Cisco Systems Inc.
Company Project
John Sass
Luisana Alvarez
I. DIAGNOSIS – Current situation: summary of factors which contribute to
present status
1. Mission
a. Cisco does not have a mission statement. Cisco’s vision is to be the
leading enabler of integrated, innovative, scalable, high value
managed services offerings; whether you are a regional managed
services provider or a global one, our vision is to enable your success.
2. Objectives
o Cost Control -Reduce costs by simplifying technology while extending
more flexible collaboration options to employees.
o Customer Satisfaction- Create more interactive and collaborative
relationships with customers.
o Employee Engagement- Provide employees with better information
access, flexible work options, and more ways to participate.
o Innovation and Growth - Accelerate generation and development of new
ideas to support new products, process improvements, or growth.
o Productivity- Accelerate decision making, build trust within and beyond
the organization, and promote innovation.
Corporate Strategy
Solve our customers’ most important business challenges by
delivering intelligent networks and technology architectures built on
integrated products, services, and software platforms.
4.
Policies
a) Diversity
Supplier Diversity
 We believe that a diverse, multicultural supply chain is a
source of innovation and is good for business in a variety of
ways
 Regional diversity gives us access to worldwide skills and
markets, and provides business resiliency if disruptions occur
in a particular region
 Culturally diverse suppliers that offer different viewpoints and
styles of interacting help develop and market products that fit
the needs of the global community
 Social diversity promotes inclusiveness that benefits
communities and local economies
 The Cisco Supplier Diversity Strategy has led to business
success for Cisco and our diverse suppliers and partners, as it:
 Enhances the Cisco competitive advantage
 Positions Cisco to meet customer requirements
 Helps Cisco customers meet government requirements, by
procuring a proportion of their goods and services from
diverse suppliers and partners
Diversity Recruiting
 Cisco uses many channels to identify and recruit top talent,
looking for strong skill sets, as well as unique perspectives and
cultural experiences. We partner with a variety of technical,
professional, and community organizations, including:
-The National Society of Black Engineers
-The Society of Women Engineers
-The National Society of Hispanic Engineers
-The Chinese Institute of Engineers
-The National Society of Black MBAs
-The National Society of Hispanic MBAs
-The Anita Borg Institute for Women and Technology
-Cisco is also involved in a number of military and veterans
hiring programs.
b. Ethical Standards/code of Conduct
 I Am Ethical- Innovative ideas, emerging technologies, strategic
acquisitions we work in an industry where the pace is fast and
change is constant. But some things will never change, like our
commitment to doing business honestly, ethically and with
respect for one another. At Cisco we put our values into
practice every day; doing the right thing is just part of our DNA.
 I Know the Code- At Cisco, we believe that long-term, trusting
business relationships are built by being honest, open and fair.
But sometimes situations arise where the right decision isn’t
completely clear.
 I share My Concerns- I understand my responsibility, as a Cisco
employee, to do the right thing and to share my concerns when
I see or suspect something that could harm the company. As an
employee, you have an obligation to speak up promptly about
anything you believe, in good faith, may constitute a violation.
We also encourage you to come forward with situations that
“just don’t feel right.
 I Respect Others - An ideal workplace is one that is positive,
creative and rewarding…an environment that promotes
individual expression, innovation and achievement. That’s the
kind of workplace we have at Cisco. Employees are offered
opportunities to grow personally and professionally. I’m
treated with respect and dignity. In return, I recognize my duty
to act responsibly, be a team player and treat others with
respect and dignity.
 I Use Resources Responsibly- Cisco counts on me to use good
judgment to conserve and safeguard company resources, such
as computers, telephones, Internet access, copiers and work
supplies. I am committed to using our resources appropriately
and wisely.
 I Avoid Conflicts of Interest- Doing what’s right for Cisco is
important. It means avoiding situations that create – or appear
to create – a conflict between my personal benefit and Cisco’s
interests.
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I Understand Our Gifts and Entertainment Policies- At Cisco,
we promote successful working relationships and goodwill
with our business partners, who are vital to our success. As
appropriate, I may consider offering or accepting a gift or
entertainment with a customer or business partner, but
recognize I should be careful not to create a situation that
would suggest a conflict of interest, divided loyalty, or the
appearance of an improper attempt to influence business
decisions.
 I protect what is ours-We are a leader in world-changing
technology. Protecting the confidentiality, integrity and
availability of our product development, financial base,
intellectual assets, systems, competitive strategy, and brand
keeps us at the forefront.
 I Follow the Law- Being a good corporate citizen includes legal
compliance. As a global company, we stay on top of laws and
regulations as they apply to doing business around the world.
 I Am Accurate and Ethical with Our Finances-As a Cisco
employee, we all have an obligation to promote integrity
throughout the organization, with responsibilities to
stakeholders inside and outside of Cisco. This includes being
aware of and adhering to internal financial and accounting
policies. The timely, accurate handling and reporting of
financial information is not only required by law, but it is also
at the core of our commitment to do business honestly and
ethically.
Suppliers - Cisco Supplier Code of Ethics
 1. Cisco suppliers shall comply with all laws, regulations and
policies applicable to them and their dealings with Cisco,
including all applicable government contractual requirements
which flow down to the supplier through its contracts with
Cisco. This includes, but is not limited to Small Business rules
and regulations, Affirmative Action and Equal Employment
Opportunity rules and regulations, and the rules regarding
suspension and debarment of companies from doing business
with the U.S. Government.
