Porter Five Forces essays

Porter Five Forces essays In the mid 1990s, Cisco Systems was the dominant player in the US router market and its leadership was undisputed . However, this position was altered with the entry of several new competitors into the high performance segment of this market. In particular, Juniper emerged as a serious threat to Cisco by the year 2000. The backdrop to the emergence of these new competitors was the rapid expansion of the internet and a corresponding escalation in demand for high performance routers. The new entrants had concluded that a high performance segment within the IP router market would emerge with Cisco or without it. This paper examines the usefulness of Porters Five Forces approach in understanding the new entrants into the router market in the late 1990s, and concludes that the approach is useful in identifying that the industry was attractive to new entrants, but does not clearly explain the dynamics that supported the new entrants into the market. Porters Five Forces (Router Market) New entrants faced large capital requirements for product development as router technology was complex and took time to develop. However, this capital was being readily supplied to new entrants by venture capitalists and, in Junipers case, technology heavyweights. Cisco had a strong brand recognition and reputation (Nobody ever got fired for buying from Cisco) . It also had the cost advantages associated with market experience (Cisco dominates the market, because if youre not participating in the internet you dont get the lessons in seeing how the software needs to evolve) . In addition, a new entrant was faced with building economies of scale to cover high start up costs. However, there was scope to overcome these disadvantages by focussing on product performance and reliability (as Juniper did). Further, there is n ...