Good Example Of Cisco Systems, Inc. Strategic Overview Essay
Porter’s Five Forces.4
TOWS Strategic Analysis..6
Competitiveness and Profitability7
Corporate Governance Mechanisms8
Analysis of Resources and Competences..9
Cisco Systems, founded in 1984, is a US-based multinational publicly traded company that serves worldwide (Cisco Corporate Overview and Resources, 2015; Jurevicius, 2013). Cisco Systems is responsible for designing, manufacturing, and selling Internet Protocol (IP)-based networking products and services; these products are related to the information technology and communications industry (Cisco Systems, 2014). Cisco’s customers are comprised of businesses of different sizes, public and private institutions, and telecommunication corporations among other companies. The main industry served by Cisco systems is networking (Jurevicius, 2013).
Cisco’s aim is to sell products to people in order to enable them to transport data, voice and video in enclosures, across school and university campuses, and generally worldwide to enhance communication and connection between diverse individuals at a global level. Cisco system’s management is based on three zones or geographical areas: The Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC)(Cisco Systems, 2014). The head office of Cisco systems is located in San Jose, Californiaand the current CEO is John Chambers (Jurevicius, 2013). The Company’s main competitors are Alcatel-Lucent, S.A., Juniper Networks, and Hewlett-Packard Company. Its primary stakeholders include direct holders such as Lloyd Robert Wayne and Robbin Charles, institutional holders such as Capital World Investors and Vanguard Group Inc., and mutual fund holders including Spartan 500 Index Fund, Vanguard Institutional Index Fund-Institutional Index Fund, and AMG Yactman Fund (CSCO Major Holders, n.d.).
Cisco’s broad vision is to provide its customers with “intelligent networks and technology, and business architectures built on integrated products, services, and software platforms” (Jurevicius, 2013). Its vision is popularly called Internet of Everything, or “sensor-equipped objects and their networks” which Cisco hopes with reshape the life of every individual. This aspiration stems from Cisco’s ability to successfully capture huge amounts of data; by extension, Cisco is striving to capture, analyze, and provide data optimally in order to ensure success; some famous examples recently discussed include Cisco’s cloud-based Videoscape TV delivery platform for service providers, parking meters which are capable of adapting to consumers’ demands, and clothes which, when worn by an individual, warn him or her of an impending bout of sickness (Endler, 2014). These aims enable Cisco to constantly evolve and develop new strategies to become successful and making businesses more efficient, thereby enabling success.
Porter’s Five Forces
Bargaining power of suppliers: The bargaining power of suppliers in Cisco is relatively sparse because Cisco is a powerful buyer; it can pick and choose its suppliers and let them go whenever it desires. Cisco has few suppliers because it wants to ensure that products supplied by existing suppliers are of excellent quality.
Bargaining power of buyers: Buyers of Cisco Systems have moderate bargaining power. Cisco’s products are diverse, innovative, and of good quality, setting it apart from many other corporations selling similar goods and services.
Rivalry: Cisco’s largest competitor is Juniper Networks which provides networking solutions, just like Cisco does. However, Cisco has a greater number of consumers than Juniper and because of this it has greater capital. According to Cisco’s CEO John Chambers, Cisco’s current top competitors also include IBM, HP, Microsoft, and Oracle and the pace at which the Information Technology Industry is advancing, it is inevitable that only three to four of these big companies will survive and emerge as leaders in the entire tech industry (Bort, 2014).
Threat of Substitutes: Cisco Systems sells a variety of goods and services, thereby reducing the threat of substitutes. When its rivals introduces new products, Cisco soon follows to innovate and release similar or better products at cheaper prices, therefore resulting in consumers choosing it over other companies.
Threat of New Entrants: Since the network and telecommunications industry has a lot of large corporations with extensive capital, the barriers to entry for new companies are very high. Cisco has large economies of scale because it produces on a massive scale, thereby reducing cost per output unit in the long run; it also offers its services and products worldwide, leaving not area unserved. New entrants are generally small businesses with no economies of scale and little investment put into research and development; thus they have little chances of succeeding.
