The strategy is not unlike that applied by Apple with the iPod, which brought millions of new customers to the company.
The organization's broader strategy is to utilize the MLX routers to bring in these new customers. When the customers are impressed with the superior performance of the MLX, they will look to Brocade for other solutions as well. In this manner, the company will leverage its new customers to build all of its lines of business, not just its router business. MLX will serve the gateway function, therefore. Margins on the other products will likely be higher than those taken on the MLX, especially after marketing costs are considered, so the primary role of the MLX line is to increase total customer volume.
The fact that the MLX is being marketed as a line supports this overall strategy. The broad range of target markets serves two essential functions. The first is to provide the line with broad appeal, driving high sales for the MLX product itself. The second is to bring in as many diverse customers as possible. The result of this will be that Brocade can market a wide range of products to these disparate customers. This not only increases the company's business in general for its existing products, but it will also allow Brocade to have the customer base to broaden its research and development activities. The company has quadrupled sales in the past five years, and the MLX strategy is part of an overall strategy to match this rapid rate of growth over the next five years. Increasing the customer base and allowing for an increase in research and development capability is part of this strategy.
The other way in which the MLX branding strategy and...
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