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Cisco's unique products like Unified communications is now one of the top two strategic technologies for organizations. (Gartner, October 2007) Companies of all sizes, including more than 85 percent of Fortune 500 companies, use Cisco's network-centric approach to build competitive advantage. (Thomson Reuters 2010) Cisco designs, manufactures and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry. Thus, provides services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate and collaborate. The Company's products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses and personal residences. It has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. Major companies like Southern U.S. bank, Greater Toronto Airport Authority (GTAA), European sports retailer and many others use Cisco IP Communications solution to save time and money and to achieve higher customer satisfaction (Cisco n.d.). Cisco gains competitive advantage by bringing the innovative and effective products to market faster than its competitors.
Porter's Five Forces Model to analyse Competitive Advantage for Cisco
Michael Porter who uses to be a Professor at Harvard Business School created this tool to analyse the attractiveness and likely-profitability of any industry. Let's see how Porter's 5 Forces Model helps to analyse the Cisco Systems, Inc. Current and future position.
Threat to New Entry: MODERATE
Big Companies can enter but only through acquisition
High financial investment and detailed R&D
High product differentiation providing complete business solutions
No restrictions by Government
Expertise Domain Knowledge Required
Bigger companies with good brand name and royalty can enter due to advancement in networking technology.
Walker et al. (n.d.) suggested that its difficult for the new entrants to establish new customers wherein Cisco already have large enterprises as their customers
Large infrastructure required to offer the services and to develop software business solutions
Competitive Rivalry: MODERATE
Dell emerges as Cisco's rival in coming years by providing low cost products
Although Juniper has emerged as a strong competitor, it hasn't been able to level with Cisco in its core business line of networking products like routers and switches. On the contrary, the firewall solutions provided by Juniper are acquiring large part of Cisco Business
Other competitors are 3Com, Alcatel Lucent, Citrix systems, Nortel Networks Corporation etc Walker et al. (n.d.).
But Cisco still leads the battlefield because of his diverse products and high quality business solutions.
? Cisco's value-added CRM services have reduced the influence of rivals.
Threat of substitutes: LOW
Very few competing technologies compare with Cisco's current networking products Walker et al. (n.d.).
Already Cisco has emerged as the greatest power in networking capturing 80% of the industry
Hubs, routers and switches are vital to the network infrastructure
Niche companies can't compare to the business solutions provided by Cisco
Buyer Power: HIGH
Cisco has diverse products that provide integrated business solutions.
Reliability and Customer satisfaction are the key features
Cisco has provided many innovative and reliable products with high customer satisfaction. These features have helped it to gain edge over its competitors
Supplier Power: LOW
Cisco's sale offices are in every continent except Antarctica Walker et al. (n.d.).
Cisco has created large suppliers through E-Commerce, internet and its CCO Portal.
Cisco doesn't compete primarily on Price, but competes on Reliability, Quality and Customer Satisfaction Walker et al. (n.d.).
Strong ability to manage channel partnerships, including IBM (storage area networks), Verizon Communications, Telstra, Sony Electronics and others omnivorous 2003.
Porter's Generic Strategies
Michael Porter further suggested a generic strategy model. This model defines that even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns. The industry's strengths fall into Cost Leadership or Differentiation (Internet Center for Management and Business Administration n.d.).
Porter's Generic Strategies
Figure 2. Porter's Generic Strategies (Internet Center for Management and Business Administration n.d.)
Cisco Systems has been ranked No. 1 on Fortune's Most Admired Networking communications Companies (Cisco n.d.). Cisco has various products ranging from £8 to £3500+ depending upon customer needs and company size. Cisco has products to serve every consumer's requirement whether it is a home user, SME or large enterprises. Cisco believes in their product's uniqueness, reliability, quality and Customer satisfaction. Cisco has online portal wherein customers can buy products based on their needs and technical support is provided to them by trained Cisco Agents, if they face any issue.
Cisco is totally based on Differentiation that provides a unique experience to its customers. Cisco has great expertise in the networking domain wherein the company always comes up with innovative products and different business solutions based on consumer's business needs. The urge to spend more on R&D than its competitors is a key factor to Cisco's competitive advantage. Cisco has always been an aggressive company and has gained large market share through mergers and acquisitions. John Chambers, CEO of Cisco systems, Inc says that Employees are the valuable asset to any company. Hence, Cisco always retains the employees of the organisation and trained them on various Cisco based training programs. Cisco has gained its popularity through blogs, YOUTube Videos and social networking sites like Facebook, Twitter etc to know what customer thinks of their product and services and how can they add a value to it.
One of the key ingredients in John Chamber's strategy is Customer Focus. Every evening, he listens to taped conversations with corporate clients. (Jobbers 2001:606)
John T. Chamber vision
"CEOs and government leaders worldwide clearly understand the productivity opportunities and the associated standard of living implications that Internet business solutions provide" (Cisco n.d.).
Value Chain Analysis:
Michael Porter suggested that Value chain Model is essential to analyse the firm's competitive advantage.
Figure 3. Value Chain (Wikipedia Foundation 10 March 2010)
The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin. Cisco's global supply chain management has turned complex, high-end, configure-to-order products or high-volume commercial goods ideas into the solutions (Cisco n.d.). Cisco gave top priority to order fulfilment and project management to achieve on-time delivery to customers. According to many analysts, the company's networking strategy had played a major role in its success over the years. After the low sale value in 2000, Cisco, through an online information and communication system, linked suppliers, manufacturers, customers, resellers and employees seamlessly (ICMR Case Studies and Management Resources n.d.). Hence, Cisco's proactive Supply chain boomed the networking industry.