Businessmodel of NETGEAR

Customer Segments

Netgear has a segmented business model, with customers who have slightly different needs and problems. Its three customer segments are as follows:

• Retail Business Unit: Focuses on individual consumers, offering home networking, home security automation, and storage products.
• Commercial Business Unit: Focuses on small and medium-sized businesses, offering business networking, storage, and security solutions.
• Service Provider Business Unit: Focuses on service providers, offering made-to-order home networking hardware and software solutions, in addition to 4G LTE hotspots for providers to sell to their subscribers. ### Value Proposition

Netgear offers three primary value propositions: brand/status, accessibility, and customization.

The company has a well-known brand, having been in existence since 1996 and maintaining a large global footprint of 27,000 retail locations in 26 countries.

Beyond being broadly available, it also sells its products through a wide variety of channels, making them more accessible to customers who might have difficulty finding or obtaining the items; these range from regular retail stores to direct market resellers.

Finally, Netgear’s offerings are sold in multiple configurations to accomodate the preferences of end-users in its various geographic areas of operation. This customization makes its products easy to use regardless of audience and thus more widely appealing.

Channels

The majority of Netgear’s sales come through wholesale distributors and traditional retail. Its other distribution channels are online retail through its website, direct market resellers, value-added resellers, and broadband service providers.

Customer Relationships

Netgear’s customer relationship is primarily of a personal assistance nature. Its strong customer service operation provides assistance in a variety of formats including phone, chat, and e-mail. That said, there is also a self-service component as customers can obtain answers through its website, as well as a community component in the form of a user forum on the site.

Key Activities

Netgear’s key activities focus on production. The company’s business model entails designing and developing its various lines of products.

Actual manufacturing of products is outsourced to other firms, all of which are headquartered in Taiwan. These firms are: Cameo Communications Inc., Delta Networks Incorporated, Hon Hai Precision Industry Co., Ltd. (more commonly known as Foxconn Corporation), Sercomm Corporation, Pegatron Corporation, and Wistron New Web Corporation.

Key Partners

Netgear maintains a key partnership with original equipment manufacturer (OEM) suppliers. The company purchases products from firms who have offerings matching its design requirements. In certain situations it may request the supplier make modifications.

Another important partnership is with third-party companies to whom it outsources its warehousing, distribution logistics, and order fulfillment. These parties also oversee certain aspects of product configuration and repackaging, such as the insertion of relevant documentation and the addition of power adapters. There are four main providers, which are as follows:

• APL Logistics Americas, Ltd. in City of Industry, California serves the Americas region
• Kerry Logistics Ltd. in Hong Kong serves the Asia-Pacific region
• DSV Solutions B.V. Netherlands serves the EMEA region
• Agility Logistics Pty Ltd. in Matraville, NSW, Australia serves Australia and New Zealand ### Key Resources

Netgear’s primary resource is its intellectual property, which largely consists of over 22 issued U.S. patents and 18 foreign patents as of 2016. It also includes the company’s access to hardware and software license rights and trade secret rights for its products.

Netgear also relies heavily on a variety of human resources. They are as follows:

• Research and Development Staff: Netgear’s key resources align with its main R&D processes. Under its in-house development process, it relies on its engineering team to design and develop one or more of a products’ subsystems. Under its original design manufacturer (ODM) process, it utilizes its technology suppliers to develop products its engineering team has designed.
• Sales and Marketing Staff: Another important resource is the company’s sales and marketing team, which includes over 300 employees. Staff members work directly with customers on activities such as co-advertising and sales associate training.
• Customer Service Staff: Netgear relies on its customer support team to address customers’ questions and concerns. It is comprised of permanent employees and outsourced subcontractors. ### Cost Structure

Netgear has a value-driven structure, emphasizing quality and highly personalized service. The company’s top cost driver is a variable cost, cost of revenue, which includes cost of goods sold (hardware from suppliers, etc.). Other major costs include sales and marketing (fixed), research and development expenses (fixed), and general and administrative expenses (fixed).

Revenue Streams

Netgear has one revenue stream: sales of its products. While it does not divide products into reportable segments, product categories include networking, smart home security, wireless, switches, network storage, security, telco, cable, mobile, and home monitoring and automation.