Cisco System

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.
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 market strategy.
To expand its market in the face of dynamic competitors like IBM and Apple, Cisco faced a
situation in which it must expand market channels. Because of its’ technology, Consumers are
increasingly well informed, with the advent of internet technology which allows them to
gather a great deal of information before making the choice to “hire” one product/service or
another, according to their needs. Successful companies are increasingly turning to marketing
to find niches spaces in the consumer consciousness in an effort to increase customer reaction
by treating them as individuals with specific sets of needs. Company websites may offer
specialized services that cover a wide range of possible targets in an effort to induce these
more empowered customers to find value, displaying the loyalty that stems from satisfaction.
The relationship between the consumer and the business is no longer necessarily determined
entirely by the politics and media in this new age of marketing and the internet, which could.
Though Cisco was a pioneer in business-to-business tools for resellers, it attempted to develop
direct web sales channel as well. By selling its preconfigured low-end equipment to the SMB
and SOHO directly over its website, Cisco could successfully reduce the reseller cost and
potentially increase products margin. Cisco contracted with online retailers such as CDW,
Insight, PC Connection, and Micro Warehouse in order to expand direct-sell options, in this
way, Cisco could attract more customers by offering more choices to them to decide if they
preferred to buy from a systems integrator or an online retailer. Expanding in Internet direct
selling channel might be reducing its VARs’ sales, but on the other hand, VARs could focus
more on their high-end customers and improve their specialized services.
VoIP Telephony:
VoIP telephony market is the new emerging segment in the telecommunication industry; it
was expected to grow rapidly from $3.5 billion to $10.5 billion by 2008. Cisco’s IP telephony
solutions used a single network infrastructure to transmit voice, data and video
 Recommendation
 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 market strategy. To expand its market in the face of dynamic competitors like IBM
and Apple, Cisco faced a situation in which it must expand market channels.
 Cisco became the market leader in the consumer market; it had doubled sales to
about $800 million and took a 40% market share. The competition was still strong
from NETGEAR and D-Link. The aggressive competition eroded its margins to barely
half the levels of the corporate networking gear business.
 Its products and service were focusing on the $2 billion - $3 billion top end of the
market. Cisco faced aggressive competition from Nortel, Juniper, Siemens, Alcatel, and
Lucent. Juniper was the market leader with nearly a 30% share. Cisco was currently
designing next generation products to seize a bigger position at the higher end.