, with innovative technology, quality, unique, high capacity, high speed, reliable, low cost-per-gigabyte products. These factors and product expansion strategy have gradually increased WDC percentage of net revenue from 56% in 2008 to 64% in 2010. The goal is to capture 70% by 2012. 3. Through technology innovation and corporate responsibility on the environment, WDC is strived to make its drives smaller but cooler and consume less power. WDC is working to have more environmental friendly products. 3.4 Target Markets Western Digital sells its products globally to OEMs, ODMs, distributors and retailers.
y

OEMs purchase WDs products, either directly or through acontract manufacturer such as an ODM, and assemble them into the computer or Consumer Electronics (CE) systems they build. OEMs and ODMs accounted for 51%, 54% and 51% of WDCs net revenue in 2010, 2009 and 2008, respectively. Distributors typically sell WDs products to non-direct customers such as small computer and CE manufacturers, dealers, systems integrators, online retailers and otherresellers. Distributors accounted for approximately 31%, 26% and 31% of WDCs net revenue for 2010, 2009 and 2008, respectively. Retailers typically sell WDs products directly to end-users through their storefront or online facilities. Retailers accounted for approximately 18%, 20% and 18% of WDCs net revenue for 2010, 2009 and 2008, respectively.

With the purchase of Hitachi Global Storage Technologies (Hitachi GST), Western Digital Corp. (WDC) pads its lead in the global HDD market, giving it nearly double the market share of No. 2 supplier Seagate Technology LLC. With the purchase, WDC claimed 49.6 percent share of global Hard Disk Drive (HDD) unit shipments based on fourth-quarter 2010 totals, compared to 29.4 percent for Seagate.The Hitachi purchase allows WDC to enter the critical enterprise HDD segment. WDC was only a marginal player in the enterprise HDD market, with nearly all of its sales went instead to the market for consumer drives. The enterprise HDD market garners significantly higher margins than the consumer segment, which makes the enterprise a fast-growing market for HDD revenue. The solid-state drive (SSD) market is also growing as more enterprise customers see the advantages of the power savings that the drives offer. SSDs are also offered in many laptop and netbook computers currently on the market. Recognized the lucrative market of SSD, WDC acquired SiliconSystem to give it an edge. These two acquisitions by WDC showed the recognition of the enterprise segment. The enterprise segment will be the largest target market for WDC. Page 18 of 31

Brand Extension Marketing Plan 19

WDC has reputation for its high quality and reliable products, whether they are HDDs or SSDs. The brand name will draw attention to many mainstream consumers and enterprise customers looking for a name they know and trust. WDs products will also be marketed to a segment that makes purchases based on behavioral traits such as brand name, quality, capacity and reliability over price. Overall a consumer looking for a HDD or SSD that is technologically advanced, features rich and reliable will be attracted to the WDCs products. 3.5 Positioning WDCs HDDs and SSDs meet the needs of the target market by offering a high quality, light weight, high capacity and reliable drives. The SiliconEdge Blue SSD will be positioned as a reputable brand in the growing market for SSD. There are no substantial barriers for existing competitors to offer competing products. WDs drives cannot be differentiated solely on attributes such as storage capacity, buffer size or time-to-market. Accordingly, WDs products are differentiated by focusing on operational excellence, high product quality and reliability, and designing and incorporating into drives desirable product performance attributes. Such performance attributes include seek times, data transfer rates, intelligent caching, failure prediction, remote diagnostics, acoustics, error recovery, low operating temperature, low power consumption and optimized streaming capabilities. In addition, WDC differentiates itself by emphasizing non-product related attributes, including rapid response to our customers. Rapid response requires accelerated design cycles, customer delivery, production flexibility and timely service and support, which contribute to customer satisfaction. WDC also rely on the strength of the WD brand name with value-added resellers, retailers and solution providers to whom WDs products are sold directly and indirectly. Trust in a manufacturers reputation, its execution track record, and the establishment of strategic relationships have become important factors in the selection of a storage product, particularly in a rapidly changing technology environment. 3.7Marketing Mix y Product Western Digital is the first of the hard drive manufacturers to embrace SSD technology. Their new SiliconEdge Blue SSD is a mainstream SSD available in 64 GB, 128 GB and 256 GB capacities. They have fast data transfer of 250 MB/s sequential read and 170 MB/s write speeds. They also consume less power than HDD, using just 2.2 W to read or 3.5 W to write. The drives have high level of tolerance to shock and vibration. The shock rating of the new SiliconEdge Blue SSD is higher than most SSDs from its competitors.The drives feature MLC flash, custom TRIM support, SATA II Page 19 of 31

