Business Strategy and Innovation of Cisco Systems Inc

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EXECUTIVE SUMMARY

The purpose of the report was to discuss the business strategy of Cisco Systems Inc (Cisco), a company widely considered innovative. The report was to discuss the justification of Cisco’s status of innovative, how the business environment impacted on Cisco and it’s opportunities for innovation, their sources of competitive advantage, strategic options available to Cisco, and evaluate the risks of implementing the strategic change to achieve this option

This was done by evaluating Cisco’s current strategies, its business environment and markets, applying strategy frameworks in the context of its industry and innovation, and by analysing the risks that could be associated with implementing this change.

Cisco innovate in three ways; they build innovation using research and development budgets; they buy innovation, by making strategic acquisitions; and they partner, developing strategic partnerships and ecosystems to aid innovation.

Cisco’s external environment was assessed using PESTEL analysis and applying Porter’s Five Forces framework. It was established that the main key drivers for change were technological and worldwide competition laws.

VRIN Frameworks were applied to assess Cisco’s sources of competitive advantage, as well as some of the threats they face in these areas. It would appear that the biggest threat to Cisco in this area is Non-substitutability; Cisco’s competitors are eroding their market share by offering similar products.

Two strategic options were discussed; selling their enterprise products directly to the end users and entering the consumer market. It was decided that the more radical of the two was entering the consumer market; and the risks associated with implementing the change, along with advice on how Cisco could manage the strategic change, were discussed.

TABLE OF CONTENTS

1.0 INTRODUCTION5
2.0 IS CISCO INNOVATIVE?6
3.0 CISCO AND THEIR BUSINESS ENVIRONMENT8
3.1 THE MACRO ENVIRONMENT8
3.2 KEY DRIVERS FOR CHANGE8
3.3 APPLYING PORTER’S FIVE FORCES FRAMEWORK9
3.3.1 The Threat of Entry10
3.3.2 Threat of Substitutes11
3.3.3 Power of Buyers11
3.3.4 Power of Suppliers12
3.3.5 Competitive Rivals12
4.0 COMPETITIVE ADVANTAGE13
4.1 Value14
4.2 Rarity15
4.3 Inimitability15
4.4 Non-Substitutability16
4.5 Cisco’s Organisational Knowledge16
5.0 STRATEGIC OPTIONS17
6.0 IMPLEMENTING STRATEGIC CHANGE19
6.1 Risk20
6.2 Managing Strategic Change21
7.0 CONCLUSION22
8.0 REFERENCES24
9.0 BIBLIOGRAPHY26

1.0 INTRODUCTION

Cisco Systems Inc (Cisco) was established in 1984 by a husband and wife team who wanted to solve the technical issue of emailing each other, but on different networks, and developed the first multi-protocol router, a device which allowed the different networks to ‘talk’ to each other by translating the different protocol languages (Cisco Systems Inc, 2012).

This report will examine Cisco as an innovative company, the external factors affecting their ability to innovate, their sources of competitive advantage within the industry and consider some of Cisco’s strategic options, the risks associated with the changes in strategy and how this can be managed.

The information has been compiled from information published by Cisco on their website, Exploring Strategy, Ninth Edition (Johnson, Whittington and Scholes, 2011), Academic Journals and published articles.

2.0 IS CISCO INNOVATIVE?

To establish if Cisco is innovative, first we have to define what innovation is. Innovation can be defined as, “…the conversion of a new knowledge into a new product, process or service and the putting of this new product, process or service into actual use.” (Johnson, Whittington and Scholes, 2011, pg 296). Therefore until the product, process or service is brought to the market; it cannot be considered an innovation.

In regards to innovation, Cisco has an extensive innovation strategy....
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