Cisco was founded in 1984 by two employees of Stanford University and became a public company 6 years later. After the company became public, the founders of Cisco decided to sell their shares and leave the company. This allowed the company to have a more receptive environment for growth and new management. Cisco became a fast growing and fast moving company due to the consistency of strategy, goals, organization and management that was implemented. Cisco’s goal was to become a leader in technology for the new internet based infrastructure where voice data and video could be transferred from one user to another over a single network.
Cisco provides products and services that transport voice, data and video around the world. The company designs and manufactures products and services associated with the communications and IT industry as well as internet protocol networking. There are three categories of products offered by Cisco: core technology, routing and switching, advanced technology, and other products. Cisco also provides service offerings, technical support and advance support for networking devices, applications, solutions, and complete infrastructures to support the customers that purchase their products.1 Because Cisco provides a variety of products and services in the networking and communications industry, there are several competitors they face on various levels.
The competitive environment for Cisco can be seen by looking over Porter’s Five Forces. At the time of the case the market was rapidly growing with constant new developments. Cisco’s main competitors in the industry are Nortel, Juniper, Avaya, HP, and Microsoft. There is rivalry among the competitors but because of the industry growth at the time, Cisco could focus on being the leader in the industry instead of focusing on taking over their competitors.
The threat of new entrants into the industry was low for Cisco with a high barrier for entrants. Startup companies wouldn’t have the knowledge base that Cisco had developed over the years, nor the capital to reach that level in time to be a threat. They didn’t have to worry about startups that would be able to reach the magnitude and variety of their products and services. Cisco was working to set industry standards and stay ahead of the curve.
They were providing customers with not only the products they wanted but also with customer service and support. They made sure to meet the customer needs on every level. It would be difficult for a customer to leave Cisco for one of their competitors because the customer would have to redo their entire technical infrastructure, therefore Cisco didn’t see a threat in substitutes.
Because of the magnitude of products sold by Cisco and how much they purchase from their suppliers, Cisco had some control over the suppliers’ prices because of the large quantities and frequency of purchases. The threat of suppliers is minimized for a company of this size with their level of success.
Lastly, the buyer power in the industry is not a threat to Cisco. Cisco is a leader in the industry, setting standards among its competitors. It offers its customers high quality products with extensive customer service. The customers that come to Cisco are not expecting low cost; they know they are paying for a superior product. Because Cisco has this reputation, they are able to price their products without worrying about competitors’ prices or the customers finding a better price elsewhere. They sell a refined differentiated product and service that makes it harder to ‘shop around.’ Cisco has always invested in research and development and the company’s internal system to be able to produce a quality product and have earned their reputation. The enterprise resource planning tool used internally by Cisco allowed them to continue to grow as a company and reach this level.
After Cisco went public in 1990 and the founders had left the company, Cisco continued to succeed under new