Strategic Analysis Of Cisco Systems Inc.

Option 1: The Corporate Strategy of Cisco Systems Inc.

Cisco Systems Inc. is a telecom-based company operating in the infrastructure sector. It deals with the design, production and selling of IT and communications related commodities, internet protocols, and network-dependent infrastructure. Its main headquarters is in USA, California but it has other operations within America, Pacific Asia, and Europe.

According to Cisco’s management, it is vital to have a strategy discipline as the company continues to progress to offer support to the functions of Corporate Development and the duties of the Chief Strategy Officer (Olson, Slater & Hult, 2005). The strategy team implemented five primary goals to attain corporate strategy which include:

To drive current development projects and coordinates Cisco’s corporate strategy.

To develop an ongoing agenda of strategy problems and opportunities for Cisco to assist in establishing and implementing actions that generate competitive advantage thus improving Cisco’s long-term development.

To form partnerships with Cisco’s executive team to initiate key strategies, address key business problems and formulate and implement strategies that enhance opportunities in Cisco’s operations.

To develop and disseminate proper leadership.

To create an excellent center for strategic skills, capabilities, and tools.

Cisco’s three core data capabilities include professional services, consulting IT strategy and adoption services. Cisco’s professional services ensure that partners drive the successful plan, design, and integration of the company’s technologies with other systems from primary vendors (Bharadwaj, El Sawy, Pavlou & Venkatraman, 2013). The IT strategic consulting capability ensures that Cisco collaborates with stakeholders to establish a strategy for technology that connects technical investments with business results. Adoption services capability drives end-user adoption to ensure client technology investments attain projected corporate benefits through enhanced employee productivity and optimized business operations (Teece, 2010). Cisco’s data capabilities are dedicated to maintaining Cisco’s highest competency levels across the broad solution portfolio.

Strategic Analysis of Cisco

SWOT Analysis Strengths

Product value: According to Brand Finance, Cisco falls in the 52nd rank and its product value is $19.162 billion.

Leading technological company: Cisco has established itself as one of the critical technology leading companies in the world. It has designed and developed techniques which emphasized high-development markets. Cisco attained the support of small retail organizations to penetrate the smaller market much earlier than competitors. In the year 2015, Cisco achieved 11 acquisitions.

Strong Financial System: In 2015, Cisco recorded incomes of approximately $ 49.161 billion which had increased by 4.3% since the previous year. In the same year, Cisco’s profits had increased by 14.4% to $8.981 billion (Ghemawat, Cassiman, Collis & Rivkin, 2010).

Market Executive:

Cisco holds the leading position in its operation market. For example, it owns 59.9% market share in the market for Ethernet switching, 47.4% market share for wireless LAN routers, 42.6% market share for firm equipment for video conferencing and 56% share of the market in the router and switching market. Furthermore, Cisco previously had more than 9% of the market share in the embedded security market. As a result of its marketable edge, Cisco gained competitive advantage.

High potential for growth: The technology sector is quickly evolving. There is high demand for data centers in the market due to the development of the internet and an increase in data as well as cloud computing and high-speed wireless equipment. According to Vorhies & Morgan (2003), Cisco has a significant impact on the IT industry and is due to attract the market with its high-quality technology products. In 2015, Cisco’s wireless internet commodities rose by 10.9%.

SWOT Analysis Weakness

Order delays: Cisco’s supply chain suffers adverse effects. Although it meets customer expectations and its products are of exquisite quality, the company constantly experiences delays in its shipping orders and product shortages.

SWOT Analysis Opportunities

The establishment in the software market: The network function virtualization (NFV) and software-dependent networking (SDN) markets are estimated to increase by a rate of more than 86% between 2015 and 2020 to the value of almost $45 billion.

Development of cloud computing: The Cisco Global Cloud Index predicts that the yearly worldwide traffic is set to increase by four times to 8.6 from 2.1 zettabytes (ZB) by the year 2019. The traffic for an extensive data center is estimated to increase by three times from 3.4 to 10.4 by 2019. Moreover, the cloud is expected to be responsible for more than 83% of the overall data center traffic in 2019. The strong influence of Cisco in the cloud computing industry will ultimately increase its profits and revenues.

