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Cisco Case

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I. Viewpoint

John Chambers, CEO

II. Time Context

January 21, 2011

III. Objectives

a. To formulate a business strategy that will increase Cisco’s revenue growth to 12-17% for the next ten years starting in 2011 amidst economic downturn in 2010.

b. To identify prospective new markets that Cisco can penetrate in 2011 to maintain its commitment to add 20 percent of business annually.

c. To properly invest Cisco’s $35 billion company expansionary fund into 30 ventures and ensure $1 billion annual return from each venture.

d. To make a directive that will ensure Cisco to earn profit and avoid incurring more losses by the end of 2011. IV. Statement of the Problem

The economic downturn in 2010 threatens to undermine Cisco’s expansionary programs to tap more revenue from the emerging collaboration market.

V. Areas Of Consideration

Cisco had been constantly increasing its annual revenue since 1995 through developing new technologies for the collaboration market and aggressive business expansion. However in 2010, Cisco’s financial performance is down due to the economic downturn. This weak performance in 2010 can threaten the expansion program of Cisco for the succeeding and not be able to tap revenues from the emerging collaboration market.


a . Strengths- Cisco’s allocation of $35 billion for business expansionary can potentially increase revenue by $30 billion in 2011.

b. Weakness – There is always a risk in investing in new, emerging markets because they are still untested. The recent economic downturn makes it all the more riskier.

c. Opportunities – There is a positive outlook for growth of collaboration market in Asia particularly in China and South Korea because of their drive for the information age. Cisco can further increase their investment in Asia with lesser chance of failure.

d. Threats – It will be very hard for Cisco to recover once its expansionary programs fail because of its huge scale.

VI. Alternative Courses of Action

a.) We will be more conservative in the expansion program and cut the expansion budget by $20 billion

b.) We will make a division that will create consumer based products.

c.) We will not invest our funds and new technologies to new market, rather we infuse them to our existing market .

d.) We will go ahead with the plan and aggressively expand to new markets using the entire $35 billion budget.

e.) We focus our expansionary efforts to China and South Korea

VII. Evaluation of ACAs

Strengths – We can dramatically decrease the chance of incurring more losses by lessening the scale of the expansion program. Weakness – With the smaller scale of expansion, there is a lesser chance to achieve the goal of increasing annual revenue by 12-17%. And we are not guaranteed that we will not incur any losses Opportunites – We invest only to markets that we think are the most prospective so there is lesser chance for failure. Threaths – While holding back, competitors can already penetrate new markets and have the first-mover advantage. Once that happens, it will very difficult for us to catch up.

Strengths – This can dramatically increase the market share and revenue of Cisco. It can be a future expansion focus. It can add additional profitable products to Cisco’s already impressive portfolio. Weakness – Consumer based products is a forte of Cisco. Also Cisco’s 61 new technologies can be wasted if they can’t be modified for consumer based products. Opportunities- Cisco can use its experience and technology developing expertise for this venture. Asides, this is in lieu with Cisco’s revenue generating strategy which is to expand in ventures related to information technology. Threats – It is a waste of time, effort and resources if not done right. Also competition in consumer based hi-technology devices is already tight with Apple, Microsoft and Dell clashing head-on.

Strengths – It is less riskier than expanding into new markets because we are already flourishing in these markets. Also, its almost guaranteed we can increase revenue in this market if we increase our market share through more investments. Weakness – Since the existing markets are already tapped, it will not generate as much profit as a successful venture in a new market. Opportunities – As we invest in more fund and technology to our existing markets, there is a possibility that they will also expand. Threats – Again, competitors can already penetrate new markets and have the first-mover advantage. Once that happens, it will very difficult for us to catch up.

Strengths – It can add revenue of up to $30 billion if it pays off. Weakness – With high rewards come high risk. Cisco will not be able to recover the staggering losses once it fails. It can be a potential major drawback that will reverberate in many years. Opportunities – We can have the potential first-mover advantage in over 30 markets. This will ensure that we reach our expansion objective of a 12-17% increase in annual revenue for the next 10 years Threats – The recent economic downturn makes ventures all the more riskier. There is a tendency that Companies will be more conservative in their spending thus sparking a failure in our investments.

