Cisco Systems

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  • Topic: Dot-com bubble, Stock market bubble, Marketing
  • Pages : 7 (2465 words )
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  • Published : January 4, 2013
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Analysis
Company background (Cisco Systems):
Cisco Systems is a world leading company in the switches and router market. Established in 1984 by a Stanford University couple, IT administrators Len Bosack and Sandy Lerner. Ina short period after founding, it became one of the most successful companies in high technology industry. In Cisco, manufacturing of its switches and router was outsourced, the company focused on core competencies: product design and development. Indirect sales and distribution through resellers became the major sales channel in the end of 1990’s; its “Value-Added Reseller” (VAR) was the most successful indirect sales channel strategy at that time. In later 1990s, Cisco had ever been the world’s most valuable company, its market capitalization exceeded $500 billion in 2000, and sales reached $18 billion. With the telecom and dot-com crash in 2001, Cisco’s business was hugely affected; $1 billion loss was reported in 2001. The shrunken market made Cisco’s management completely review and revamp its go-to market strategy. Market and Products:

Cisco’s major products are switches and routers. A switch is used to connect workstations within a local-area network (LAN). The switch directs data only to the destination for which it is intended, and increases the efficiency of networks by reducing traffic and the number of “collisions” of data headed in opposite directions. Routers are the devices that connect networks to other networks in a wide-area network (WAN). Switches and routers are classified along a layer 1 to layer 7 continuums in technical point of view. Cisco competes on layer 2 onwards in the switches and routers market. With the explosion of the Internet in 1990s, Cisco achieved great success in the high tech industry, from basic connectivity to high-end, multilayer intelligent service switching solutions. Cisco mainly competed in three big markets: Firstly. Core corporate networking gear market, it was severed for both enterprise accounts and small- and medium-business (SMB) accounts. Secondly, Telecommunication service providers. Cisco provided hardware devices and technical supports to telecommunication service providers. Thirdly, Consumer markets. After acquisition of Linskys, Cisco entered this home networking market. Issues:

Before the dot-com bubble collapsed, Cisco was a conglomerate that achieved growth less through expanding marketing channels, and more through M&A. This was the industry standard of the time, because the market had a limited room to expand during the dot-com bubble. In the case, Cisco is shown to be a company that achieved a lot of cost cutting and streamlining at the end of the dot-com bubble. Much of this was accomplished through disciplined operations rationalization on many fronts. Cisco, which had agglomerated more than 75 firms since it’s founding, virtually halted its aggressive M&A. The main issue of note in this case is how Cisco, after surviving the dot-com boom and crash that ruined so many of its competitors, can maintain competitive advantage as a streamlined and still-expanding company. With the collapse of the dot-com market and related shrinkage in the high-tech industry, Cisco took a dip in its sales and profits in 2001. Coming back from the recession, Cisco had to manage and evolve its go-to-market strategy and design in keeping with its new business strategy. In terms of this evolution, the case focuses on marketing and management function objectives key to the company’s expansion. Cisco Systems accomplished its management functions by integrating its networked system with hiring practices- many of the company’s skilled and talented employees, most of whom have a high level of education required for the specialized field of networking, are garnered from the internet. Cisco’s primary issue faced in the case is how to sustain change after the so-called bursting of the tech bubble or the stock market bubble, and how to revamp its route to...
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