Aditya J

Chidambaram N
Haneef M
Lucille D
Siddhartha S
STRATEGY ANALYSIS
 o Develop, Manufacture and Sell Networking,
hardware and other advanced Telecommunications
products.
8 Major Product Categories

Switching Routing
Collaboration Data Center
Security Wireless
BACKGROUND Services Others
&
HISTORY
o 45% of revenue from Switching & Routing;
o Global presence in 95 countries. 50% of revenues
from outside North America
BACKGROUND
&
HISTORY
BACKGROUND
&
HISTORY
 Selected Financial summary

o In 2016, $49B in revnues. YoY 3%

o Market cap. $164B ,CCE and Investments $65.8,
operating margin 25.7%

BACKGROUND
&
HISTORY
EXTERNAL ENVIRONMENT
ANALYSIS
 EXTERNAL ENVIRONMENT ANALYSIS
GENERAL ENVIRONMENT

Political/Legal
• Political challenges
• China: Privacy concerns on Cisco
equipment since Snowden’s
revelation.
• Brazil: Tax evasion claims.
• Stringent Government regulations on
electronic components.
Moderate Threat
Trend: N/A
Technological
• Trend towards software based
networking(SDN).
• Trend towards open source
technologies.
• Networking talent drain.
• Increasing prominence of Security,
Cloud and Collaboration categories.
Moderate Threat
Trend: Increasing
 EXTERNAL ENVIRONMENT ANALYSIS
GENERAL ENVIRONMENT

Economic
• Uncertain global economy.
• Buying patterns in IT
infrastructure(5-6 years
usually) are closely linked
to economic environment.
• Volatile exchange rates.
Moderate Threat
Trend: No pattern
Demographics
N/A
Socio-Cultural
• Increased connectivity
Low Opportunity
Trend: No pattern
Global
• Strong growth prospects in
Emerging markets
Moderate Opportunity
Trend: No pattern
 EXTERNAL ENVIRONMENT ANALYSIS
INDUSTRY ENVIRONMENT
THREAT LEVEL TREND

Barriers to entry

Switching costs : High

Economies of scale : Increasing

LOW INCREASING
THREAT OF NEW Access to distribution channels : Unfavorable RAPIDLY
ENTRANTS Capital requirements : High

Product Differentiation : High

INTERFIRM • Traditional rivals are Juniper, HP, IBM, and Alcatel

Lucent. HIGH INCREASING
RIVALRY • Global expansion of domestic competitors –
Huawei, ZTE
• Increasing number of startup & non conventional
competitors in specific product segments.
 EX TERNAL ENVIRONMENT ANALYSIS
INDUSTRY ENVIRONMENT

THREAT LEVEL TREND

THREAT OF • Disruption prevalent in technology industry

• Migration to software based switching MODERATE INCREASING
SUBSTITUTE routing solutions for networks.
PRODUCTS
• Few suppliers and high switching costs for the
BARGAINING buyers.
• Enterprise clients in a position to negotiate MODERATE INCREASING
POWER OF BUYERS price to some limits
• Minimal threat of backward integration

• Cisco has diversified its supplier base across

BARGAINING many vendors.
POWER OF • Backward integration an option for the firm. LOW NO PATTERN
SUPPLIERS
 COMPETITOR ANALYSIS BY PRODUCT
CATEGORY

NGN ROUTING JUNIPER, HUAWEI

SWITCHING HEWLETT PACKARD, HUAWEI

COLLABORATION MICROSOFT
CLOUD
AMAZON & MICROSOFT
INFRASTRUCTURES
WIRELESS ACCESS
ARUBA
SOLUTIONS

HIGHLY COMPETITIVE &

FRAGMENTED MARKET
 EXTERNAL ANALYSIS SUMMARY

• General environment is moderately not

attractive for Cisco, mainly due to
technological and political landscape.
• Industry environment is attractive for Cisco,
as all other factors other than Interfirm rivalry
are favorable.
• Cisco is operating in a highly competitive &
fragmented environment and its’ traditional
advantage over rivals is beginning to erode.
INTERNAL ENVIRONMENT
ANALYSIS
 INTERNAL ENVIRONMENT ANALYSIS

STRENGTHS WEAKNESSES

Global Market Leader Over-reliance on switching and routing.

