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Introduction
The current competitive business world has presented many opportunities and challenges to different companies. This is as far as globalization is concerned. Different companies have been enhancing their operations to reach a wide market through globalization. The main aim of this report is to asses Cisco Systems Inc in relation to its strategic positioning in the market.
In this case, the report will analyze and evaluate various strategic challenges that the company is facing. As a matter of fact, these strategic challenges will be looked at after a clear assessment of the company has been done. This is because every global or multinational company like Cisco Systems Inc is expected to encounter such challenges in the course of doing business.
The report will also carry out a PESTEL analysis. This will be done to evaluate the current external environmental conditions that the company is facing in its operations. It should be known that every company is exposed to different external environmental conditions that can end up affecting its operations and business.
In a broad perspective, the report will evaluate if Cisco Systems Inc is strategically positioned in the market to exploit its strengths and on the other hand defend itself against its own weaknesses. In this case, the report will evaluate if the company’s current strategy is in deed sustainable. This will be done using Michael Porters Five Forces and Three Generic Strategies.
As a matter of fact, the current competitive business world offers many opportunities to Cisco Systems Inc. In this case, there are some common urgent issues that the company needs to deal with as far as its global strategy is concerned.
Therefore, the report will recommend a good course of action that can be undertaken by the company to deal with such issues. Wholesomely, the report will give various recommendations that can be used by the company to enhance its global competitive as far as strategic positioning is concerned.
History
Cisco Systems Inc is an American global company. The company develops and sells different consumer electronics in various countries. In addition, the company is a big player in communications technology and networking. As a matter of act, it offers different services as far as these aspects are concerned. The company’s headquarters are located at San Jose in California (Bunnell 2000, p. 14).
The company has more than 70, 714 employees. In 2010, it is estimated that the company will receive revenues of more than $40 billion (Cisco 2010, p. 16). As a matter of fact, it is rated as one of the world’s largest technological corporations. In addition, the company trades its stocks on the Dow Jones stock exchange market. It should be known that the company was founded in 1984.
As a matter of fact, the company’s name was derived from the name San Francisco (Cisco 2010, p. 6). In a broad perspective, Cisco Systems Inc was one of the first companies to sell good routers that had the capacity deal with a large number of network protocols.
Currently, its routers are widely used in different countries to enhance the delivery of IP packets. The company has been acquiring other companies to enhance its product base and bring in new talent that can help it to advance its operations.
An example of these companies is Stratacom that was acquired to bring in new products. In 2000, the Cisco Systems Inc was the most valuable company around the world (Cisco 2010, p. 12). This was as far as its market capitalization was concerned.
Strategic challenges
Like every other technological company, Cisco Systems Inc is facing various challenges that need to be looked at. These challenges have been increasing as time goes by in relation to various and distinct prevailing market conditions (Paulson 2001, p. 17).
As much as the company has faced different strategic challenges, it is the market leader in switches and routers. This can be evaluated from an enterprise and service provider point of view.
One of the major strategic challenges that the company is facing is the fact that sales in the USA market are declining as time goes by. In this case, the company has a challenge to look for other markets to enhance its growth (Cisco 2010, p. 16).
Another strategic challenge that Cisco Systems Inc is facing can be seen in the erosion of margins in its existing markets. This has been brought about by increased competition in the global technological industry.
Such issues have ended up affecting the company’s sales and revenue projections in a broad way. The company has to face new- low cost competitors in the market and this is a very big strategic challenge (Cisco 2010, p. 19). Low cost competitors have emerged because of various advancements in technology. This ends up giving them an advantage in the market.
Cisco Systems Inc’s core technologies have been commoditized in the market and this is a strategic challenge that needs to be looked at. As much as USA accounts for 13% of Cisco Systems Inc’s market share, total sales have been declining because the market is saturated (Cisco 2010, p. 10).
As a matter of fact, demand is softening in this market and the company needs to be creative and innovative to increase its overall demand and sales.
PESTEL Analysis
A PESTEL analysis is very important in assessing the current environmental conditions that Cisco Systems Inc is facing in the market. In this case, it is done to analyze various economic, social, political, environmental, legal and technological issues that affect the company and its operations (Traverso 2000, p. 21).