Increase in cloud security: The growth of cloud computing will ultimately result to increase in cloud security. Between 2014 and 2022, the solutions market for global cloud security is estimated to experience growth of more than 13% to reach approximately $12 billion in 2022 (Peng, Wang & Jiang, 2008).

Cisco’s presence in the cloud computing and software market can be associated with its provision of services such as Cisco Operations for Security Intelligence, Cisco IronPort service for Hybrid Email Security and email filtering, Cisco AnyConnect Secure Mobility Solution and Cisco IronPort Encryption Appliance.

SWOT Analysis Threats

Lawsuits: Cisco is experiencing litigations with the federal tax authorities of Brazil. The authorities have stated that the company has evaded approximately $262 million taxes and claimed $1.1 billion for interest and $1.2 billion for damages. Such kinds of lawsuit accusations could tarnish Cisco’s brand name and image.

Competition: Cisco faces extreme competition from organizations such as ARRIS Group, Dell, Check Point Software Technologies, Alcatel-Lucent, Fortinet, Brocade Communications, Arista Networks, Citrix Systems, HP, Microsoft, VMware, Huawei Technologies, Polycom, Arista Networks, Amazon Web Services, LM Ericsson, Motorola Solutions, Ubiquiti Networks, Juniper Networks, F5 Networks, Blue Jeans Networks, Ruckus Wireless Symantec, PaloAlto Networks, Extreme Networks and Riverbed Technology (Noe, Hollenbeck, Gerhart & Wright, 2006).

Inconsistent market: The sales of routers and service providers in the field of the data center are lubricious in the market due to fluctuating business and economic conditions of the countries that Cisco conducts transactions with.

Cisco’s Competitive Strategy

Cisco is recognized for its ability to acquire the support of innovative startup enterprises that assist in keeping up with technological development in the market. Cisco also allows these young enterprises autonomous freedom to operate on the boundaries of startup firms while using Cisco’s organizational resources. As a result, many of these firms’ leaders are given primary positions of management within Cisco’s executive team thus sharing knowledge and experience to compete in emerging markets. Hence, through strategic partnerships, Cisco has managed to purchase and establish an ecosystem whereby other companies can co-create their customer value and decrease their operational costs while Cisco can reduce IT-dependent risks (Figge, Hahn, Schaltegger & Wagner, 2002).

Cisco has also managed to maintain the competitive advantage due to its thriving IT infrastructure, MTO (made-to-order) software and model services and unified architecture interrelated technology whose primary goals are providing personalized services to its clients.

Although Cisco has managed to emerge a leading competitor in various vital sectors such as integrated circuits, microprocessor, and cloud computing infrastructure and diversified global distribution network, its original challenge is competitive prices particularly from companies located in Asia.

Cisco’s Managing Capabilities

Cisco has managed to establish a networking system that is intent-based to enhance business innovation by reducing error and time wastage associated with duties that can be better attained through a software code system (Ghemawat et al., 2010). The intent-dependent networking, therefore, enables the company’s IT team to implement and manage troubleshoot network systems via application programming interfaces (APIs) to collect information and create automated network functions. According to networking experts, the IT department can rely on APIs for uniform network management and the establishment of new network capabilities. APIs can transform the network into a centralized system that effectively manages infrastructure and apps.

Cisco integrators and partners are viewing the importance of intent-dependent networking hence planning to formulate apps with distinct functionality due to programmability and APIs. According to the Enterprise Strategy Group, many organizations consider the network as the framework of business benefits. According to Teece (2010), the following networking capabilities are found the most advantageous to organizations: Internet of Things (IoT)-connected infrastructure (23%), new applications (23%) and network security (46%).

By use of APIs, Cisco service providers have been able to effectively manage mobile network through the Cisco Digital Network Architecture (DNA) that can identify an issue within the network and resolve them. The company’s IT team also envisions connecting the mobile network app with other technologies like voice-activated assistant systems such as Siri and Alexa. For example, Italtel USA which is one of Cisco’s integrator and partner has linked intent-dependent networking with parallel technologies and IoT-based devices a secured manufacturing production oriented space.

Strategic Structures

Cisco is utilizing demographic segmentation variables to improve customer services hence enhancing client satisfaction and its development proposition. The advantages of demographic segmentation to the company include increasing its focus on market segments thus allowing better performance and increased profits (Noe et al., 2006). Moreover, Cisco increases its competitiveness in the market from a holistic perspective thus allowing it to expand in the territory of its target customers. Customer retention, increased profit margins and improved communication are other benefits of Cisco’s demographic segmentation.