 2. No supplier, or its representatives or employees, shall offer
to any Cisco employee a kickback, favor, gratuity,
entertainment or anything of value to obtain favorable
treatment from Cisco. Cisco employees are similarly prohibited
from soliciting such items. This prohibition extends to
immediate family members of both suppliers and Cisco
employees. As long as a gift is not intended to obtain favorable
treatment for the suppliers and does not create the appearance
of a bribe, kickback, payoff or irregular type of payment, Cisco
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d.
HR
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employees are not prohibited from accepting the gift if: (1) it is
$20 or less in value, (2) public
disclosure would not embarrass Cisco, (3) acceptance is
consistent with Cisco business practices and (4) acceptance of
the gift does not violate any applicable law. Furthermore, Cisco
employees are prohibited from accepting IPO stock for Cisco
suppliers.
3. No supplier shall enter into a financial or any other
relationship with a Cisco employee that creates a conflict of
interest for Cisco. A conflict of interest arises when the
material personal interests of the Cisco employee are
inconsistent with the responsibilities of his/her position with
the company. All such conflicts must be disclosed and
corrected. Even the appearance of a conflict of interest can be
damaging to Cisco and to the supplier and therefore must be
disclosed and approved by Cisco management.
4. Cisco suppliers shall not engage in collusive bidding, price
fixing, price discrimination, or other unfair trade practices in
violation of federal or state antitrust laws.
5. Cisco suppliers will supply products that conform in all
respects with the requirement of their contracts with Cisco
including, in particular, all applicable quality requirements.
6. Cisco suppliers shall promptly notify the Cisco Corporate
Controller at (408) 527-4087 of any known or suspected
improper behavior by suppliers relating to their dealings with
Cisco, or any known or suspected improper behavior by Cisco
employees.
Human Rights- Cisco and all employees must continue to
respect, support and promote human rights as outlined in the
Universal Declaration of Human Rights. Employees, partners,
suppliers and contractors must:
1. Commit to responsible business practices that do not
infringe on human rights including appropriate
evaluation of the human rights impacts of activities
undertaken by and under the control of Cisco and a
governance structure which will provide appropriate
processes and mechanisms to address questions
regarding the impact of Cisco’s activities on human
rights.
2. Avoid human rights abuses by complying with all
applicable laws and regularly assessing human rights
risks.
3. Protect privacy and data security for our customers.
4. Promote the benefits of increased connection and
communication through the use of technologies that
support freedom of expression.
5. Contribute to global communities by supporting
diversity and employee engagement.
6. Support impactful social programs including those
focused on critical human needs (food, water, shelter
and disaster relief), healthcare, education, and
economic empowerment
7. Report transparently on Cisco’s support of and
performance on human rights.
8. Engage openly with stakeholders on issues that impact
human rights.
9. Contribute to the development of international
standards relevant to the IT sector and consistent with
respect for human rights.
10. Work with Cisco’s suppliers and partners to uphold
these same values and implement similar policies and
practices
5. Strategic Managers and Board
A. Sr. Level Executives
John T. Chambers
Chairman and Chief Executive Officer
John Chambers is Chairman and CEO of Cisco. He has helped grow the company
from $70 million when he joined Cisco in January 1991, to $1.2 billion when he
assumed the role of CEO, to record revenues of $48.6 billion in FY13. In 2006,
Chambers was named Chairman of the Board, in addition to his CEO role.
Chambers joined Cisco in 1991 as Senior Vice President, Worldwide Sales and
Operations. He assumed the role of President and CEO in 1995. Prior to joining
Cisco, he spent eight years at Wang Laboratories (1982-1990) and six years with
IBM (1976-1982). He holds a Bachelor of Science / Bachelor of Arts degree in
business and a law degree from West Virginia University and a master of business
administration degree in finance and management from Indiana University.
Gary Moore
President and Chief Operating Officer
Gary B. Moore is the President and Chief Operating Officer of Cisco, responsible for
enabling operational excellence across the company and building capabilities for
Cisco's future growth. Previously Moore led Cisco Services, a division with 10,000
employees that helps customers' businesses work smarter. Under his leadership,
Cisco Services grew to over $8 billion in annual revenue. Moore joined Cisco in 2001
from network consulting company Netigy, where as CEO he expanded the business
globally through 22 months of continuous revenue growth. Previously he had a 26year career at Electronic Data Systems (EDS), where he held a number of senior
executive positions. He created and grew the e-solutions global business unit, the
company's fastest-growing organization with more than 20,000 employees, and
served as one of six EDS group executives that held profit and loss responsibility for
multiple strategic business units with worldwide responsibility for all
manufacturing, retail, and distribution customers. While at EDS, Moore was
instrumental in its creation of Hitachi Data Systems, serving as its president and
CEO from 1989 through 1992.
Frank Calderoni
Executive Vice President and Chief Financial Officer
Frank Calderoni is Executive Vice President and Chief Financial Officer (CFO) at
Cisco, managing the financial strategy and operations of a company with more than
72,000 employees and total revenue for fiscal year 2012 of $46 billion. Calderoni is
committed to maximizing long-term shareholder value, ensuring a balanced
portfolio of growth initiatives, and maintaining the high level of integrity and
transparency for which Cisco is known. Calderoni holds a bachelor’s degree in
accounting and finance from Fordham University and a master of business
administration degree in finance from Pace University.