Brand Extension Marketing Plan 20 interface, 3-year warranty, an impressive 130,000 hours testing in the Western Digital R&D labs, and back by WD's world-class technical support. For years the company has used a naming scheme that reflects where the drive stands performance wise in their product line up. For those concerned about power consumption and other environmental matters, the Green Series was made to satisfy their needs. In the middle is the Blue Series, generally a collection of mainstream products that satisfy users looking for a nice balanced mix between capacity and performance. The enthusiast level products are found in the Black Series, an area that Western Digital has been very successful in for quite some time. That leaves theSiliconEdge drive in the middle since it comes with the Blue name y Price At the start there will be three different capacities and the Manufacturer Suggested Retail Price (MSRP) are $279.00 for 64 GB, $529.00 for 128 GB and $999.00 for 256 GB. The SiliconEdge Blue SSD MSRP is in line with its competitors. With market growth and technology improvement, drive storage capacity will increase and price will drop to more affordable for the targeted market segment. The pricing objective is to make SiliconEdge Blue SSDs a market leader in the SSD market and be recognized as the most durable, innovative and features-rich and reliable SSD on the market. The unique and quality features of the SiliconEdge Blue SSD allow for it to be competitive in price and product offerings in all targeted market segments. Western Digital will take the Product-Quality Leadership pricing approach. SiliconEdge Blue will be the first mainstream SSD. WD traditionally is known for selling quality products. The WDs brand name will generate interest based on brand quality and recognition in the computers drive industry. y Place The target market for solid state drives expects quality products for affordable prices. WDC will continue their tradition and reputation of ensuring quality sales and presentation by introducing the SiliconEdge Blue SSD to the vast network of resellers around the world. WDC will also ensure the SSDs are available to the shops where one can buy computer parts and get a wide range of WD parts there. WDCs high quality brand name will be supportingthe SiliconEdge Blue SSD through quality advertising, promotions and direct sales to the partnered retailed stores.

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Brand Extension Marketing Plan 21 E-Commerce offers a quick and easy way for customers to shop for products without the hassle of sales reps and often offer a cost effective way for companies to sell products with low overhead. The SiliconEdge Blue SSDs will be available on line through the selected major distributors websites with either bare drives or special package drives. The retail channel complements WDCs othersales channels while helping to build brand awareness for WD and WDs products. Retailers supply end-users with WDs products to upgradetheir computers, externally store their data for backup or mobility purposes and play their stored digital content or content accessed over theInternet on their television or home theater systems. WDC grantsthe retailers limited price protection. WDC also sellsWDs branded productsthrough its Web site. y Promotion WDC performs its marketing and advertising functions internally and through outside firms. WDC targets advertising, worldwide packagingand marketing materials to various reseller and end-user categories. WDC utilizes both consumer media and trade publications. WDC has programs under which it reimburses qualified distributors and retailers for certain marketing expenditures. WDC also maintains customerrelationships by communicating with its resellers and providing end-users with information and support through its Web site. 3.8Marketing Research The objective of the marketing research is to determine if customer truly see a value in solid state drives, especially the mainstream consumer. It is important to determine if consumers prefer to have fast boot-up and applications access. It would also be interesting to know if consumers are truly drawn to an environmentally friendlierdrives that consume 50% less power than the traditional hard disk drives. There were many marketing researches for the SSDs but WDC is the first company to commission a marketing research in the mainstream consumer market. WDCs internal marketing research was conducted worldwide. WDC also relies on marketing research from independent organizations, such as the International Data Corporation (IDC). IDC is a premier global provider of market intelligence, advisory services, and events for the information technology telecommunications and consumer technology markets and it is predicting tangible levels of growth within the solid state drive (SSD) market in 2 phases until at least 2019. The prediction was made after IDC figures revealed that SSD shipments exceeded 11 million units in 2009, which represents a 14% year-on-year increase. The market watcher added that shipment levels will achieve a compound growth rate of 54% over the 2008-to-2013 forecast period.