• Market share domination
• Footprint : 95 Countries
Strategic expertise in acquisition &
collaborations.
• Stellar acquisition track record.
• Strategic alliances.
• Declining revenues
• Threat of disruption.
Countering inherent threat of operating
in rapid cycle technology industry.
• Patent-> cash cow.

Customer Orientation
• Positioning as digital
transformation partner.
• CRM strengths

Technological Might – 19k patents,

extensive knowledge base and talent
pool.
 COMPETITIVE ADVANTAGE

COMPETITIVE NON-
VALUABLE RARE INIMITABL
ADVANTAGE SUBSTITUABLE

Customer
Orientation
Global Market
Leader Position
Technological
assets and
maanufacturing
prowess
Expertise in
acquisitions and
alliances
 CORPORATE LEVEL STRATEGY
Cisco’s Strategy -“lead our
customers in their digital
transition”
Our Analysis
Related Constrained type Diversification
strategy
• Various product divisions linked through
operational activities within the company.
Value creating diversification strategy
• Blocking competitors through multimarket
competition
• Cisco competes with Arista, Aruba, HP,
Juniper - (Enterprise Networks, Security,
Mobility / Wireless, Switching, Routing)
 • 180 acquisitions in its 30 year
history.

• Cisco Acquisition guideline: small

MERGERS AND companies, fast growing, focused,
ACQUISITIONS entrepreneurial, in geographical
proximity and culturally similar.

• A 50 strong Strategy Team directs

& executes the seamless
integration in few days

• Diversification and horizontal

acquisitions
 MERGERS AND
ACQUISITIONS

Acquisitions roadmap
Traditional business
(1990)--> adjacent areas
(2000-10)
Few failures/write-offs:
Linksys ($500 mil), success
rate above 98%
Benefits: Technology,
Talent, Ready made
market.
 INTERNATIONAL STRATEGY BY CISCO

Type of strategy : Global

ADVANTAGES DRAWBACKS

• Increase market size for products. • Draining resoruces to compete in

• Increasing ecnomoies of scale and rapidly shifting and unique
scope competitive environments globally
• Enhanced reactiveness due to • Adjusting to varied political/legal
proximity to local markets. Keep the environment
company in pace with local
environment. ahead of competition
• Better customer relations through
adapting to local cultural
environment.
 COOPERATIVE STRATEGY

Primary Intention Strategy External Partners

Promote growth and Diversifying Strategic Alliances Microsoft, IBM, Intel, Ericson
diversification

Enhanced differentiation Network Cooperative Emerson, Hitachi, CA

strategies Technologies, Fujitsu, Wipro

Reduce Cost Outsourcing and Vertical Contract Manufacturer

complemetary strategic
alliance
 MANAGEMENT ISSUES FACED BY CISCO

• How to address weakness in Switching &

Routing segment?
• Over-reliance
• Growth deflation.
• Threat of product substitutes
• Competitive environment
• Slow erosion of its market leader
position.
• Difficulties in China.
 QUESTIONS??

THANK YOU
APPENDIX
References:

1. http://www.techrepublic.com/article/think-your-cisco-switch-is-secure-think-again-hundreds-are-
vulnerable-to-a-simple-attack/
2. http://www.businessinsider.com/how-linkedin-is-shrugging-off-the-175-billion-hardware-
industry-2016-10
3. http://www.businessinsider.com/how-linkedin-is-shrugging-off-the-175-billion-hardware-
industry-2016-10
4. http://www.wikinvest.com/stock/Cisco_Systems_(CSCO)/Foreign_Currency_Exchange_Rate_Risk
5. https://newsroom.cisco.com/press-release-content?articleId=1528533
6. http://www.networkworld.com/article/2191771/data-center/cisco-s-top-10-rivals.html
7. http://www.cisco.com/c/dam/en_us/about/annual-report/2016-annual-report-full.pdf
8. https://blog.cbtnuggets.com/2016/06/juniper-vs-cisco-4-reasons-to-go-juniper/
 Cisco’s Innovation
Engine

Source:http://www.cisco.com/c/dam/en_us/about/annual-report/2016-annual-report-full.pdf
Cisco’s Corporate
Strategy