Analysis of Cisco System's Primary Business Strategies and Its Utilization of Information Technologies

Cisco Systems

Networking the Internet Revolution

Brandi Martin

brandi@ucsc.edu

Table of Contents

Paper Objective

Section 1: The Network Equipment Industry

A. Industry Profile

B. Competitive Strategies within the Industry

C. Porter Model Evaluation of Industry Forces

D. Globalization of the Industry

E. Importance of Information Technology to the Industry

Section II: Company Perspective: An Analysis of Cisco Systems

A. Cisco Company Profile

B. Market and Financial Performance

C. The Competitive Strategy

D. Significance of Information Technologies

E. Strengths and Weaknesses of Cisco

Section III:

A. Strategic Option Generator

B. Roles, Roles and Relationships

C. Redefine/Define

D. Significance of Telecommunications

E. Success Factor Profile

Section IV: A Final Analysis of the Success of Cisco Systems

A. Success of Business Strategy and Information Technology Use to Date

B. The Effective Position of Cisco for the Future

Objective of Paper

The purpose of this paper is to provide an analysis of Cisco System's primary business strategies and its utilization of information technologies to achieve a competitive advantage in the network equipment industry. The paper is divided into four sections, starting with a broad industry analysis, then narrowing to concentrate on Cisco Systems Inc., followed by an analysis of their use of information technology. The conclusion is a final analysis of Cisco System's success.

The first section defines the structure of the network equipment industry. This complex industry can be defined with the help of detailed industry trends, universal strategies, effects of globalization and the significance of information technologies within this fast paced industry. The second section will provide an analysis confined to Cisco. Included in this in-depth examination is a company profile discussing Cisco business, the business leaders, specific strategies, financial performance, use of information systems and a summary of strengths and weaknesses. Section III concentrates on the use of information technologies for this company. The role of information systems within Cisco is analyzed using a "strategic option generator" and a "value to customer model". The paper concludes with a final analysis of the success of Cisco Systems, including strategies and information technology that gave Cisco a competitive advantage. Cisco's current position in the industry for continued future success will also be addressed.

SECTION I: THE NETWORK EQUIPMENT INDUSTRY

A. Industry Profile

The network equipment industry, although still in its infancy, is a booming industry made possible by the Internet revolution. Broad acceptance of the Internet has created new models for business, new means to motivate, organize and inform the public, and new thinking about how humans communicate. Successful companies within this industry have shown record growth in a world where everyone wants to be connected and speed is everything. To connect the planet, network equipment companies design and manufacture routing and switching equipment, communication and network access devices, security hardware and wireless networking products. These networking products are used to connect both WANs, wide area networks, and LANs, local area networks. Large scale product solutions exist for corporations, governments, and universities while smaller solutions are available for individual consumers.

Two main markets exist for network equipment industries, a telecommunications or service provider market and an enterprise or datacommunications market. Both markets buy networking equipment but the telco market is defined by customers like PacBell, Verizon and China Telecom whereas the datacom market consists of mid to large corporations in banking, healthcare, transportation and dozens of other industries. The ten dominant companies within the network equipment industry include: Cisco Systems, Nortel Networks, Lucent Technologies, Juniper Networks, Extreme Networks, Alcatel Fundamentals, 3Com Corporation Fundamentals, Foundry Networks and Enterasys Networks. Lucent, Nortel and Alcatel are leaders in the Telco market while Cisco rides high, estimated to own more than 90% of the enterprise market.

Cisco, Alcatel, Nortel, 3Com and Lucent are large corporations that offer a diverse range of products and services. Not all of their products and services would be classified as network equipment but their core businesses can be defined as such. Extreme, Juniper, Foundry, and Enterasys are much smaller companies that specialize in one area within the network equipment industry. The discrepancy in size of companies focused in the enterprise sector can often be attributed to mergers or acquisitions. Traditionally, successful start-ups are often bought by larger companies such as Cisco before they have a chance to significantly grow in size. However, many of the smaller successful network equipment companies today have not been acquired due to the recent economic downturn.

Size of the Ten Dominant Network Equipment Companies

Figure 1(1)

Recent years have dealt a major blow to the information technology industry including the network equipment industry. The network