Rising from Recession Market Strategies of Cisco Systems Essay

Cisco Systems, Inc. is an American-based transnational company that designs and sells consumer electronics, networking and communications engineering and services. Headquartered in California, Cisco has more than 65,000 employees and one-year gross of US $ 40 billion as of 2010. Cisco is one of the universe ‘s biggest technological companies ( Bloomberg 2010 ) .

This assignment examines the schemes adopted by Cisco to undertake recession in the US markets during the old ages 2008-2009. During the recession of 2001, Cisco was caught unaware of what John Chambers called the ‘100 twelvemonth inundation ‘ taking to the write down of stock list deserving US $ 2.2 billion. The company reported a loss of US $ 2.69 billion.

The dot-com bubble was a stock market bubble which burst in 2001. It was fuelled by the rise of Internet sites and the tech industry in general. Many companies folded and those that survived learnt valuable lessons. Investors lost astronomical amounts of money on the dot-com bubble.

Several factors combined to do the dot-com bubble. Low involvement rates, the leap in internet-users were seen by most companies, possible customers-this resulted in legion start-ups. These companies came to be referred to as ‘dot-coms ‘ , after the.com in many web references.

( WiseGeeks 2010 )

Many of these companies engaged in unusual and make bolding concern patterns with no sustainable concern theoretical account, all they were trusting to accomplish was a bigger piece of a pie ; comparing bigger pie to bigger consumer base hence believing net incomes will follow.

Unfortunately for many companies and investors, the growing of the tech sector proved to be illusive. A diminution in concern disbursement ( due to a hiking in involvement rates ) combined with market rectification to cover a serious fiscal blow to many dot coms, and tech companies began to turn up, one by one.

( Wise geeks 2010 )

Cisco, as mentioned, was n’t spared either. Let us now examine what Cisco could hold done, could n’t hold seen and/or should n’t hold done, non merely did Cisco service as a ‘plumber ‘ to the tech-world, it was a beacon of inspiration for organisation leading and direction.

CISCO ‘S Environment

Cisco ‘s client base was non concentrated in any one industry ; Cisco ‘s clients fell into one

of four classs:

Enterprise: Large organisations with 500 and more staff necessitating complex networking demands across multiple computing machine systems. Clientele include corporations, authorities bureaus, public-service corporations, and educational establishments.

Service Suppliers: Organizations supplying informations, voice, and picture communicating

services to concerns and consumers.

Small/Medium-Sized Businesss: Businesss with fewer than 500 employees and a demand for internal webs for itself and for its concern spouses connected to the Internet. These clients were by and large limited in their resources, as such Cisco designed and built easy to utilize and put in systems at low-cost monetary values.

Consumers: Persons with a demand for networking devices and services to link themselves to the Internet from within their places.

During the clip of the dot com, Cisco Systems was a decentralized company organized around 3 lines of concern. Each concentrating on a client section as shown above, for the easy communicating we will group small/medium-sized concerns and consumers under one LOB.

Each LOB produced customized merchandises for that section ‘s demands this generated tremendous growing during the dot-com old ages. As we know that came to an disconnected terminal in 2001, Cisco was forced to put off 18 % of its work force and incurred losingss amounting to $ 2.69 billlion.

Cisco did last unlike many other companies, what it so did was do a series of organisational alterations that continue to this twenty-four hours.

It centralized maps from each of its LOBs so that caputs of each division reported to the CEO instead than the presidents of the three LOBs. Customer focal point was maintained by, making three cross-functional concern councils, each responsible for one of the client sections. A functional caput chaired each council, taking both a map and concern council. ( Kilman 1985 )

This construction is a type of matrix organisation called the two-hat theoretical account. Cisco used this functional construction to make an appropriate cost footing for the downswing, as functional organisations bead costs in two ways. First, by consolidating applied scientists into specializer groups, the company minimizes the figure of applied scientists needed, the applied scientists are placed in a ‘pool ‘ where they can be shared across lines.

For illustration, under the old LOB organisation, each LOB might hold required two-thirds of a sound applied scientist. Resulting in Cisco engaging three applied scientists, one for each LOB. Under a centralised construct, the sound technology group hires merely two sound applied scientists and works them across the merchandise lines, leting fewer people to make a given volume of work.

Second, functional organisations cut down costs by diminishing duplicate and standardising merchandise and procedure designs. When gross is turning and borders are high, redundancy is a little monetary value to pay but when gross beads and borders shrink, duplicate is a good procedure to make away with.