Strengths: One of Cisco Systems’ greatest strengths is that it is a geographically diverse and expanded business. Cisco offers its services across the globe, covering all geographic areas such the Americas, Europe, Asia, China, Middle East, Africa, and Japan (Cisco Systems, 2014). This entails that a loss or shock in any one region would automatically be covered by profits or success elsewhere, therefore diversity acts like a buffer, lowering the risks involved in small and narrow markets. Since Cisco Systems is a large company, which made over $46 billion revenue and $8 billion profit in 2012, and employed almost 67000 individuals, it experiences economies of scale or cost advantages arising from its large size, output, and wide scale of operation which reduces cost per output unit as the scale of products made increases (Jurevicius, 2013). In 2015, up till now, Cisco has made almost $12 billion profit and has almost 70 000 employees (Cisco Corporate Overview and Resources, 2015). Other strengths of Cisco are the diversity of its products and its massive data storage.
Weaknesses: One of the major weaknesses of Cisco systems is delayed product deliveries to customers. In 2010, many customers turned to Cisco’s competitors when the delivery of Ethernet firewalls and other netgear was delayed considerably; it is stated that customers typically have to wait for a month before they receive complete products (Duffy, 2010).Another drawback is that other companies offer the same goods and services at lower prices.
Opportunities: A plethora of opportunities exist for Cisco Systems to prosper and benefit from, including data mining, cloud computing, smart grid usage, mobile broadband, WiFi home calling, and other data intensive applications. Many of these are also part of Cisco’s Internet of Everything vision. Since Cisco is adept at collecting and analyzing large amounts of data, it can make use of big data and search for patterns and yielding useful analytical information.
Threats: The major threats faced by Cisco Systems include competition from its rivals, open source competitors, and virtualization. The industry which Cisco operates in is undergoing rapid development and Cisco must adapt to the changes in order to compete with its rival companies. The number of competitors which Cisco has to out-compete in terms of design, efficiency, costs and delivery are also sprouting; existing competitors, such as Hewlett Packard are also becoming “smarter” whereas Cisco is currently not progressing as fast as it should, and is relatively stagnant – it is firing its employees and therefore undergoing constant restructuring, which threatens its development (Alter, 2012).
TOWS Strategic Analysis
In order to succeed, Cisco must play on its strengths and minimize its weaknesses. Cisco is strong in certain domains, such as its control, demonstrated by its share gains, and gross margin; it needs to make “promising acquisitions” to secure a safer future. Close association with start-ups and optimistic small businesses can also boost Cisco’s development (Alter, 2012). Cisco systems can come up with network virtualization solutions in order to manage services, rather than using physical resources. Virtualization diminishes costs and makes processes more efficacious.
Cisco can also capitalize on its strengths and make use of its opportunities to minimize weaknesses and overcome threats by specializing in areas such as data mining and cloud computing, which are relatively new fields in the information technology industry. Since Cisco is capable of handling and analyzing large amounts of data, it has a comparative advantage over its competitors, which it can utilize to overcome the threat from its competitors.
Competitiveness and Profitability
Cisco’s strategies for competitiveness and profitability include several motives, such as transforming user experience, transforming business practices, increasing revenure, decreasing the overall expenses of operations, making the company’s process more efficacious, and transforming the overall architecture among other things (Transformation through Innovation: A Strategy for Service Provider Success, n.d.). In order to be successful and emerge above its rival companies, Cisco recognizes the need to transform its business strategies by conceiving new business models, adapt to the rapid changes occurring in the industry as a whole, innovating through “cloud-based services”, and basically acknowledging and studying the changing needs of customers. Cisco’s strategy also includes an increased devotion of research and development on virtual technology and open networks (Transformation through Innovation: A Strategy for Service Provider Success, n.d.).
