Cisco Systems is an American public limited technology firm dealing in the networking industry, offering a wide range of products like routers and switches, cable modems, security equipment, network storage systems and data centers, telephony products, and servers worldwide. Dealing in the networking industry, the firm was established in 1984, with the location of its head operations in California, United States. As of 2020, the company produced a strong figure of revenue of 49.30 US billion dollars and has attached a workforce figure of almost 77,500 individuals (Cisco, 2020). Therefore, from the viewpoint of the global networking industry, the assessment of Porter’s five factors would be a helpful system for maintaining prospect strategies to better understand the business standing position.
Cisco Systems – Competitive Rivalry in Market
The competitive rivalry in the networking industry is high because of different service providers globally due to the increase in usage of digital technology and advancements in the business and individual context. As a result of this outcome, several companies and institutions have captured the market to provide software and hardware networking services, ultimately resulting in increased competition among existing firms. The company’s major competitors are HPE/Aruba, Ubiquiti, MikroTik, TP-Link and NETGEAR in terms of market share of WLAN vendors across the world. As of 2020, with a market share of 39 per cent, Cisco Systems is currently standing at the leading position in the market, while HPE/Aruba is ranked second with 13.9 per cent among vendors and Ubiquiti is accounted for 8.6 per cent of the global WLAN vendor market (Statista, 2020). Thus, the presence of such firms enables the environment of the industry more competitive.
Cisco Systems – Threat of Substitutes
The threat of having substitute products is considerably low in the networking industry, mainly because the industry is highly dependent on technology and innovation. For the purpose of networking, routers, hubs and switches are required for building infrastructure, which is already provided by the big firms operating in the market. In addition, Broadband internet networks are available from cable companies with direct connections into houses, and satellite connections can be used to meet higher customer networking needs, but all these facilities require almost the same equipment. Moreover, servers and security equipment are also in abundance, and the advancement and innovation in technology can only change the process or model of the equipment and cannot be termed as replacements (Doloreux et al, 2018). Therefore, the risk of substitutes in the networking industry is low.
Cisco Systems – The Threat of New Entrants
The threat of new entrants in the networking business is considered to be low as Many enterprises already exist in the country and worldwide, but the entry barrier is high enough to prevent entrants from breaking into the market. It’s no surprise that the most prominent barrier to entry in the capital-intensive networking market is capital investment. Potential applicants typically require a large chunk of money to cover the high costs of building the network infrastructure. Aside from the financing barrier, emerging businesses must contend with the presence of significant networking brands and stringent federal rules that govern operations, access to facilities, and license ownership (Hawthorne et al., 2016). Hence, minimizing the threat to enter the industry.
Cisco Systems – Bargaining Power of Buyers
The Bargaining power of consumers in the context of the telecom industry is high due to the large number of support providers and the breadth of their offerings. Regardless of which suppliers offer business telephone devices and data services, the options are essentially the same. For the most part, basic amenities are seen as a commodity. As a consequence, consumers demand reasonable rates from firms that deliver dependable service. Purchasing capacity, on the other hand, may vary slightly between market groups. Moreover, consumers with low switching costs have more negotiating power (Fontana and Zirulia, 2015). Keeping in view these trends, the bargaining power of buyers is high in the networking industry.
Cisco Systems – Bargaining Power of Suppliers
The Bargaining power of suppliers in the networking industry is moderate. Networking equipment manufacturers have a lot of leverage when it comes to negotiating with service providers. Indeed, Without high-tech network swapping facilities, fibre-optic lines, cellular phones, and a billing system, such businesses will be unable to transmit data and voice from one side to the other. However, because there are so many manufacturers with varying resources, firms’ bargaining power is limited when it comes to negotiating terms (Ayub et al., 2019). Thus, in the context of the networking industry, the bargaining power of suppliers is moderate.
References:
.Ayub, S.E., Kwendo, E. and Liyayi, C.S., 2019. Effect of Differentiation Strategies on the Performance of Mobile Phone Service Providers in Kenya. Int. J. of Multidisciplinary and Current research, 7.
Cisco, 2020. Annual Report. [online] Cisco.com. Available at: https://www.cisco.com/c/dam/en_us/about/annual-report/cisco-annual-report-2020.pdf.
Doloreux, D., Shearmur, R. and Rodriguez, M., 2018. Internal R&D and external information in knowledge-intensive business service innovation: complements, substitutes or independent?. Technological and Economic Development of Economy, 24(6), pp.2255-2276.
Fontana, R. and Zirulia, L., 2015. “… then came Cisco, and the rest is history”: a ‘history friendly’model of the Local Area Networking industry. Journal of Evolutionary Economics, 25(5), pp.875-899.
Hawthorne, R., Mondliwa, P., Paremoer, T. and Robb, G., 2016. Competition, barriers to entry and inclusive growth: Telecommunications Sector Study.
Statista, 2020. Enterprise WLAN vendors market share 2020 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/219473/global-market-share-of-enterprise-wlan-vendors/.