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Brand Extension Marketing Plan 22 The goal of the WD SiliconEdge Blue SSDs was to release a product that was in the top 25% of the consumer SSD market in terms of performance. Marketing research to date has shown that WDCs goal is within reach. 4.0 FINANCIALS 4.1 Break-even Analysis In the first year (introductory) of the SiliconEdge Blue SSD, Western Digital Corporation expects the sales revenue to be approximately $55,283,000. The SiliconEdge Blue SSD has an average sales price of $279.00 for each 64 GB unit, $529.00 for each 128 GB unit, and $999.00 for each 256 GB unit. It is estimated that in the first year, Western Digital Corporation will capture 2% of the mainstream Upper Middle class socioeconomic class consumers and 1% of the enterprises. The 2% of the mainstream consumers will purchase mainly the 64 GB and the 128 GB drives, representing approximately 100,000 units. The 100,000 units for the mainstream consumers will further divided into approximately 60,000 64 GB units and 40,000 128 GB units. The2% of the enterprise will purchase mainly the 256 GB drives, representing 50,000 units. Table 4.1.1 captures the first year sales for 64 GB drives; table 4.1.2 captures the first year sales for 128 GB drives; table 4.1.3 captures the first year sales for 256 GB drives; and table 4.1.4 captures the first year total sales.
Table 4.1.1 First Year Sales for 64 GB Drives Per Unit Total 64 GB Sales (60,000 units) $279.00 $16,740,000.00 Less Variable Expenses $179.00 $10,740,000.00 Contribution Margin Less Fixed Expenses Net Operating Income $100.00 $6,000,000.00 $10,000,000.00 ($4,000,000.00)

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Brand Extension Marketing Plan 23

Table 4.1.2 First Year Sales for 128 GB Drives Per Unit Total 128 GB Sales (40,000 units) $529.00 $21,160,000.00 Less Variable Expenses $300.00 $12,000,000.00 Contribution Margin Less Fixed Expenses Net Operating Income $229.00 $9,160,000.00 $10,000,000.00 ($840,000.00)

Table 4.1.3 First Year Sales for 256 GB Drives Per Unit Total 256 GB Sales (50,000 units) $999.00 $49,950,000.00 Less Variable Expenses $760.00 $38,000,000.00 Contribution Margin Less Fixed Expenses Net Operating Income $239.00 $11,950,000.00 $10,000,000.00 $1,950,000.00

Table 4.1.4 First Year Total Sales Total -$4,000,000.00 -$840,000.00 $1,950,000.00 ($2,890,000.00) Per Unit -$66.67 -$21.00 $39.00

Net Operating Income (64 GB) Net Operating Income (128 GB) Net Operating Income (256 GB) Net Operating Income

Of the three drive capacities, only 256 GB drives will earn positive net operating income. In order for WDC to break even for 64 GB drives, the company will have to sell 100,000drives [$10,000,000 / ($279 -$179)]. Similarly, for WDC to break even for 128 GB drives, the company will have to sell 43,669 drives [$10,000,000 / ($529 - $300)]. With an estimated first year sales of 60,000 drives with 64 GB capacity and 40,000 drives with 128 GB capacity, WDC can expect to achieve its break-even point by the first quarter of the second year. Table 4.1.5 and 4.1.6 with the break-even numbers to illustrate the break-even sales, while table 4.1.7 captures the break-even total sales.

