Cisco Inc. Essay

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Basically, Cisco Systems, Inc. (Cisco or the company) is leading network manufactures and IT service providers whose main businesses is providing network routers, switches, remote access servers,
Internet protocol telephony equipment, and network service associated with these products (Marketline,
2012). Cisco is headquartered in San Jose, California and has over 66,000 employees around the world
(Cisco Systems, Inc., 2012a). Cisco Systems, Inc. (2012b) made the prediction that the fiscal revenue around the world in 2012 will be $11.5 billion among the fiscal year ended July 2012 (FY2012), with 11% increase over FY2011. The aim of this essay is to analyse and evaluate the past and present performance of Cisco, using SWOT analysis and also suggest the probable performance of the company in the future.

Cisco, which was the origin of the city name, San Francisco was founded by computer scientists, Len
Bosack and Sandy Lerner, from Stanford University in 1984. The company went public and was listed on the Nasdaq stock exchange with a market capitalization of $224 million in 1990. During the mid 1990s, the company acquired several network companies, such as Kalpana, Grand Junction, and Crescendo,
Mario Mazzola Communications which together formed the one of core businesses as Ethernet switch business. In 1995, John Chambers (current CEO) was appointed CEO. Throughout the mid­2000s,
Cisco became the world’s most valuable company, in terms of market capitalization $569B, with a high of $82 a share (Cisco Systems, Inc. 2007). At present, the area of business for the company has spread over the world, as well as increasing the number of their acquisitions. Meanwhile, the company has been competing mainly with Juniper Networks in the domestic market and Huawei in overseas market
(Marketline, 2012).

Cisco has distinguishing features which can be highly effective for their business. According to Cisco
Systems, Inc. (2012b), Cisco was in leading positions of Switching: Modular/Fixed, digital video/IPTV and Wireless: LAN. As can be seen in Figure.1, the company could hold massive market share of
69.6%, 64.2% and 53.3%, respectively. This means that leading market position is likely to bring great advantage to Cisco. The company, for instance, may be able to beat their rivals in the IT competitive market, due to the strong brand image which probably affects the leading position. With regard to this, the company was ranked 10 on the top 100 list with a brand value of $26.6B (Badenhausen, 2012). For the reasons mentioned above, the market leader position and strong brand equity have lead Cisco to maintain its strong position and brand products.

1

(Figure.1) Market share of Cisco products Source: Cisco Systems, Inc., 2012b

Cisco, however, pointed out that a widespread supply chain over the world may be a weakness of their business. On account of dependence on the outsourcing of over 600 suppliers around the world, the company is more likely to suffer from product shortages (Cisco Systems, Inc., 2012c). To illustrate this,
Lakenan, Boyd and Frey (2001) put forward the argument that in the dot­com bubble as the early 2000,
Cisco experienced severe supply chain issues which were shortages of memory and optical components. As a result, it triggered the downturn of telecommunications infrastructure, falling customer satisfaction and the loss of $2.25 billion. Despite the fact that outsourcing could lead to a variety of benefits such as reducing direct and indirect costs, and contributing to the economy in developing countries, it would often increase risk of supply chain issue. Accordingly, supply chain issue which may be caused by a material shortage could be a major weakness for the company.

On the other hand, strategic alliances, which focuses on technology exchange and product development result in a very good opportunity for business expanding. Cisco, for instance, has created the
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