Blair Christie
Senior Vice President and Chief Marketing Officer
Blair Christie is Cisco's Chief Marketing Officer, with responsibility for the
company's Global Marketing, Corporate Communications, and Government Affairs
groups. Cisco integrated these groups in 2011 to oversee a holistic marketing
approach and brand strategy for its highly recognized brand. Her organization is
responsible for positioning Cisco's growth strategy, cultivating opportunities in new
and existing markets, and growing demand for Cisco's solutions globally. Christie
holds a Bachelor of Science degree in marketing and business administration and a
master of business administration degree, concentrating in investment
management, from Drexel University.
Wim Elfrink
Executive Vice President, Industry Solutions & Chief Globalization Officer
Wim Elfrink is responsible for three global functions at Cisco: the Industry Solutions
Group, the Emerging Countries Initiatives, and the company's globalization strategy.
Elfrink joined Cisco in 1997 assuming global responsibility for Cisco Services
Europe. In 2000, he was promoted to Senior Vice President of Cisco Services where
under his leadership business grew from $3.3 billion to more than $7.6 billion in
2010 with industry-leading margins and customer satisfaction. Lloyd joined Cisco in
1994 as General Manager of Cisco’s Canadian subsidiary. He holds a bachelor of
commerce degree from the University of Manitoba.
Robert Lloyd
President, Development and Sale
Robert Lloyd is responsible for Cisco’s development and sales efforts, as the
company creates tighter connections between customer requirements and
innovation, along with ensuring greater speed-to-market. Lloyd’s organization
manages the alignment and acceleration of Cisco’s technology innovation to enable a
faster response to market transitions, increased customer relevance, and growth.
Lloyd is also a member of the Cisco Executive Committee, which sets strategic
direction for each of Cisco’s market segments. Lloyd joined Cisco in 1994 as General
Manager of Cisco’s Canadian subsidiary. He holds a bachelor of commerce degree
from the University of Manitoba.
Edzard Overbeek
Senior Vice President, Cisco Services
Edzard Overbeek is Senior Vice President for Cisco Services. He manages the Cisco
services business portfolio, which delivers unique and strategic consulting,
platform, advanced and technical services solutions to customers and partners
worldwide. His focus is to help our customers transform their businesses through
intelligent networked-based service offerings that support their business goals and
increase their competitiveness, as well as ensuring efficient business and technical
operations throughout the lifecycle of the network. Overbeek holds a master's
degree in business administration from NIMBAS, University of Bradford, United
Kingdom
Randy Pond
Executive Vice President, Operations, Processes, and Systems
As Executive Vice President of Operations, Processes, and Systems at Cisco, Randy
Pond oversees the functions of connected business operations, corporate affairs,
supply chain operations, go-to-market operations, go-to-market shared services,
human resources, information technology, and legal services. He also co-chairs the
Quality Experience Steering Committee. To help fuel growth, promote innovation,
and increase Cisco's productivity, Pond is currently leading a comprehensive
business transformation across Cisco operations by reengineering business
processes, rearchitecting IT systems, and redefining the role of Cisco leadership.
Pond holds a bachelor's degree in accounting and economics from Ball State
University in Indiana.
Padmasree Warrior
Chief Technology & Strategy Officer, Cisco
Cisco Chief Technology & Strategy Officer Padmasree Warrior is charged with
aligning technology development and corporate strategy to enable Cisco to
anticipate, shape, and lead major market transitions. She helps direct technology
and operational innovation across the company and oversees strategic partnerships,
mergers and acquisitions, the integration of new business models, the incubation of
new technologies, and the cultivation of world-class technical talent. Warrior holds
a Bachelor of Science degree in chemical engineering from the Indian Institute of
Technology in New Delhi and a Master of Science degree in chemical engineering
from Cornell University.
Mark Chandler
Senior Vice President, General Counsel and Secretary, and Chief Compliance Officer
Mark Chandler is Senior Vice President, General Counsel and Secretary, and Chief
Compliance Officer, of Cisco, where he manages a team of 450 professionals,
including legal, employee relations, ethics, investigations and brand protection
teams. Previously, he was Managing Attorney for the Europe, Middle East and Africa
region, based in Paris. Chandler joined Cisco in 1996 upon the acquisition of
StrataCom, Inc., where he had been general counsel. Prior to working at StrataCom
he worked for six years as vice president for corporate development and general
counsel of Maxtor Corporation, a manufacturer of hard disk drives. Chandler holds a
bachelor’s degree in economics, summa cum laude (1978) from Harvard College,
where he was elected to Phi Beta Kappa, and a juris doctor degree from Stanford
Law School (1981).
Chris Dedicoat
President, Europe, Middle East, Africa, Russia
Dedicoat is responsible for EMEAR sales, operations, growth initiatives and
investments in strategic alliances throughout the region. Customer success is his
first priority and the foundation of the culture for his organisation. Passionate about
helping customers achieve high levels of innovation and productivity through
technology, Dedicoat was a founding member of the UK Information Age
Partnership and a member of the European Commission ICT Taskforce to shape
government initiatives and policies, combining long-term thinking with a focus on
short-term deliverables. For his outstanding contribution to the field of engineering,
he was awarded an honorary doctorate from the University of Central England. He
has a US Airline Transport Pilot License and a JAR Commercial Pilot License and he
is an ardent Aston Villa Football supporter.