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Brand Extension Marketing Plan 24

Table 4.1.5 Break-Even Sales for 64 GB Drives Per Unit Total 64 GB Sales (100,000 units) $279.00 $27,900,000.00 Less Variable Expenses $179.00 $17,900,000.00 Contribution Margin Less Fixed Expenses Net Operating Income $100.00 $10,000,000.00 $10,000,000.00 $0.00

Table 4.1.6 Break-Even Sales for 128 GB Drives Per Unit Total 128 GB Sales (43,669 units) $529.00 $23,100,901.00 Less Variable Expenses $300.00 $13,100,700.00 Contribution Margin Less Fixed Expenses Net Operating Income $229.00 $10,000,201.00 $10,000,000.00 $201.00

Table 4.1.7 Break-Even Total Sales Total Net Operating Income (64 GB) $0.00 Net Operating Income (128 GB) $201.00 Net Operating Income (256 GB) $1,950,000.00 Net Operating Income $1,950,201.00

Per Unit $0.00 $0.01 $39.00

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Brand Extension Marketing Plan 25

Tot

($ i Milli

Total Revenue for 64 GB Total Profit for 64 GB Break-Even Point for 64 GB Drives

Fixed Expenses
0 10 20 30 40 50

60 70 80 90 100 110 120 130 140 150 (Uni in Thousand)

Loss Area

Figure 4.1.1 SiliconEdge Blue SSD Break-Even Chart The SiliconEdge Blue SSD Break-Even Chart shows there will be an initial loss in the first year for the 64 GB and 128 GB capacities, but once the 100,000 64 GB drives and 43669 128 GB drives are sold, WDC will begin to earn significant profits on the SSD sales. Note that the 256 GB capacity is profitable from the first year. 4.2 Sales Forecast: 1styear by month; 2nd and 3rdyears by quarter For the first year of sales it will be important to monitor projected vs. actual sales on a monthly basis. Sales on the SiliconEdge Blue SSD will be at a minimum until marketing efforts and joint sales efforts of retailers, wholesalers and the direct sales force generate new business for WDC. It is predicted that in year two, WDC will have a 3% growth over year one in the mainstream consumer area and 5% over in the enterprise area. By year three, the SiliconEdge Blue SSD will have a growth of 8% and 10% over year two for mainstream consumer and enterprise, respectively, and continue in the double digit growth for the next 3 5 years. It is WDCs goal to gain valuable market share within 5 years of launching its own SSD, especially in the enterprise arena.
Table 4.2.1 Western Digital Corporation SSD Sales Forecast - 2010 (USD in Million) Year One Jan $87.85 $0.20 Feb $0.30 Mar $0.50 Apr $2.00 May $7.40 Jun $7.55 Jul $8.20 Aug $10.70 Sep $6.20 Oct $9.40 Nov $11.10 Dec $15.30

Quarter One Total $10.00

Quarter Two Total $16.95

Quarter Three Total $25.10

 

50 45 40 35 30 25 20 15 10 5 0

Break-Even Point for 128 GB Drives

Total Profitfor 128 GB

Total Expense for 128 GB Total Revenue for 128 GB for 64 GB

Quarter Four Total $35.80

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Table 4.2.2 WDC SSD Sales Forecast -2011 ($ in Million) Year Two Q1 Q2 Q3 Q4 $94.88 $20.40 $23.44 $25.06 $25.98

Table 4.2.3 WDC SSD Sales Forecast -2012 ($ in Million) Year Q1 Q2 Q3 Q4 Three $109.11 $20.50 $29.21 $29.30 $30.10