Cisco implements the differentiated targeting strategy to develop IT-dependent commodities that suit consumer requirements. The different marketing and strategy models that Cisco utilizes include the following:

BCG Matrix: Otherwise called the growth-share matrix, the BCG matrix is a marketing strategy used to categorize commodities and helps to identify profitable business entities which help Cisco gain a competitive advantage over peers.

Ansoff Matrix: The model helps the firm’s marketing team decide the future strategies they can use at both product and brand levels. The Ansoff Matrix is categorized into two quadrants namely the market and product quadrants. Cisco implements the Ansoff Matrix to penetrate the market with its existing products and to enhance growth due to high competition from other firms marketing telecom products (Figge et al., 2002).

GE-McKinsey Matrix: The model helps Cisco evaluate its business and product portfolio because every product has its customer requirements and demands.

Gap Analysis: Cisco will benefit from the Gap Analysis model by identifying gaps in the business’ operations. The model is the best marketing and strategy tool to enhance the company’s operations and expand its business. Additionally, Gap Analysis helps to identify the current position of the company, its current business environment and the direction it needs to take to reach its targets. Gap Analysis also offers the best strategies that optimize resource utilization to acquire optimal results. Finally, Gap Analysis enables Cisco to meet customer expectations.

Cisco implements the value-centered positioning strategy to maintain its position as a globally trusted partner which interconnects with other firms through the network.

Cisco’s Organizational Structure

Cisco implemented a shift in its organizational structure in 2001 and had continued to define it over the years to remain innovative and competitive in an evolving industry (Vorhies & Morgan, 2003). Before 2001, Cisco used the silo organizational structure but changed to cross (matrix) organizational structure after 2001. The previous silo organizational structure was a hierarchic model that made communication quite simple however the company was unable to create satisfactory customer products which caused it to incur losses of $2.2 billion. After 2001, Cisco adopted the matrix organizational structure to develop customer-based products hence improving its profit margins. The cross-organizational structure is an individual system however it complicates the company’s communication system.

Under the silo organizational structure, Cisco’s business process was slow which caused its sales to reduce hence poor performance. However, with the cross (matrix) organizational structure, Cisco can create exceptional IT products thus improving its performance and financial capability. In 2009, Cisco’s management claimed that the company’s future strategy was to enhance its economic outcome by executing its development strategy due to its organization structure and creative business model (Olson, Slater & Hult, 2005). Cisco’s innovative business model enabled it to penetrate in over 30 markets while minimizing non-GAAP operating costs by 10% every year and its headcount.

Cisco’s Incentives and Enablers

Cisco implemented a new Teaming Incentive Program to improve growth by adjoining the cloud, video and virtualized information center. The incentive program will ensure that partners benefit from their interaction with the business vendors to improve sales and value-increasing opportunities. The Teaming Incentive Program supports Cisco’s other current incentive programs such as the Opportunity Incentive Program (OIP), the Value Incentive Program (VIP) and the Solutions Incentive Program (SIP).

Cisco launched the Global Partner Network to enable the collaboration of business partners to offer better customer services based on global business requirements. The partners can also establish agency relationships with other Cisco distributors and partners to assist meet customer requirements especially those located in remote areas (Bharadwaj et al., 2013). The sole benefit of the Global Partner Networks is the host partner will maintain complete ownership of the client relationship and design a solution strategy for the end-subscriber.

Cisco will divert its focus to architectures from technologies to maintain partner specializations. The company is currently specializing in areas such as integrated communications, switching and routers as part of its evolution strategy to incorporate Borderless Networking, virtualization, and collaboration.

Conclusion

For many years, the deployment of management theories has influenced corporations’ understanding of core capabilities. The fundamentals of core capabilities can be further perceived when enterprises adapt to internal and external pressures in the corporate environment. Companies’ management teams need to be cautious and active in designing and implementing innovative methods for enhancing core capabilities. Moreover, managers should evaluate their companies’ goal to estimate the best approach to establish core competencies. The primary purpose of building core capabilities is to gain competitive advantage hence it is interesting to see how companies make use of opportunities to regain their valuable resources.

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