Cisco Systems Inc is a global company and is therefore exposed to various macro environmental issues that define the way it conducts its business and operations.
Cisco Systems Inc has to contend with various economic factors that it is facing in the market. Recently, there was the global financial crisis that had its effects on different businesses.
This means that various economies have not recovered as expected and the company needs to come up with good mitigation measures (Soederbaum 2008, p. 18). As a matter of fact, sales have been adversely affected in countries that were seriously hit by the global financial crisis.
Because the company is a global player, it has been affected by exchange rate variations. This is because it sells its products in different countries with diverse and distinct currencies. It should be known that exchange rate variations keep on changing as time goes by.
This is in relation to prevailing market conditions and scenarios (Moore 1995, p.9). Therefore, for the company to return to profitability, it has to trade carefully as far as the global financial crisis is concerned. This is because there has been a gradual return to normalcy in relation to the global financial crisis.
In this case, economic uncertainty has affected the company’s profits in different markets. This is because there is a slow growth in GDP in other developing countries. There are other political factors that have ended up affecting the company’s operations.
Different countries have had networking restrictions as far as the company’s business is concerned (Cisco 2010, p. 29). This has reduced its growth momentum in such countries. In most occasions, such countries have strict rules that are supposed to be adhered to.
Cisco Systems Inc has to deal with various legal issues when it is establishing its operations in different countries. Some of these legal issues can either favor the company or work against the company. In this case, the company has been at the mercy of different legislations from various countries. Such legislations have political inclinations and can therefore be done with vested interests.
In extreme cases, the company has been accused of being involved in China’s censorship issues. As a matter of fact, the company has been blamed for supplying China with the equipment that it used to block internet sites (Slater 2003, p. 17).
Such political issues have affected the company’s image in the global market. In this case, the company argued that it did not specifically supply China with the equipments that it used to block internet sites but it was doing business with no vested interests.
Different countries have their own tax systems that are supposed to be adhered to. Some of this tax systems and policies might have serious implications for the company in different markets (Wright 2004, p. 14). This is because some countries levy large tariffs and quotas with an aim of protecting their home industries. In 2007, the company was accused for tax fraud in Brazil.
Technology has been advancing as time goes by (Stauffer 2001, p. 23). As a matter of fact, Cisco Systems Inc is a technological firm with global operations. This means that it has to face various technological issues in enhancing its operations.
The growth rate of technological advancements has been very high in recent years. This means that other technologies have been wiped out and made obsolete. In this case, Cisco Systems Inc has been forced to invest in research and development to come up with new products as far as technological advancements are concerned.
It should be known that new technology has created new products in the global market. To remain competitive, the company has been coming up with new products in relation to existing market trends and dynamics. This therefore explains why the company has been acquiring other technological companies as time goes by (Waters 2002, p. 21).
As far as technological forces are concerned, companies can effectively enhance their technological processes to reduce operational costs. This helps to improve on the quality of products through vibrant innovation activities.
The company is currently exposed to a lot of social issues that need to be dealt with. Technology moves with existing market trends and dynamics (Wright 2004, p. 19).
This means that the current consumer is very demanding and needs new products every now and then. In a broad perspective, there are various social trends in the market. These forces have an impact on the overall demand that a given company will have in the market.
Markets like the UK have an ageing population that needs a lot of investment in pension payments. When announcing its Q4 results, the company implied that it has conservative customers (Cisco 2010, p. 29). This means that such customers are very cautious about the economy and will therefore limit their spending and investments.
The technological industry has one of the most unpredictable social trends. This implies that customers want new experiences every now and then. In this case, the company has been forced to source for new talent to enhance its operations and market presence.
The company has not been exposed to a lot of environmental issues. This is because most of its products do not need a lot of environmental assessment (Young 2001, p. 18). The only issue has been the company’s ability to comply with various environmental requirements and expectations.
In this case, the company has to look at all environmental issues when it is designing its products. This is because technology has an impact on the environment and should be evaluated for sustainability.
All this factors are very important in coming up with a strategic management plan. Because Cisco is a global player in the technological industry, it needs to assess such aspects for its own sustainability (Young 2001, p. 18). This is because such macro environmental issues influence a business and its operations. Economic indicators will continue to play an important role in a company’s growth plans and future prospects.