Strengths – It is less riskier because Asia is not affected by the economic downturn being experienced in USA and Europe. Also, Asia has proven to be a very profitable venture for Cisco over the years. It can provide revenue of up to $30 Billion Weakness – It will stagnate Cisco’s current venture to collaboration market. Opportunities – There is an emerging smart city industry in China and Korea that Cisco has a first-mover advantage. Asides from current prospects, it has an additional potential of $30 Billion that Cisco can already tap. Threats – Competitors can overtake Cisco in the Collaboration Market. Competitors can also be first-mover in new collaboration market ventures. This will give Cisco a hard time in regaining its dominance in the Collaboration Market if the “smart city” venture fails.

VIII. Conclusion
It will be good for us to focus our expansionary efforts for 2011 to Asia. We can go ahead with the scale of expansion without the same risk because Asia is virtually unaffected by the economic downturn. We are the first-mover in the “smart city” industry so we have no problem expanding our operation. There is also an untapped potential of $30 Billion that we can exploit. If everything goes well, we have problem of meeting with our expansionary goals.

IX. Recommendation

We can cover the weakness of this course of action by allocating $5 Billion of the expansionary program to the maintenance of our Collaboration Market ventures. This will ensure that we maintain our current market share ergo our dominance in the Collaboration Market.

X. Contingency Plan

If the “smart-city” venture fails, we will suffer a major setback in our expansionary program. We will incur losses for two straight years. The company will have a hard time recovering from this staggering amount of loss. Our expansionary program can be delayed by years.

XI. Solution

Though it is less riskier, we must still be very careful in our investments in Asia. We will not invest all our funds unless it is almost a guarantee that there will be returns.

1.Discuss the nature of the market structure and the demand for Cisco’s products

All of the products of Cisco are industry based. They are a company that sell their products to other companies. Their expertise lies in information technology. They develop intranet of companies and fix their connectivity to the internet to improve overall company communication. Cisco also offer consultancy services for their so they can ensure that companies can use them efficiently thus effectively minimizing operational cost.

2. Given the industries in which Cisco competes, what are the implications for the major types of buying situations?

For straight rebuys, Cisco maintains their market share maintaining a high standard to their products and services.
Modified rebuys – Cisco is continuous in its innovations so it has problems in upgrading the capabilities of their products.
New task – Over the years Cisco has added more and more products and service to its portfolio. They have no problem delivering new products if asked.

3. What specific costumers benefits will likely result from the Cisco products mentioned in the case?
Distance will no longer be an issue for communication within a company. The dissemination of information will be very quick so managers and employees can make implement orders very quickly. There will be a fast and reliable connection to the internet. People don’t have to relay to memos. They can receive real-time instructions. Overall, there is a significant increase in productivity and efficiency.

4.Discuss the customer buying process for one of Cisco’s products. Discuss the selling process. In what ways do these processes differ from those found in buying and selling broadband router for home use?

Since Cisco sells to other companies, the scale of the transaction is always huge. In the Buying process, it starts with the problem recognition – there must be a problem present in the company. Then, General need description. They make a list of characteristics and quantify the product or service that they believe will solve the problem. After which, they will do a product specification to concretely identify the product or service they need. Then comes the supplier search. This is the time when the companies approach Cisco. Through proposal solicitation, Cisco will send its bid to the potential buyer. Next comes the supplier selection. If the company has chosen Cisco, the will finalize the order through order-routine specification. After all the products are delivered, the buyer will do a performance review in order to see if Cisco has been an efficient supplier or not. Future purchases can be based on performance review.

The process of buying or a consumer based broadband router is considerably less complex. The buyer will also do research about the router but the selection process lies with preference or purchasing power. The seller need not to submit proposals and bids.

5. Is the relationship between Cisco’s own collaborative culture and the products and services it sells something that could work for all companies? Consider this issue for a consumer products company like P&G.

Yes, communication is always important for a company especially for huge corporations. Companies will always perform efficiently if information is delivered concisely and without error. P&G is a huge company. They will need an effective intranet in order or to maintain a secure communication in the organization. P&G also has supplier that deliver intermediate goods that P&G will process as final good. This is a form of collaboration. Collaboration is at the core every business. No business can stand on its own. .

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