Rebecca Jacoby
Chief Information Officer and Senior Vice President
Rebecca Jacoby is Cisco's Chief Information Officer (CIO) and Senior Vice
President. Her extensive understanding of business operations, infrastructure, and
application deployments as well as her knowledge of products, software, and
services helps her advance Cisco's business through the use of Cisco technology. As
CIO, she has made the Cisco IT organization a strategic business partner, producing
significant business value for Cisco in the form of financial performance, customer
satisfaction and loyalty, market share, and productivity. Her strong commitment to
operational excellence, innovative approach to business problems, and aptitude for
partnering cross-functionally have reshaped and elevated the role of IT at Cisco,
resulting in great synergies of IT and Engineering through a history of Cisco on Cisco
deployments. Jacoby holds a bachelor's degree in economics from the University of
the Pacific and a master's degree in business administration from Santa Clara
University
Pankaj Patel
Executive Vice President and Chief Development Officer
Pankaj Patel is Executive Vice President and Chief Development Officer at Cisco. He
is responsible for leading the development and execution of Cisco's $36.3 billion
technology portfolio across a global team of more than 28,000 employees. He also
helps define Cisco's technology innovation strategy to transform how people
connect, communicate and collaborate through integrated hardware and software
platforms and architectures from Cisco's routing, switching, security, mobility,
video, collaboration, data center and cloud offerings. In previous roles at Cisco, Patel
served as Senior Vice President and General Manager for the company's service
provider business, which achieved market segment leadership in routing, video and
mobility under his leadership. He was a founding leader of Cisco's first multi-service
access business unit, developing strategy for access routers and voice-over-packet
technology and delivery. He was also responsible for the Cisco IGX product line and
software development for all Cisco ATM switches. Patel joined Cisco through the
company's acquisition of Stratacom in 1996. Patel holds a bachelor's degree in
engineering from the Birla Institute of Technology and Science in Pilani, India, and a
master's degree in electrical engineering from the University of Wisconsin-Madison.
In 2003, he was awarded a patent in the area of multi-service architecture.
Chuck Robbins
Senior Vice President, Worldwide Field Operations
As Senior Vice President of Worldwide Field Operations for Cisco, Chuck Robbins
leads the company's Worldwide Sales Organization and Worldwide Partner
Organization. Robbins has more than 20 years of sales leadership experience. Prior
to his current role, he was Senior Vice President of The Americas, Cisco's largest
geographic region, where he led more than 8500 employees in the United States,
Canada, and Latin America. Prior to leading The Americas, Robbins was Senior Vice
President of U.S. Enterprise, Commercial and Canada, and from 2007 to 2009, he led
the U.S. Commercial sales organization, one of the largest growth segments in the
company. From 2003 to 2007, Robbins led the U.S. and Canada channel
organization, where he was instrumental in building a world-class partner program
for Cisco. He was recognized in CRN Magazine as one of the top Channel Chiefs in
2008, and VARBusiness named him one of the Top 100 Channel Executives of the
year in both 2005 and 2006. Robbins joined Cisco in 1997 as an account manager
and quickly advanced into the role of regional manager and operations director.
Prior to joining Cisco, he held management positions at Bay Networks and Ascend
Communications. Robbins holds a bachelor's degree in mathematics with a
computer science concentration from the University of North Carolina.
Kathleen Weslock
Senior Vice President and Chief Human Resources Officer
Kath Weslock is Cisco's Chief Human Resources Officer. She leads Cisco's global HR
team in providing HR support and services to employees and is responsible for
Cisco's overall people strategy. She is also responsible for the company's global
strategy for inclusion and diversity as well as its talent design and performance
management, compensation and benefits programs, employee rewards systems, and
aligning business objectives. Weslock has more than 20 years of HR experience.
Prior to joining Cisco in 2012, she held HR leadership positions at SunGard Data
Systems, Deloitte & Touche, Shearman & Sterling, Covance, Lehman Brothers, and
William M. Mercer Companies. While at SunGard, she was the Chief HR Officer and
Senior Vice President of Internal Communications where she pulled together
disparate benefits programs, the acquisition process, and compensation plans
across the company. She also created a Center of Excellence bringing together
appropriate services into a shared model producing HR operational efficiencies.
Weslock holds a Bachelor of Science degree in Spanish and psychology from Hood
College, a master's degree in labor relations from Cornell University and a juris
doctorate from Pace University.
2. Corporate governance
 Corporate governance policies are designed to foster ethical conduct and
comply with regulatory requirements and applicable laws for publicly listed
companies. We implement practices that help manage risk exposure and
appropriately align risk-taking to increase shareholder value. We promote
responsible business practices at every level of the company and expect our
partners to meet our high ethical standards as well.
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Investor confidence in public companies is essential to the functioning of the
global economy. At this website, we intend to provide you with key
information about our corporate governance policies. These policies provide
a framework for the proper operation of our company, consistent with our
shareholders' best interests and the requirements of the law.
