Case Discussion Question

Providing state of the art technology at a competitive price and with a high value support system, Altera was able to steadily increase its revenues to staggering $1.4 billion by the first quarter of year 2000. Thereafter, the world scenario, regarding the technology boom, took a downward plunge that threw the whole technology industry into a spin.
The year 2000 onwards, saw an unexpected decline in the demand for the hi-tech goods that completely wiped out the small players and left the big manufacturing companies with huge inventory that had far too few customers. ‘Chipmakers and PC companies suddenly found themselves with a glut of inventory and capacity. Networking and telecom equipment makers were particularly hard hit. Cisco, more irrationally exuberant than most, was forced to write off a staggering $2.25 billion worth of gear’ (Teach, 2001). Others also followed suit with huge quantity of unsalable inventory. Altera Corporation too faced the repercussion of the time and had to declare goods worth $115 million as unsalable. One can gauge the extent of loss when Nathan Sarkisian, senior vice president of the company said ‘I’ve been in the chip industry for 20 years and I have never seen anything like this’ (article).
The reason for this trend may be attributed to a wide variety of causes but the main being that with the large number of electronics manufacturers and suppliers, it became difficult for the customers and distributors to identify ‘who owns which surplus parts’. While at the same time, the grey markets in the networking equipments in the new emerging economies took a new dimension that threatened the whole industries. At this very time, the PC companies became broiled in an unhealthy cut throat competition of waging price wars.
The deteriorating market conditions demanded some hard hitting formulae to restrict the decline while at the same time, create effective strategy to counter the menace of such

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