The major competitors for the MLX router
Brocade MLX Router
The major competitors for the MLX router are Cisco Systems and Juniper Networks, two well-established players in the router industry (Kerner, 2010). Both of these companies offer similar product ranges. They are both substantially larger than Brocade, and they have a broader product line. They are both able to mass produce routers at low cost and there are many firms attempting to undercut the big players, to varying degrees of success (Newman, 2004). The two companies both have the capability of producing high-end routers, but for the most part they concentrate on the mass market. Both are well-distributed and well-marketed, but of the two Juniper is the closer competitor, a function of Cisco’s market dominance. The main weaknesses for these competitors is that they are best known for their low-end and middle-market products, which opens the door a little bit for higher-end positioning.
The basic strategy is to use the MLX as almost a loss leader (without the loss part) in order to attract new business to the company. Therefore, even though the MLX is an excellent router, Brocade intends to use the high quality of this router in conjunction with a relatively modest price to deliver to the consumers a product that has a high value proposition. This is to be the main point of differentiation with the MLX router. Other routers will be superior in quality, but priced much higher. Other routers from the main competitors that are priced within the same range as the MLX are going to be inferior quality pieces of equipment.
Marketing will also help Brocade to differentiate itself from its competitors. Cisco in particular is a major firm that holds substantial market share. The idea in the marketing campaign will be to communicate to the consumer that Brocade is simply a better router, and that Cisco’s success owes more to marketing than to its inferior products. This message will be blunt and to the point that the Brocade MLX is the best router on the market for the money. By emphasizing the value proposition, Brocade will be able to obtain a degree of differentiation from its competitors.
Overall, Brocade’s strategy with the MLX will be that of a leader. Over the past number of years, the company has been more of a follower in the market, and the result is that it has a lower market share than its closest competitors. With the MLX, Brocade plans to become more aggressive in its marketing, and in that way it wants to take the lead in the market. Brocade sees there being an opportunity to provide a better quality router than its competitors at a mainstream price, and as a result it is going to leverage this advantage to help to build market share against its competitors.
The macroenvironment is challenging. A PESTLE analysis will help to gain a better understanding of the macroenvironment. The political environment is of limited impact on the router industry. The economic environment is more important. The current economy is generally poor for the industry, as the economy in general is characterized by overcapacity and a lack of investment, leading to generally slow growth (Bonney, 2010). What this means for Brocade is a general reluctance of corporate customers to make major technology investments. However, the shelf life of routers combined with increasing Internet usage means that firms need to turn over their router inventory fairly frequently. This creates an ongoing market for routers. In particular, after two years of recession, there is reason for optimism that the market for routers will begin to improve again.
The social environment is in the favor of Brocade. Internet usage is increasingly rapidly. Transactions and media that even a couple of years ago had low market penetration online are now almost fully in the Internet sphere. Customers are turning to wireless connectivity, and this has fueled demand for faster Internet with more capacity (Donoghue, 2008). As a result, there is reason to believe that as long as this trend continues, Brocade will benefit. The technological environment is characterized by rapid pace of change. Combined with the social environment, this is the biggest driver of business in routers. Brocade has a limited window of opportunity with the MLX to be the market leader, as it can reasonably be expected that within a year somebody will have a better, cheaper router on the market. This implies that the pace of technological change is a threat to Brocade, yet it is actually an opportunity, with Brocade being the technologically superior company today. If it can maintain its technological leadership, Brocade will be to be able to grow its business steadily over the coming years.
The legal environment is not particularly challenging for Brocade. The company is not subject to any major legal action. The biggest difficult that Brocade has is protecting its intellectual property rights overseas. Brocade will need to manage its patents effectively in order to maintain these rights, which are essential to the company maintaining its technological competitive advantage. The environmental environment is not a major issue, although there is some concern with wastage from consumer electronic goods. This concern, however, has failed as of yet to manifest itself as a major direct threat to Brocade.
The most significant threat to Brocade, however, is that of competition. The company faces two larger, more well-financed competitors in Cisco and Juniper. In addition, there are a number of low cost producers, mainly in Asia, that are undercutting the MLX product as well. The position of the MLX is as a value proposition, with high quality at a low price, yet to be realistic, there are higher quality routers and there are lower-priced routers as well. Thus, Brocade must be very careful with respect to its competitive positioning. This implies that it must address carefully the threat posed by technological change and it must also be willing to engage in a little bit of price competition as well. There is a fine line with this strategy that Brocade will either price so low as to lose money or price so high as to reduce its market share potential.
It is also worth noting the threat represented by the economy. Even if Brocade outflanks the competition and delivers this better product at a better price, the company needs buyers. Thus, there needs to be some uptick in the economic environment in the coming months in order for this strategy to succeed. Brocade cannot rely on organic growth in the industry, it must cultivate that growth by convincing companies to buy new routers. If Brocade can overcome the reluctances on the demand side that comes with an economic downturn, then the company has a good chance of being successful with its chosen strategies.
There is no doubt that Brocade has a good router, and a good plan to use this router to introduce customers to other Brocade products. The strategy, however, hinges on the ability of Brocade to deliver the price/quality ratio that will entice buyers to the product in the first place. The pace of technological change is rapid, and as a result the window to successfully execute this strategy is relatively short. Brocade must therefore move both quickly and aggressively to leverage its competitive advantages to increase its market share with the new MLX router. If it does so, there is market share for the taking, and a value proposition could indeed allow Brocade to leverage the MLX to increase its market share.
Bonney, J. (2010). Manufacturers group sees ‘slow growth’ for economy. The Journal of Commerce. Retrieved December 12, 2010 from http://www.joc.com/logistics-economy/manufacturers-group-sees-%E2%80%98slow-growth%E2%80%99-economy
Donoghue, a. (2008). at&T: Internet to hit full capacity by 2010. CNet News. Retrieved December 12, 2010 from http://news.cnet.com/2100-1034_3-6237715.html
Kerner, S. (2010). Brocade unleashes 15.36 terabit per second core routing platform. Enterprise Networking Planet. Retrieved December 12, 2010 from http://www.enterprisenetworkingplanet.com/news/article.php/3903741/Brocade-Unleashes-1536-Terabit-Per-Second-Core-Routing-Platform.htm
Newman, D. (2004). Adtran serves up newest low-cost router. Network World. Retrieved December 12, 2010 from http://www.networkworld.com/reviews/2004/112204rev.html
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