Ensuring that Cisco's financial results fairly reflect the results of our
operations is of paramount importance to this company and our investors. At
Cisco, we have always been diligent in maintaining compliance with our
established financial accounting policies, which are consistent with
requirements of Generally Accepted Accounting Principles (GAAP), and for
reporting our results with objectivity and the highest degree of integrity. We
are committed to providing financial information that is transparent, timely,
complete, relevant and accurate.
Cisco is committed to excellence in corporate governance and maintains
clear policies and practices that promote good corporate governance. Many
of these policies and practices are designed to ensure compliance with the
listing requirements of NASDAQ and applicable corporate governance
requirements, including:
The Board of Directors has adopted clear corporate governance policies;
The Board of Directors has adopted majority voting for uncontested elections
of directors;
A majority of the Board members are independent of Cisco and its
management;
The independent members of the Board of Directors meet regularly without
the presence of management;
All members of the key committees of the Board of Directors-the Audit
Committee, the Compensation and Management Development Committee,
and the Nomination and Governance Committee-are independent;
The charters of the committees of the Board of Directors clearly establish the
committees' respective roles and responsibilities;
Cisco has a clear code of business conduct that is monitored by Cisco's ethics
office and is annually affirmed by its employees;
Cisco's ethics office has a hotline available to all employees, and Cisco's Audit
Committee has procedures in place for the anonymous submission of
employee complaints on accounting, internal accounting controls, or auditing
matters;
Cisco has adopted a code of ethics that applies to its principal executive
officer and all members of its finance department, including the principal
financial officer and principal accounting officer;
Cisco's internal audit control function maintains critical oversight over the
key areas of its business and financial processes and controls, and reports
directly to Cisco's Audit Committee;
Cisco has adopted a compensation recoupment policy that applies to its
executive officers; and
Cisco has stock ownership guidelines for its non-employee directors and
executive officers.
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We are dedicated to ensuring that the high standards of financial accounting
and reporting we have established are maintained. Our culture demands
integrity and an unyielding commitment to strong internal practices and
policies. We have the highest confidence in our financial reporting,
underlying system of internal controls and our people, who are objective in
their responsibilities and operate under the highest level of ethical
standards. We thank you for the confidence you have placed in us.
a. Board Committees
* Audit Committee
The purpose of the Audit Committee (the "Committee") is to assist the Board of
Directors (the "Board") in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and others;
reviewing the systems of internal controls which management and the Board have
established; appointing, retaining and overseeing the performance of independent
accountants; and overseeing the Company's accounting and financial reporting
processes and the audits of the Company's financial statements.
* Compensation and Management Development Committee
The Compensation and Management Development Committee's (the "Committee")
basic responsibility is to review the performance and development of the
Company's management in achieving corporate goals and objectives and to assure
that the Company's executive officers (as defined below) are compensated
effectively in a manner consistent with the strategy of the Company, competitive
practice, sound corporate governance principles and shareholder interests. Toward
that end, the Committee will review and approve all compensation to executive
officers.
* Finance Committee
The Finance Committee is authorized to review and approve the Company's global
investment policy which applies to all equity and fixed income investments made by
the Company and by its subsidiaries worldwide; review the Company's minority
investments and fixed income
assets; authorize the issuance of debt securities of the Company; oversee stock
repurchase programs adopted by the Board of Directors; review the Company's
currency, interest rate or equity risk management policies and programs; review
and approve decisions made by the Company and its subsidiaries to enter into
swaps; review the Company's insurance risk management policies and programs;
review the Company's tax program; and approve charitable contributions on behalf
of the Company.
The Finance Committee is also authorized to approve the acquisition and leasing
(through synthetic leases or otherwise) of real property by the Company, including
approving the financing of the land and construction costs, in each case in an
amount not to exceed $750 million per property.
* Acquisition Committee
The Acquisition Committee shall have the authority to review and approve merger
and acquisition transactions and investment transactions proposed by the
Company's management. The Acquisition Committee is authorized to approve
merger and acquisition transactions and investment transactions by the Company
valued in an amount not to exceed, for any particular acquisition or investment, $2.0
billion in cash, stock or a combination thereof.
* Nomination and Governance
The Nomination and Governance Committee (the "Committee") shall oversee,
review, and make periodic recommendations concerning the Company's corporate
governance policies, and shall recommend candidates for election to the Company's
Board of Directors (the "Board").
b. Director Compensation
6. Generic Industry Type:
1. Fragmented, Maturing, Energizing, Declining
2. Industry Economic Characteristics (p.53)
3. Generic Industry Type
Industry definition
Cisco Systems, Inc. (Cisco) designs, manufactures, and
sells Internet protocol (IP)-based networking and other
products related to the communications and
information technology (IT) industry and provide
services associated with these products and their use.
Its products are installed at enterprise businesses,
public institutions, telecommunications companies,
commercial businesses, and personal residences. The
Company operates in three segments: The Americas;
Europe, Middle East, and Africa (EMEA), and Asia
Pacific, Japan, and China (APJC). In July 2013, the
Company announced that it has completed the
acquisition of Composite Software, Inc. In October 2013,
Cisco Systems Inc completed the acquisition of
Sourcefire, Inc. In October 2013, the Company
announced that it has completed the acquisition of
privately held WHIPTAIL. In December 2013, Cisco
Systems Inc completed the acquisition of privately held
Insieme Networks.
