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Cisco Systems Inc. :

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Jackie Jawitz

on 6 January 2015

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Transcript of Cisco Systems Inc. :

Cisco Systems Inc. :

Growth Through Acquisitions


Getting to Know Cisco
“Change the way the world works, lives, plays, and learns”
Means of Diversification
Cisco expands and diversify using Horizontal and vertical acquisition.
The Acquisition Process
Let’s compare two of their biggest acquisitions:
Diversification Strategy
“Morgridge realised that Cisco’s 80% market share of routers would be of little value if the market decided to move to new technologies and that product diversification was therefore essential.”
Interrelated SBU's
“Cisco employs a structured and carefully designed business process, which is carried out by cross-functional integration teams.”
Conclusion
Recommendations
Continue to conform to changing times
Increase profit not only revenue
Focus on the core network equipment business instead of the consumer market business

Goals & Plan
~Dominate the Networking Industry~

How?
1. Provide complete solution
2. Make acquisitions a structured process
3. Definite industry wide networking protocols
4. Form the right strategic alliances
What they do...
How we got here...
http://www.processor.com/articles/P2533/25p33/25p33timeline.pdf?guid=

Main Incentive
In 1993 Cisco realized that they could not develop everything that it needed inside the company and that an acquisition strategy would enable Cisco to be able to keep up with new technologies, and keep their companies market position without losing track of the market’s demand by having to develop all the technologies from scratch.
Level and types of diversification
Mean of Diversification: Acquistion
First acquisition: Crescendo Communications (1993) - $10 million

-Main reasons for this strategy:
1- Increase Market power
2- Increase speed of getting products to market
3- Eliminate time and cost needed for technology development

1997-Coporate Structure change
Decentralized structure
Line of business structure
Highly related products
Service a particular need

"Lines" of Business
1. Service Provider
2. Enterprise
3. Small/Medium Business

3 Years Later...
General Benefits
1. Increased profitability
2. Larger market share
3. Economies of scale
4. Economies of scope
Why?
Vertical Acquisition:
1. More control
2. Ability to appeal to customer’s need very quickly

Horizontal Acquisition:
1. Market power
2. Targeting more segments
3. Incresed Diversification

Stratacom
Employees
Sales force had issues selling Stratacom (low commission)
Stratacom sales force dissatisfied with sales approach and 1/3 resigned

Customers
Angered


Cerent
Created an acquisition team
Q&A sessions
Great benefits
Manufactured at original factory
Sales staff were able to keep own accounts (production high)
Acquisition within 100 days
Unique strategies
Acquire companies rather than create new products
Chamber team of 70 VP’s from all of these CEO’s

Lessons for other companies:
Businesses need to adapt and not resist change
Innovation is key!
Great customer service and employee relations

Based on Jim Harvey's speech structures
Major Products
Global Reach:
US, China, India, Isreal & Europe
Major Acquisitions in each SBU
A Brief History:
Moderate to high level of diversification
- Related
-Horizontal
Step 1:
Evaluate the Prospective Company
Common Vision
Fast-growing, focused
Culturally compatible
Immediate positive return
Long-term strategic win


Step 2:
The Cisco Sell
No hostile takeovers
people before the product - succes only if staff wants to work for Cisco
Step 3:
The Appraisal
Acquisition team
Step 4:
Integration
Challenges
Transition Team
Customized Package - Q&A
“Map” Employees into New Jobs

Chamber’s wanted to triple Cisco’s revenue from 2000 to 2010
2000: $18.93 billion
2010: > $40 billion
Only doubled

Cisco was still able to make a solid increase despite of the Great Recession that started in 2007.
12 high tech companies

Mean of Diversification:
Alliances and Partnerships
Three rules for strategic alliances:
1. It has to benefit the customer
2. It has to result within 3 years in $500 million to $1 billion in incremental revenue per year.
3. It needs to be a competitive landscape change for both partners.
Full transcript