Current strategy and positioning
Cisco Systems Inc is currently the world largest company in networking for the internet (Cisco 2010, p. 9). The company has been growing because of its ability to handle various external and internal business factors.
All along, the company has focused on its core business by engaging in effective strategic partnering. To remain competitive, the company has maintained a positive cash flow as time goes by. This has enabled it to compete well with other competitors in the market.
In a broad perspective, the company has built its core strategy by being customer centered. This means that its current business strategy is very competitive and sustainable (Cisco 2010, p. 15). In this case, all technological companies should continue being customer centered to enhance their market share.
This is because customers can shift their attention and loyalty depending on their tastes and preferences. In this case, a company should occasionally consult customers to understand their needs.
Porters’ five forces help to analyze an industry and enhance the development of a given company’s strategy. The bargaining power of customers has been increasing as time goes by (Porter 2008, p. 17). This is because the current consumer is more informed and demanding.
As a matter of fact, e-business has been affected by distinct customer preferences. This is because customers want more personalized products. In extreme cases, they want such products to be delivered at their own convenience.
To remain competitive, the company has come up with customer centered products to satisfy their individual needs and preferences. As a matter of fact, the company offers highly responsive services to its customers. Since its creation, the company has been moving products to customers (Cisco 2010, p. 16). As a matter of fact, the company has a lot of business processes to the internet as time goes by.
The global technological industry has a lot of competitive rivalry. This has enhanced the emergence of various low cost companies. Such companies are threatening the existence of established companies like Cisco Systems Inc. In extreme cases, technological advancements have brought in new companies in the market.
Therefore, the company has been forced to come up with new ways of doing business to remain competitive. In this case, the company has occasionally developed new products to keep off competition.
Government policies have been encouraging technological advancements and that is why many companies have taken advantage of such provisions to establish their presence in the market (Slater 2003, p. 14).
Competitive rivalry has also been intensified through various innovations that have taken place in the industry. The company’s strategy is very sustainable because it has been attracting new talent to enhance product development.
There is a high threat of substitute products and services in the global technology industry. The existence of substitute products has increased buyers’ ability to switch products according to their needs. As a matter of fact, there are a lot of substitute products in the market (Waters 2002, p. 16).
To remain sustainable, the company has built a good relationship with customers. This has been done by occasionally coming up with new products in relation to their needs at a particular time.
The company relies on proper utilization of the internet to enhance its operations. Such aspects have seen it become one of the most successful technological companies in the world. As a matter of fact, the company has driven e-business to customers to enhance its performance.
The bargaining power of suppliers for technological companies has been increasing in recent years. This is because technological companies have come up with better ways of doing business.
In this case, suppliers can switch to different companies in relation to the prevailing market switching costs (Soederbaum 2008, p. 14). All this withstanding, the company has an effective distribution channel that it has used to enhance its operations and activities in the market.
This has been done through good strategic partnerships and relationships with different suppliers in the market. Although this has been improving as time goes by, the company has projected that it will experience different supply chain constraints that are expected to affect its 2010 financial performance (Cisco 2010, p. 18).
The number of new competitors in the industry has also been increasing in relation to market needs and trends. This has always threatened the company’s core business. For sustainability, the company has come up with better ways of doing business. This revolves around new approaches to strategic management. In extreme case, the company has occasionally developed new products to remain competitive.
Cisco Systems Inc’s success and continued profitability can be attributed to proper enforcement of porters’ three generic strategies. The company’s segmentation strategy has been very effective in penetrating new markets (Cisco 2010, p. 12).
In this case, it has identified different market segments that need to be attended to. As a matter of fact, the company has differentiated its products to compete well with other market players and companies. This is because customers want new and effective products in the market.
The company’s cost leadership strategy has enabled it to appeal to different price sensitive consumers. As a matter of fact, the company has always come up with good prices to suit its target market. This is because its serves different clients with distinct needs.
In a broad perspective, the company was able to save $ 1.5 billion dollars in 2009. This was done through effective cost avoidance and increased operational efficiency in its operations around the world.
Cisco Systems Inc has a good strategic scope that has focused on effective customers’ needs delivery. In this case, the company competes in all market segments. Globalization has come up as a new way and approach of doing business (Cisco 2010, p. 14).