Market size and growth
rate
2013 Revenue: $9.7B
Annual growth 07-13: -5.3%
The Telecommunications Networking Equipment
Manufacturing industry experienced fluctuating
demand during the past five years, due to economic
instability and growing demand for imported goods.
When the recession occurred in 2009, aggregate private
investment fell 24.8%. Because private corporations are
major purchasers of networking equipment, their
reduced investments in the industry’s products
hampered industry revenue growth. In addition,
operators outsourcing production to low-wage
countries has surged over the past five years. As a
result, consumer demand for imported goods has
grown, especially from China, causing a decline in
demand for domestically manufactured products. In the
five years to 2013, revenue is anticipated to decrease at
an annualized rate of 5.1% to total $9.7 billion, but will
grow 1.1% in 2013.
Improving economic conditions have encouraged wired
telecommunications carriers and internet service
providers to upgrade networks for next-generation
technologies. These tech-savvy customers demand very
expensive and complex industrial routers and
associated networking equipment. Fortunately for the
industry, operators still manufacture this high-margin
equipment domestically. Furthermore, industry profit
margins increased as several players focused on
designing and developing high-end networking
equipment, but outsourced manufacturing to contract
companies to reduce costs. Consequently, profit
increased from 8.5% in 2008 to 9.8% in 2013. The
industry’s future prospects look promising, with
revenue growth anticipated through the five years to
2018. Upgrades to networks will continue to boost
demand for industry products over the next five years,
given that the ongoing convergence in media and
telecommunications technologies necessitates major
information technology (IT) investments by internet
service providers and telecommunications carriers.
Key rivals & market share Juniper Networks, Inc.
Extreme Networks, Inc.
Alcatel-Lucent
Avaya Inc.
Brocade Communications Systems, Inc.
Check Point Software Technologies Ltd.
F5 Networks, Inc.
Hewlett-Packard Company
Hauwei Technologies Co. Ltd.
ARRIS Group, Inc
Fortinet Inc
International Business Machines Corporation
LM Ericsson Telephone Company
Microsoft Corporation
Riverbed Technology, Inc
Symantec Corporation
Aruba Networks, Inc
Citrix Systems, Inc
Polycom, Inc
Arista Networks, Inc
Dell Inc
Motorola Solutions, Inc
Palo Alto Networks, Inc
VMware, Inc
Scope of competitive
rivalry
Competition in this industry is Medium and the trend is
Steady.
Concentration vs.
fragmentation
The telecommunication industry has a medium level of
concentration with four players making up 43.7% of the
industry revenue. Broadband internet has significantly
increased over the past five years causing an increase in
demand for networking equipment. In the next five
years, there is an expected increase in government
demand with networking products.
Number of buyers
45,806,739
Demand determinants
The telecommunication industry is dependent on how
much level of capital the service providers are going to
spend. Newest technology is usually in the highest
demand. New or enhanced communications services
promote sales of upgraded communications equipment
that helps users efficiently access these new services.
New communications services typically have a slow
initial uptake, followed by rapid growth, and then a
slowdown.
Degree of product
differentiation
There is not a high level of product differentiation in the
telecommunication industry. When a company comes
up with a product, it will sell that product at a high price
until a competitor comes out with a similar product
driving the price of the product down. This means that
product differentiation is small in the industry.
Product innovation
pProduct innovation within this industry is high.
Telecommunication industry creates a lot of new
technologies, producing a highly product innovative
working environment.
Key success factors
Cisco’s key success factors include effective quality
control, superior financial management and debt
management, production of a range that accommodates
future developments, undertaking technical research
and development, and having contracts within key
markets.
Supply/demand
conditions
In the telecommunication industry, when a company
comes up with a new product it will sell that product at
a premium price until another company comes in with a
similar product. Once a company comes in with a
similar product, the first company will decrease the
price of its product. As a result this means that the
supply and demand relies heavily on competition.
Analysis of stage in life
cycle
The Theoawita The telecommunication industry is in
the declining stage
Key features of the declining stage include revenue
growing slower than the economy, falling company
numbers (large firms dominate), little technology and
process change, declining per captia consumptions of
goods, and stable and clearly segmented products and
brands. According to IBIS World, the telecommunication
industry growth in the number of establishments is at 5.2%, showing a decline in the industry. The industry is
also dominated by large firms like Cisco.
Pace of technological
change
The telecommunication industry is always changing as a
result of technology. Due to the industry technology is
always changing and innovating the creation of new
products. This is a result of computers, new platforms,
and new programs being created and used by the
company.
Vertical integration
Companies in the telecommunication industry are
leaving the manufacturing to outside suppliers. This
was shown in the SWOT analysis of the company. One of
the weaknesses that were pointed out was being
dependent on suppliers. International trade has been
an important part in the telecommunication industry.
This has allowed to be connected to massive supply
chains that give access to supplies for a cheaper price.
Economies of scale
Learning/experience
curve effects
Barriers to entry
Barriers to entry in this industry are high, but
decreasing. A reason for barriers to entry being high is
due to the fact that companies have to invest heavily in
research and development. It is also hard to develop a
reputation and brand recognition. Another reason is
that skilled employees are scarce and hard to come by.
The barriers of entry are decreasing as a result from
commoditization of technology.
