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Strategic Management and Organization 1

Cisco, a leading global company, in the fast-growing communications and information technology industry, focuses on offering Internet Protocol (IP)based networking and many other products. Cisco s targeted market can be segmented geographically into four segments, namely, United States and Canada, European Markets, Emerging Markets, and lastly, Asia Pacific Markets. Due to its global operations, Cisco employs 71,825 employees. Over the years, Cisco has been declining due to its lack of focus in its customers, intense industry competition and the decline of the information technology industry. Therefore, the purpose of this paper is to analyze how Cisco can reinvent the company in order to improve its competitiveness.

The amazing results that Cisco had achieved in the past shows the strategies that it had used were extremely effective, thus, it will be useful to conduct a study on its past strategies in order to identify the areas where it had competitive advantage. Thus, in order to identify its competitive advantage, and analysis of is distinctive capabilities will be done. The distinctive capabilities of Cisco are the resources that Cisco possesses that play an essential role in delivering its competitive advantage. The many relationships that Cisco have built over time with its employees, suppliers, distributors and customers as well as collaborating firms makes Cisco s resources distinctive from its competitors . Hence, these relationships provide Cisco with opportunities to gain competitive advantage. The three unique resources areas are related to distinctive capabilities are architecture (network), reputation and innovative ability.

Cisco had built a customer-focus company culture; it ensured that its employees had close contact with its customers. In addition, it had implemented a system where is employee s compensation are directly linked to customer s satisfaction. Therefore, this ensures that its customers are always on the first priority. In addition, unlike, many other companies in the information technology industry that just focuses on developing innovative products, Cisco had focus on developing innovative products based on its customers needs. Therefore, over time Cisco s customers are assured that their needs will be served and this help Cisco to develop strong relationship with its customers.

STRATEGIC MANAGEMENT AND ORGANIZATION

Over time, through consistent research and development and acquisition efforts, Cisco had earned a reputation for its credibility and its ability to produce products that meets customer s needs.

In general, in order for companies to survive in the competitive information technology, companies are required to offer new products at same or half the cost and have twice the performance of its previous generation. In order to stay ahead of its competitors, Cisco had ensure that it was able to consistently offer new product solutions that cost half and have three times the performance than its previous generation. This standard that Cisco had set was far better than the industry s average.

As a result, with those distinctive capabilities, Cisco was able to stay ahead of its competitors and build a stronghold in the competitive and fast changing industry.

Cisco had adopted an egalitarian culture. As with all practices, there are always advantages and disadvantages associated with it.

An egalitarian culture treats every employee equally thus, this means that there will be less top down approach. Hence, this encourages empowerment, active experimenting, learning and adjusting. Employees are encouraged to provide opinion, ideas and customers feedbacks. Thus, Cisco is able to learn and improve from the customers feedbacks and use the ideas to invent new products. This ensures that Cisco will be able keep in touch with its customer s needs as well as maintaining its innovative capabilities.

In addition, as the employees are involved in the strategy development process, instead of being instructed, this helps to improve employee s motivation and moral.

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However, there are also disadvantages associated with the egalitarian culture. Having an egalitarian culture makes Cisco lose its focus. Without a top down approach, Cisco had tried to focus on too many things. Hence, it had begun to lose its innovation capabilities and customer-focused practices and it had tried to cover too many product areas.

In addition, without a top down approach, the employees are not instructed. As a result, Cisco had been slow in making decisions and had lost its execution ability. This is an obvious disadvantage, because in order to survive and capture opportunities in such a fast changing industry, companies should be able to make decisions quickly and implement strategies effectively.

As a result, Cisco will have to look into its egalitarian practices and weight its pros and cons and decide what type of practices best suits its needs.

A company s mission describes the reason for the company s existence, which stakeholders are the company s priority, how it intends to generate value that is to be distributed amongst its stakeholders. A company s vision is an ideal future state that the company wants to achieve. Therefore, it is important to study how Cisco s mission and vision influence its organization, resource and strategic options.

Cisco s mission was to be the supplier of choice by leading all competitors in customer satisfaction, product leadership, market share and profitability. Cisco s vision was to shape the future of global networking by creating unprecedented opportunities and value for customers, employees, partners and investors . Therefore, in order to achieve its mission and vision, it is likely that Cisco will focus on resource-based view and develop its core competences. Core competences are the production skills and technologies that Cisco can be used to provide benefits to its customers. There are three types of core competences namely, customer value, competitor differentiation and extendable

STRATEGIC MANAGEMENT AND ORGANIZATION

Cisco has the ability to provide unique value to its customers with its innovative and technological advanced product. Its innovative products provide its customers convenience at reasonable prices. In addition the company also offer customer service engineering and advanced service to be better able to serve its customers well.

Cisco have the financial capability that enables it to invest in research and development and to acquire companies and hence knowledge. Hence, this allows it to gain market share over competitors.

Cisco strong knowledge in their five priorities and research facilities enables it to research other related technologies that are better able to meet its customer s needs. In addition, it has a well-known brand name that can be leveraged for other products. Therefore, this help to ensure that it is able to stay ahead of its competitors.

Cisco will have to generate strategies options based on the core competences that it has, so that those core competences can contribute to the strategies options. As the strategies options generated based on the core competences, Cisco will have higher chances of achieving success and better ability to compete as it have the necessary core competences that complements the strategies options generated.