With any new product launch there are risks to consider, especially for the global company like Western Digital Corporation. Entering a market, especially in the enterprise arena, that is already well established could be a barrier for WDC. WDCmust use its quality name brand to build product awareness and product trust in the market, especially in the enterprise arena. There is a possibility, albeit it is a remote one, that the enterprise customers do not accept WDCs dual use SSDs as reliable, so WDC must work hard to earn the trust of the enterprise customers. WDC has already successfully used its brand name of quality and innovation to enter the enterprise market with its HDDs, so it can do it again with its SSDs. Although the majority of the transactions will be in U.S. dollars, some transactions are based in various foreign currencies. WDC purchases short-term, foreign exchange contracts to hedge the impact of foreign currency exchange fluctuations on certain underlying assets, revenue,liabilities and commitments for operating expenses and product costs denominated in foreign currencies. The purpose of entering into thesehedge transactions is to minimize the impact of foreign currency fluctuations on the results of operations. The contract maturity dates do notexceed 12 months. Currently, WDC focuses on hedging its foreign currencyrisk related to the Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling. Thailand and Malaysia are WDCs drives manufacturers. Market trends are an uncontrollable element to a sales and marketing plan. Another major risk that WDC must consider is the economic status of the US and World target markets. Though the economy is showing signs of reviving, the worlds economy is still weak due to the enormous national debts in many countries and the persisting high unemployment rates. These factors could result in consumers and enterprises pulling back.This could decrease the initial expected drives sold in the first 3 years. The most important components of sales performance for the SiliconEdge Blue SSD will be acceptance and penetration of the target market that is already a little crowded. Successful sales of the SiliconEdge Blue Solid State Drives also include WDCs commitment to provide timely shipping, adequate supply to avoid backorders, Page 26 of 31

Brand Extension Marketing Plan 27 strong Quality Assurance to minimize defects or returns of the product, and continue improvement in innovation to bring down the cost per gigabyte.

5.0 CONTROLS Setting strict controls before the launch of the SiliconEdge Blue SSD is a vital part to the success of the product. It will be important to monitor sales and profit levels on a quarterly and annual basis to confirm positive growth from previous quarters or fiscal years. Sales reports from direct sales reps, retail stores, wholesalers and other sales channels will be collected monthly to compile this information, at least for the first couple years. Company expenses for sales reps, shipping charges, marketing efforts, returns and other productions costs will have to be monitored monthly, semi-annually, and annually to maximize the companys net profit on the solid state drive. Marketing effectiveness will be measured by feedback from sales channels, pre and post purchase surveys to consumers for product satisfaction and by the level of increase in sales directly related to promotional advertisement. This is most important with the enterprise customers but it is applicable to both the mainstream and enterprise customers. WDCs marketing department will maintain customer relationships by communicating with the resellers and providing end-users with information and support through WDs web site. Through the results of surveys and feedback from all sources, WDC will closely monitor market needs, trends and changes in demand to make sure products are updating with the latest technology and carrying the most optimal features requested from the market. Once the SiliconEdge Blue SSD is successfully launched, WDCshould begin planning the launch of an updated version of the SiliconEdge Blue SSD that has larger capacity, faster, and lower cost. 5.2 Marketing Organization WDC sells its products globally to OEMs, ODMs, distributors and retailers.It uses a broad group of distributors to sell its products to non-direct customers such as small computer and CE manufacturers,dealers, systems integrators, online retailers and other resellers. It also sellsits branded products directly to a select group of major retailers such as computer superstores, warehouse clubs, onlineretailers, and computer electronics stores, and authorize sales through distributors to smaller retailers. WDC maintains sales offices in selected parts of the world including the major geographies of the Americas, Asia Pacific, Europe and theMiddle East. It performsits marketing and advertising functions internally and through outside firms. It targets advertising, worldwide packagingand marketing materials to various reseller and enduser categories. WDC utilizes both consumer media and trade publications. It has Page 27 of 31

Brand Extension Marketing Plan 28 programs under which it reimburses qualified distributors and retailers for certain marketing expenditures. WDC also maintains customerrelationships by communicating with its resellers and providing end-users with information and support through Western Digital Web site. 5.3 Contingency Planning y Risk Factors y Negative or uncertain global economic conditions could result in a decrease in the sales and revenue and an increase in the operating costs, which could adversely affect the business and operating results. Significant slowdown in industry demand as a result of negative or uncertain global economic conditions or otherwise, may force WDC to take steps to align the cost structure with demand, which could result in impairment charges and have a negative impact on the operating results. Negative or uncertain global economic conditions increase the risk that WDC could suffer unrecoverable losses on WDCs customers accounts receivable, which would adversely affect the financial results. Declines in average selling prices (ASPs) in the drive industry could adversely affect the operating results. Fail to anticipate or timely respond to changes in the markets for hard drives and solid-state drives could adversely affectthe operating results. Prices and margins are subject to declines due to unpredictable end-user demand and oversupply of hard drives and solid-state drives. Failure to accurately forecast market and customer demand for the products could adversely affect the business and financial results or operating efficiencies. Entry into additional storage markets increases the complexity of the business, and if WDC is unable to successfully adapt the business processes as required by these new markets, WDC will be at a competitive disadvantage and WDCs ability to grow will be adversely affected. Customers demand for storage capacity may not continue to grow at current industry estimates, which may lower the prices the customers are willing to pay for new products or put WDC at a disadvantage to competing technologies.