Regulation/deregulation
Heavy regulation in the industry creates a barrier to
entry for firms wanting to enter the market. This creates
a high barrier to entry for the industry. The FCC
requires that equipment on a customer’s property (i.e.
home or businesses) does not cause harm to
telecommunications networks. It requires equipment
manufacturers and suppliers to show conformity to the
appropriate technical criteria by seeking certification
from a telecommunications certification body.
Globalization
Globalization is on the rise in the industry and is
expected to keep increasing. There are currently seven
big players in the industry that already operate globally
and this number is on the rise. Exports count for 93.5%
of revenue in the industry and imports will count for
98.4% of domestic demand in 2013. The high level of
research and development (R&D) investment, the
specialist nature of many products, and the high levels
of competition in this industry require successful
operators to leverage global footprints to bolster sales
and achieve significant economies of scale.
Trends
The Telecommunications Networking Equipment
Manufacturing industry is projected to experience
revenue growth during the five years to 2018 as
telecommunications networks are upgraded and the
number of broadband connections increases.
Additionally, as the economy recovers, investment from
private companies will likely to grow at a faster rate
compared to the previous five years. Overall, during the
five years to 2018, revenue is forecast to rise at an
annualized rate of 2.9% to $11.2 billion; this rate
includes expected growth of 3.6% in 2014. Globalization
is an increasing trend and is likely to increase in the
coming years.
7. Organization Structure:
1. Cisco uses a matrix organizational structure.
2. Advantages and disadvantages
Advantages of a matrix structure include efficient information exchange and
increased motivation. Matrix organizational structure allows for departments to
work together and communicate solving issues. Matrix allows team members to give
their inputs before managers make decisions creating a motivated workforce.
The disadvantages to using a matrix organizational structure include internal
complexity and expensive to maintain and internal conflict. Employees may be
confused on who their supervisor is which creates internal complexity making it
harder to focus on the task at hand. Matrix structure is heavily dependent on
communication. If there's an error in the communication chain it creates a
catastrophic mess, altering the task at hand. A company's overhead costs typically
increase as a result of a matrix structure due to doubling management.
8. Financial Analysis
a. Graph from Yahoo Finance shows Cisco Systems Inc. having a stable, steady
pattern with its stocks over the fiscal year compared to its competitors.
b. Revenue Analysis 2013
Compared to its competitors, Cisco Systems Inc. has had a stable growth
throughout the three years. Their revenues aren't as high as the competitors,
but they are steadily growing.
c. Net Income
Cisco is showing good net income results. The company's net income and
revenues have been rising over the quarters.
d. Sales Division
Cisco has a large demand on switches, service and NGN Routers. Due to
emerging technology products, the company is facing a decline in their cable
and service provider voice products.
e. Geographical Sales
Cisco has a large portion of their sales coming in from the United States, but
they are a world leading company in data-networking equipment and
software. The company is well-positioned around the world, driving
technology applications to leading companies.
f. Altman Z-score
The Altman Z-score provides a ratio that predicts the likelihood a company
may face bankruptcy. A Z score less than 2.99 is considered "safe." A Z score
between 1.81 and 2.99 is considered a grey zone. Lastly, a Z score above a
1.81 is considered "distress" zone. Cisco is considered to be in the "safe"
zone, which is less likely to fall into bankruptcy.
9. SWOT Analysis
Strengths
The company is a leader in providing the best routing, services,
security programs, solutions and switching devices. The company holds the
position for extensive geographic reach, which includes their establishments
located across the world. The company has a diverse portfolio of products
and services to best suite each enterprise with telecommunications and
home systems. Cisco has a good balance sheet which allows the company to
robust interest expenses in future growth products.
Weaknesses
Cisco faces problems with its suppliers and manufacturers who help
create the parts to their products. Since their suppliers are located around
the world, it is hard for Cisco to keep total control over the manufacturing
process. The company has limited control on the delivery schedule and
complete shipping process. Furthermore, Cisco is unable to purchase
supplies in adequate quantities due to the price issue they have with their
suppliers and manufacturers. Due to price issues with their manufactures,
Cisco is unable to provide low prices. Cisco is then obligated to purchase
supplies and components at higher prices.
Opportunities
Cisco has the option to form partnerships with companies in areas
where the industry can gain new market presence. The benefits the company
can gain from these alliances, such as with Chinese companies, is technology
exchange, joint purchases to reduce the high supply cost and new market
penetration. Furthermore, Cisco has the opportunity to enter the could-drive
market which is replacing networking systems and storage technologies.
Although, the company is trying to enter the cloud data market, they need to
invest and capitalize more on the development and offerings of the couldbased solutions. Through collaborating with partners and investing in new
technologies, Cisco can broaden their range of products and services.
Threats
There is a new demand for products and services which can bring the
company a large portion of sales. Therefore, Cisco needs to stop investing on
operating costs for the products that have experienced the product life cycle.
Many products Cisco provides have been affected by business conditions,
economic and technology innovations. Cisco faces problems trying to keep
their operating costs low, therefore faces strong competition with those who
can provide new technological advancements or innovations. Another
external problem Cisco would face is trying to convince or specialize their
products to strict security markets like China.
10. Focal Points for Action
Short Range
Cisco is investing and budgeting themselves due to the strategies they
pursue with their partnerships. The company is investing significantly on
creating services and products that they acquire from their partnerships.
Therefore, Cisco needs to invest more on acquiring new innovations and
complete ownership of suppliers in order to improve their R&D.
