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Cisco Systems Inc. :
Transcript of 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:
“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.”
“Cisco employs a structured and carefully designed business process, which is carried out by cross-functional integration teams.”
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~
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...
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
Line of business structure
Highly related products
Service a particular need
"Lines" of Business
1. Service Provider
3. Small/Medium Business
3 Years Later...
1. Increased profitability
2. Larger market share
3. Economies of scale
4. Economies of scope
1. More control
2. Ability to appeal to customer’s need very quickly
1. Market power
2. Targeting more segments
3. Incresed Diversification
Sales force had issues selling Stratacom (low commission)
Stratacom sales force dissatisfied with sales approach and 1/3 resigned
Created an acquisition team
Manufactured at original factory
Sales staff were able to keep own accounts (production high)
Acquisition within 100 days
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
US, China, India, Isreal & Europe
Major Acquisitions in each SBU
A Brief History:
Moderate to high level of diversification
Evaluate the Prospective Company
Immediate positive return
Long-term strategic win
The Cisco Sell
No hostile takeovers
people before the product - succes only if staff wants to work for Cisco
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
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.