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Brand Extension Marketing Plan 29 y Expansion into new hard drive and solid-state drive markets may cause the capital expenditures to increase. Also, the business may suffer for failure to successfully expand into newmarkets. The business may suffer for failure to successfully manage new product development or new market expansion, or failure to anticipate the issues associated with such development or expansion. Expanding into new markets exposes WDC to different seasonal demand cycles, which in turn could adversely affect the operating results. Loss of market share with or by a key customer, or consolidation among the customer base, could harm the operating results. Further industry consolidation could provide competitive advantages to WDCs competitors. Sales in the distribution channel are important to the business, and the operating results could suffer for failure to maintain brand preference with the distributors or weaken of distribution markets. A competitive cost structure is critical to the operating results, and increased costs may adversely affect the operating margin. Shortages of commodity materials or commodity components, price volatility, or use by other industries of materials and components used in the drive industry, may negatively impact the operating results. The business may suffer for inability to retain or hire key staff and skilled employees.

It will be important for Western Digital Corporation to monitor these risks through consumer surveys, sales reports, production schedules vs. inventories as well as continuously monitor the health of the economy to properly advertise and promote the new product. In order to adapt to adversity, Western Digital Corporation will have a product team in place investigating and developing new technologies and innovative features that can quickly be added to the drive or be launched as a new product. It will be important that WDC minimizes costs on the drive immediately in case they have to lower retail pricing in order to move units to gain back investment costs.

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Brand Extension Marketing Plan 30 References Kotler, P. & Keller, K. L. (2009). Marketing Management. Upper Saddle River, NJ: Pearson Prentice Hall. Storage Networking Industry Association (SNIA).(2009, January). Solid State Storage 101 An Introduction to solid State Storage. Retrieved on April 24, 2011, from http://www.snia.org/apps/group_public/download.php/35796/SSSI%20Wht%20P aper%20Final.pdf. Galbraith, J. (2011). Western Digital Announces New Solid State Drives. PCWorld Business Center. Retrieved from http://www.pcworld.com/businesscenter/article/190751/western_digital_announc es_new_solid_state_drives.html PR Newswire. (2010, March 3). WD(R) Introduces Fast and Rugged Solid State Drives for Notebooks and Desktop PCs. Retrieved on April 30, 2011, from http://www.prnewswire.com/news-releases/wdr-introduces-fast-and-rugged-solidstate-drives-for-notebooks-and-desktop-pcs-86187752.html University of Oregon Investment Group. (2010, October 1). Western Digital Corporation. Retrieved on April 30, 2011, from http://uoinvestmentgroup.org/wpcontent/uploads/2010/09/Western-Digital.pdf Mellor, C. (2010, May 18). Solid State Drives Set For Huge Growth. Retrieved on May 1, 2011, from http://www.theregister.co.uk/2010/05/18/enterprise_ssd_encroachment/ Kyrnin, M. (n.d.). SSD Solid State Drives. Retrieved on May 1, 2011, from http://compreviews.about.com/od/storage/a/SSD.htm Kerekes, Z. (2005, January). The SSD Buyer Preferences Market Report. Retrieved on May 1, 2011, from http://www.storagesearch.com/ssdsurvey.html Donnelly, C. (2010, January 20). IDC Predicts Tangible Growth of SSD Market. Retrieved on May 1, 2011, from http://www.channelweb.co.uk/crnuk/news/1871505/idc-predicts-tangible-growth-ssd-market Western Digital Corporation. (2010, August 13). Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended July 2, 2010. United States Securities and Exchange Commission Form 10-K.

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