Cisco Case Analysis
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Case SummaryCisco in 1984-19931984 founded by Bosak and Lerner→ Strong need of new investments to grow → venture capitalist supportSequoia Capital invests $ 2.5 million, by 1990 the founders were out. 1991 – 1993 John Morgridge ran the company: cutting costsstrong customer focusfocus on high-end corporate network marketstarting to face competition from companies targeting small/medium size business sectorCorporate Strategy 1993-1999Cisco’s client base was growing and the company couldn’t keep up with demand for new products so it resorted to external sourcing→ acquisitions with the aim of being n°1 or n°2 in the markets it entered1) identify new market by talking to customers, entrepreneurs etc2) determine which products are needed to satisfy demand3) chose appropriate mode to get product developed4) internal or acquisition (if they didn’t have the resources to be market leaders in 6 moths they go for acquisitions which happened in 30% of the cases)target companies: market-ready technologies1995 : Chambers becomes CEO → decentralization startsengineering and marketing reorganized into 3 business lines (enterprise, small medium business, service provider) to optimally serve each of its major customer segments
centralized functions: manufacturing, customer support, finance, IT, HR, sales. Automatization of many organizational functions: employee services, e-commerce, support, finance etc. Growth through Acquisitions 1993-1999SHIFT IN STRATEGY: when Cisco realized that switching products would have a significant new market that could potentially challenge the established data communications equipment firms. → Cisco realized they had to listen to customers (who prefered low-cost less functional products) and decided that a strategy based on the purchase of smaller, more innovative software companies made more sense than buying established ones. → 21 sept 1993 Cisco buys Crescendo CommunicationsWhy did this acquisition succeed?1) Crescendo was kept a separate business unit2) used Cisco’s established distribution, financial and manufacturing stenghtsKey: product needed by market + cisco’s channelsKEY FOR SUCCESSFUL ACQUISITION: selection process and integrationSelection processCisco had a very careful selection process and a well-defined target: “the Cisco Kids” (small companies, fast-growing, focused, entrepreneurial, in geographic proximity to Cisco)4 CRITERIA to evaluate small targets1- the vision about the industry needs to be the same (cultural fit)2- need to produce quick wins for shareholders3- long term wins for everyone: shareholders, employees, customers and business partners4- good chemistryFIFTH ELEMENT for large companies: geographical proximity. Integration process: 1. employee retention2. follow-up on new product development – Cisco had the NIP (new product introduction) process. This meant incorporating cross-functional inputs like marketing, manufacturing etc. “Ciscofying the new companies” as seen in Exhibit 1.