Corporate Governance Mechanisms
Corporate governance includes leadership in a company, internal operations, organizational principles, and relationships with employees, investors, and other stakeholders; all of these factors must adapt to changes in the external macroeconomic environment(Corporate Social Responsibility Report, 2009). Two of the governance policies used by Cisco Systems are:
Value-based ethics: Cisco strives to ensure that business, work ethics, including all rules and regulations and followed in accordance with Cisco’s Code of Business Conduct. Cisco has its very own Ethics Office which educates employees about ethical responsibilities and rules by providing proper information and formal training through a plethora of initiatives (Corporate Social Responsibility Report, 2009). Some of the domains covered by the Ethics Office include brand loyalty and safeguarding, customer advocacy, sales finance, human resources, labor relations, and legal factors. If anyone in the Company does not comply, the case must be forwarded to the Ethics Office, which further investigates the matter and takes pertinent measures(Corporate Social Responsibility Report, 2009). Cisco supports integrity, honesty, avoidance of employee conflicts of interest in all relationships, acting in “good faith”, being responsible, caring for fellow employees, and protection of information and assets of the Company (Financial Officer Code of Ethics, n.d.).
Stakeholder guidelines: Cisco has many diverse stakeholder groups, including communities and institutions, industry organizations and analysts, Cisco’s own shareholders and potential investors, business partners, suppliers to Cisco, Cisco’s employees, consumers, and other organizations (Corporate Social Responsibility Report, 2009). Cisco makes use of the feedback mechanism by interacting closely with communities through a variety of initiatives; annually, many surveys, discussions, interviews, customer requests for proposed changes, and other reports are compiled to enable easy communication. Cisco’s web presence on Facebook, Twitter, Flickr, and many blogs enables the Company to ask for customers’ experiences, criticisms, feedback, and suggestions (Corporate Social Responsibility Report, 2009).
Cisco Systems has a Board of Directors and Executive Officers for each division. For example, John Chambers is the Chairman and CEO, Mark Chandler is the Senior Vice Presidents and Chief Compliance Officer, Robert Lloyd is the President of Development and Sales, and so on. The characteristics of a good leader are providing a lucid vision, guiding properly, and owning and promulgating the company’s culture among other serving other functions.
One of the root causes of Cisco’s weaknesses is the ineffectiveness of John Chambers as both a Chairman and the CEO. In order for effective leadership, Cisco must select a new Chairman and let Chambers remain as the CEO since the jobs of a Chairman and a CEO are often conflicting; while the Chairman is responsible for performance and sustainability, and a CEO is responsible for the execution of a previously approved strategy. Chambers, currently performing dual roles of approver and executioner, is apparently struggling.
Analysis of Resources and Competencies
In order to ensure that Cisco’s resources, mainly human resource, are competent and well-trained, Cisco has a plethora of diverse training programs, including E-service training, advanced apprenticeships, customer loyalty, learning services, learning credits, social media training, networking academy, and partner education connection (Training Resources, n.d.). Each of these programs is intended to further the training of human resource, which would eventually lead to the Company’s success. The partner education connection, for instance, links Cisco’s partners with training programs to allow them to specialize, get certification, and in-depth understanding in particular areas; most of these programs are offered free of cost. The social media training, similarly, offers courses and consulting services to help all types of businesses realize the advantages of social media.
Cisco Systems has its own ethics office, which falls under the Cisco Governance, Risk and Controls group; its aim is to make sure that everybody in the Company complies with Cisco’s Code of Business Conduct. Cisco’s Ethics Decision Tree is a set of carefully designed questions such as is the action legal, does it comply with Cisco’s business policy, is it reflective of Cisco’s overall culture and values, could it have an adverse impact on any of the Company’s stakeholders, etc. (Ethics Decision Tree, n.d.). From 2008 till 2014, Cisco Systems was named as one of the World’s Most Ethical Companies by Ethi Sphere (World’s Most Ethical Companies, n.d.).
Cisco also introduced “Ethics Idol”, a flash module with which employees can easily interact to make decisions about ethical situations; Cisco provides personalized messages related to ethics using initiatives such as Ethics Idol, therefore forming an ethics “culture” – this entails that employees are not only “informed” about ethical practices, but are made to align themselves with Cisco’s values so that the Company can succeed (Enhancing the Ethical Culture at Cisco, n.d.). All of these measures ensure close cooperation with the employees, thereby helping them make decisions, offering advice regarding decision-making and ethical responsibilities, and investigating cases where non-compliance with the Code of Business Conduct is reported or observed.
Taking into account the strategic analysis the most plausible future recommendations for Cisco would be to further expand its products and services and further explore big data, data mining, cloud computing and other such services to overcome threats from competitors and further expand its revenue.
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