To show how strategic the company is, it provides internet protocol to all businesses around the world. This means that the company has strategically positioned itself in the market to serve various market needs and interests.
Urgent issues
Cisco Systems Inc has to deal with various issues as far as its global strategy is concerned. The company has been receiving criticisms in relation to its global activities. Such criticisms include the China censorship issue that gave the company a bad image.
To solve such issues, the company should be open about its business activities and operations (Cisco 2010, p. 26). This is because customers might not want to associate themselves with a company that colludes with other governments to infringe on the rights of internet consumers.
The company has also been facing legal lawsuits in different countries. These lawsuits have been advanced by various organizations and companies in relation to its activities and operations. An example of such a lawsuit is the shareholder class issue where the company ended up paying $ 91.75 million (Cisco 2010, p. 11). In this case, the company should review it’s cooperate practices to avoid any controversies.
It should be known that the company is experiencing supply chain constraints that need to be attended to for sustainability. This is because the global market is vey competitive and such incompetency’s can end up being costly to the company.
Such an aspect can be looked at by evaluating the company’s component lead time that is supposed to be improved as time goes by (Cisco 2010, p. 13). The company should ensure that it reduces its supply chain constraints to remain competitive.
The company needs to review its strategy to reflect the current global financial crisis’s real market situation. This is because there is a market uncertainty that has seen many countries experience slow GDP growth rates (Cisco 2010, p. 9). Such an aspect is expected to affect the company’s revenue projections. In this case, the company should come up with better ways of enhancing its sales and revenues.
Another urgent issue is the slow recovery from the global financial crisis than it had been projected. As a matter of fact, the company’s customers have ended up being cautious in their spending. Because these customers are re-evaluating their spending, the company should come up with a new approach to marketing to enhance its sales and operations.
The company should also deal with an unfavorable product mix. This is because it has been introducing new products in the market every now and then. As a matter of fact, sales of its core products; switches and routers have dropped by 1.4% in the third quarter of 2010 (Cisco 2010, p. 23).
There is also an impact of different government regulations. This has affected its sales margins in different ways. In this case, it should clearly evaluate markets before launching its operations.
Conclusion and recommendation
Like every other technological company, Cisco Systems Inc is facing various challenges that need to be looked at. These challenges have been increasing as time goes by in relation to the prevailing market conditions.
One of the major strategic challenges that the company is facing is the fact that sales in the USA market are declining as time goes by. In this case, the company has a challenge to look for other markets to enhance its growth.
Therefore, it is recommendable for the company to enhance product development to remain competitive. The company should also exploit other emerging markets for sustainability.
It will also be advisable for the company to engage in strategic alliances to increase its market share. In a broad perspective, Cisco Systems Inc should enhance its relationship with customers to know what they want in the market. This will enhance the company’s competitive advantage as time goes by.
Reference list
Bunnell, D., 2000. Making the Cisco Connection: The Story Behind the Real Internet Superpower. New York: Wiley.
Cisco., 2010. Products and Services. Web.
Moore, M, H., 1995. Creating Public Value: Strategic Management in Government. Cambridge: Harvard University Press.
Paulson, E., 2001. Inside Cisco: The Real Story of Sustained M&A Growth. New York: Wiley.
Porter, M.E., 2008. The Five Competitive Forces That Shape Strategy. Harvard: Harvard business Review.
Reichheld, F., 1996. The Loyalty Effect. Boston: Harvard Business School Press.
Slater, R., 2003. The Eye of the Storm: How John Chambers Steered Cisco Through the Technology Collapse. New York: HarperCollins.
Stauffer, D., 2001. Nothing but Net Business the Cisco Way. New York: Wiley.
Soederbaum, P., 2008. Understanding Sustainability Economics. London: Earthscan.
Traverso, D., 2000. Outsmarting Goliath. New York: Bloomberg Press.
Waters, J. K., 2002. John Chambers and the Cisco Way: Navigating Through Volatility. New York: Wiley.
Wright, R., 2004. A Short History of Progress. Toronto: Anansi.
Young, J. S., 2001. Cisco Unauthorized: Inside the High-Stakes Race to Own the Future. New York: Prima Lifestyles.
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