In such a competitive industry, it will be useful to conduct an analysis of the competition in the computer-networking industry using Porter s 5 forces framework. The Porter s 5 forces framework uses past events to assess the potential threat that the environment posses. Thus, this allows Cisco to develop competitive advantage in order to be able to stay ahead of its rival companies.

Firstly, as Cisco produces specialized products, generally, it will need specialized components from the supplier. Hence, it will be more difficult for Cisco it acquire its components. As a result, its suppliers will have higher bargaining power. However, it will be good to take note that even within a single product, there will

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be different powers of suppliers for different components of the product. For instance, suppliers will have high bargaining power for computer chips while suppliers of router covers will have low bargaining power.

Secondly, although some of its customers are end consumers, majority of Cisco s customers are mainly corporations. It will be good to note that different buyers will have different bargaining powers. As corporations usually place huge orders, their bargaining power will be high. As a losing a single sales order may mean losing a huge amount of profit. In addition, as there are many competing companies that are able to offer product solutions that are similar to Cisco. The bargaining powers of Cisco s customers are high. On the other hand, the end consumers will have lower bargaining power as they usually make small purchases.

Thirdly, the threat of substitutes will depend on the purpose of the Cisco s product. As Cisco s are able to produce products that are customized to customer s needs. Then, there will be lesser threat of substitutes. However, not all customer s needs are extreme unique, therefore, the customers will be able to buy similar products from Cisco s competitors. In this case, there will be more substitutes.

Next, unlike other industry, the information technology industry is a knowledgebased industry. Any company that wants to enter the information technology industry will need to have knowledge about information technology. In addition, the ideas and knowledge required usually has to be unique in order for the company to be able to survive in such an innovative industry. In addition, information technologies are usually patented. Although it is not entirely impossible, it takes time to come up with unique information technology ideas and knowledge, Therefore, this helps to reduce the number of potential entrants. Moreover, the economies of scale in information technology are high. The cost of producing each additional product is small as compared to the value and profits that the product is able to contribute. Hence, the company will need to have the financial capability to invest in research and development as well as the ability to

STRATEGIC MANAGEMENT AND ORGANIZATION

obtain huge orders to achieve economies of scale. Hence, there will be lower threat of entrants. Lastly, there are also barriers to entry resulting from brand name or reputation. There are huge information technology companies with well-established names such as Hewlett-Packard, Microsoft and Motorola. However, there are still customers that are willing to buy products from smaller companies as long as their products are innovative and are able to suit their needs. Therefore, in this case, the threat of entrants will be higher.

Lastly, The level of industry rival usually depends on the number of market players and the other four forces. There are a huge list of market players and competitors that Cisco is facing. Coupled with the other four forces, this means that the industry rival is high in the information technology industry. This means that Cisco will have to be focus on its core competences and make decisions fast in order to deliver results.

However, the Porter s five forces framework has some limitations. Firstly, it is a static framework that relies on past information. As the information technology industry is clearly a fast-moving industry, this will be an obvious disadvantage. In addition, the framework sees everything as a threat to the company. Although the information technology industry is competitive, in some situations, it will be useful for Cisco have some form of coopetition , which means to cooperate with its competitor in order to improve its chance of success. Therefore, it will be more ideal to also look at how Cisco can cooperate with its competitors.

The considerations that the CEO have to consider when implementing the four guiding principles he puts forward are possibility of encountering employee resistance and putting in place good monitoring and control mechanisms to ensure that the objective and resources are implemented accordingly to plan.

In general, are three main types of implementation programs namely, comprehensive implementation programs, incremental implementation programs, and selective implementation programs. It was mentioned that the CEO wanted to take bold steps and make tough decisions. This means that he

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have a comprehensive implementation program in mind. Therefore, it is likely that there will be resistance from those being affect by this change and this is usually the main obstacle for the successful implementation of strategic change. In this case, in order to achieve success, the CEO will have to manage the strategic change well and ensure that are close co-ordination across the organization.

In order to make people less resistance, the CEO can look into the different reasons why people resist change. For instance, Cisco had announced some jobcutting scheme. Therefore, this will make employees anxious about their job. In this case, the company can have some open communications and discussions for employees to voice out their concerns. Sometimes, some employees are just anxious about changes due to the uncertainties involved. Therefore, the CEO can reduce the anxiety by involving people in strategy development. The CEO also wanted to make it easier for its employees to work and Cisco, as they make it easier for their customers and partners to work with Cisco, by simplifying and reworking their system. Some employees may think that they will have to do more work as they have to rework, relearn and change the way that they have been doing things. Therefore, the CEO can assure the employees by telling them the long-term benefits of making those changes.

In addition, the CEO wanted to accelerate Cisco s leadership across their five priorities and compete to win in the core. This means that good monitoring and control mechanisms have to be in place to ensure that the objective and resources are implemented accordingly to plan. In this case, using a balance scorecard will be ideal. Cisco can focus on financial KPI such as net income, as well as non-financial KPI such as customer satisfaction and market share that takes into account the perspectives of different stakeholders. After which it can put a specific numerical target for the KPI. For instance, to gain 80% market shares by the end of 2015. In addition, it should generate some specific initiatives to achieve this numerical target. For example, in order to gain market share, it could acquire companies or produce cutting-edge information technology products that suit customer s needs.