Long Range
Cisco has problems with their delivery process and supply shortage.
The company needs to increase their profits by achieving economies of scale.
Cisco Systems Inc. will need to stop investing on products that don't have a
high demand and innovate the products.
11. Develop Alternatives
Consider Generic industry type & industry characteristics
Cisco Systems Inc. is a networking equipment manufacturing industry. The
company's task is to create systems and routing solutions to further
enterprises and provide homes with networking equipment. Cisco needs to
develop solutions to providing faster wireless, cloud data systems and
service video provider in order to attract more consumers. The company
needs to consult with their suppliers and manufacturers on cheaper
alternatives for components needed in order for the company to improve the
economies of scale and provide cheaper products.
Boston Consulting Group Matrix-Build/Hold/Harvest/Divest


 Stars
Cisco's category on service provider video and data center are in the
growth stage of the life cycle. The service provider video is providing
the company with a revenue of $4.9 million in 2013. It is considered to
be a profitable product to the company, overall. Secondly, the data
center is providing the company with a revenue of $2.1 million in
2013. This category has space to grow and keep increasing profits.
 Cash Cows
Cisco's category on switching products is very successful and brings a
lot of revenue to the company. The product is at its maturity stage and
will need to be innovated soon and continue to invest on. Secondly,
Cisco's NGN routing products have reached maturity and would
require investments to innovate. Since, NGN routing is less profitable
then their switching products, Cisco should consider using the
operating costs to bring in a new product.
 Question Mark
Cisco's data center product is in the introduction stage and faces
considerable risk as to rather it will bring in sufficient profits and be
successful in the market.
 Dogs
Cisco's collaboration products are at the end of the product life cycle.
It is losing considerable profits and it doesn't help bring the company
up. Cisco should consider to discontinue the product and focus on
creating a new product.
Competitive Position
Routing-Leader
TelePresence-Leader
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

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


Wireless LAN-Leader
Switching-Leader
Voice-Leader
Web Conferencing-Leader
X86 Blade Server-Challenger
Storage Area Networks-Challenger
Security-Leader
Competitive Strategy
Cisco pursues a differentiation strategy to provide worldwide leading software and
services to networking companies. Cisco pursues a differentiation strategy to
produce innovative goods and services to attract consumers. Cisco wants to offer
new products and all forms of communications and IT. The company strives to reach
as many consumers possible and provide them with the lowest costs. Cisco is
extending out to emerging markets though alliances and acquisitions to expand
their opportunities. Cisco makes their products more valuable by marking their
products and services superior to the competitors.
12. Decision and Recommendation
A. Corporate
In the corporate level, our recommendation to Cisco is to fund their R&D
center and reduce acquisitions. At the corporate level, Cisco should search
to find funding to invest on switching routing products to could data
solutions.
B. Business
In the business level, Cisco should acquire its own suppliers and set up its
own facilities to ensure more control over their supply chain and delivery
products. Cisco should use vertical integration and purchase their suppliers
to improve their efficiency and cost savings. This strategy would help cut
transportation costs and improve their profits to make the company more
competitive.
C. Functional
In the functional level, Cisco should invest less on routing products and
focus more on innovative products. Cisco can sell the products which are
sell profitable to the company or discontinue the mature products.
Implementation
1. Corporate Level
Cisco seeks joint-ventures or alliances to become more innovative
and integrates new products with existing technologies from other
companies. The problem is that Cisco puts their trade secrets and
product quality in hands of possible competitors. Therefore, our
recommendation is for Cisco to reduce the acquisitions they have
throughout the world and invest more on R&D to acquire status. By
reducing the acquisitions, Cisco can use the money to implement it to
innovating and producing new products. This will reduce the bad
performance measures and protect their proprietary knowledge.
-Implementation Stepsa. Concentrate/Fund on R&D
b. Obtain suppliers and acquire established facilities
c. Hire experienced, innovative employees
d. Offer benefits to employees to improve and live up to their motto
of "work, live, play and learn."
2. Business Level
Cisco has had problems with their economies of scale and delivery
process. Products have been arriving late. Cisco needs more control
over their supply and demand. The company lacks control over their
products that are being manufactured abroad and lack of
communication between their partnerships. Therefore, our
recommendation to Cisco is have direct control over their suppliers
and have direct aid with the production process, delivery, quantity
and quality. Cisco should implement a vertical integration a purchase
their suppliers, in order to have more internal dependence on their
facilities.
-Implementation Stepsa. Search for big local networking distributors in the market
b. Vertically integrate the suppliers, which the company selected for
ownership.
c. Furthermore, Cisco should hire qualifies managers to run the
operations abroad and report back to the headquarters.
3. Functional Level
Cisco has too many "Cash Cows," which are departments that are
creating no revenue. The company need to expand to more
innovative products in order to keep a competitive position against
their competitors. Cisco keeps investing on products that aren't
bringing in much profits, when the company can use the money to
upstart their new products. Cisco should decrease the amount spent
on Cash Cow products such as switching and routing departments or
sell the products. The money that would have been spent on these
departments should be implemented into demanding segments such
as cloud data.
-Implementation Stepsa. The company should distinguish which departments are bringing
in revenue and which departments aren't growing.
b. Cisco should sell the least productive units
c. Invest their money on R&D and improve their brand loyalty
d. Create profitable innovative sectors