In the early 2000s, Cisco was n’t able to maintain up with the demand for its merchandises and some of its clients were looking elsewhere and those that did wait had to wait up to 15weeks, as Cisco providers could non maintain up with the high demand, Cisco pushed industries and providers to stock up on stock list, perpetrating itself to purchasing stock before holding even sold them-This proved fatal when the recession came, go forthing Cisco with immense stock lists.

At Cisco, duplicate was reduced by centralising the applied scientists and uniting them into common groups. This standardisation achieves economic systems in holding one design alternatively of three. Manufacturing gets volume in bring forthing one high-volume merchandise instead than three low-volume merchandises ; procurement gets volume price reductions on fewer but common constituents. ( Porter ‘s Value Chain Competitive Advantage: Creating and Sustaining Superior Performance 1985 )

Logisticss reduces entire stock lists with one big stock, instead than three smaller stocks. Similar nest eggs can besides be achieved in other maps as the figure of minutess and procedures are reduced.

( Porter ‘s Value Chain )

In this manner, Cisco responded to the downswing by reorganising, seeing as functional organisations addition efficiency, lower costs all while minimising the figure of people needed without compromising on quality. They worked smarter in accomplishing better consequences.

The Cisco cost construction clearly benefited from the reorganisation. But Cisco besides made certain non to standardise to such an extent that the end-user experience suffered.

“ Focus on the Customer ”

Many companies achieve balance over clip between standardising, cost decrease, custom-making and client satisfaction.

Restructuring can blow energy, consequence in victors and also-rans, and do top endowment to go forth. Fortunately, Cisco did non walk this way and alternatively at the same time organized around client sections and maps, compensating the prejudices of a functional construction,

Cisco added cross-function concern councils for each client section. These councils supported their several client sections. The same people who had places of power in the functional construction staffed the councils, so when the applied scientists proposed standardising a merchandise, the sales representative who were stand foring client sections had a argument to contend the applied scientists. ( Kast & A ; Rosenzweig 1972 ) , Cisco adopted an unfastened system where feedback was viewed positively.

However, non all merchandise differences are duplicates, as some are required by clients.

For illustration, big organisations would hold required more faster waiters and merchandises as opposed to smaller concern whom neither had the demand or desire, so there were times when gross revenues demands conflicted with merchandise criterions.

Cisco understood that it was of import for them to acquire near to their clients, as it would assist them cognize if recession had impacted their grosss and net incomes. Cisco worked closely with its clients to spread out its engineering and concern relationship. Cisco and its spouses formed strategic confederations a co-operative partnership for common advantage. ( Miller & A ; Dess 1996 ; Yoshino & A ; Rangan 1995 )

“ Open Communication ”

Cisco made much of its corporate information available to its employees and shared

relevant information with providers and clients. They shared much more information than anyone idea was prudent. Cisco gave the employees themselves all the information. In a batch of companies, information is power.

At Cisco, information is empowerment. Technology clearly plays a large function in making

this. The IT substructure was both sophisticated and incorporate across the company, Cisco opened up the the substructure to both its clients and providers.

There were concern regulations codified in the IT substructure that described who got entree to what information. For case, all Cisco employees had entree to identify information such as client satisfaction, overall gross, and entire costs, while more differentiated information was restricted.

Customers merely had entree to merchandise information such as how to configure a router, and providers were given entree merely to the gross revenues informations necessary for be aftering their stock list. ( Quantitative Management Viewpoint, Management Information Systems Pg.56 )

For the most portion, nevertheless, Cisco gave out more instead than less information.

Making information available created chances for communicating.

For illustration, the employee directory made all employee information available from the CEO to the freshly employed, all contacts and organisational information was available. This allowed Cisco employees to reach anyone in the company without holding to travel through a concatenation of bid.

“ Authorization ”

Cisco ‘s employees had great latitude in making their occupations. The end of the IT is to authorise the employee to give them freedom of infinite, range and entree to all sorts of information. ( Herzberg 1966 )

Cisco employees were expected to take enterprise. For case, client satisfaction was taken rather earnestly. Employees are empowered to make right by Cisco and the client. They are given full liberty to do determinations that are client centric and are measured on the impact we have had on them. ( Richard Hackman & A ; Greg Oldham 1980 )

“ Quality Team ” HUMAN RESORCE

Cisco planned on engaging the top 10 % of the employees that they interviewed and let go of the bottom 5 % yearly. Cisco employees were brightly driven people.

Cisco non merely set attempt into engaging good people, but besides exhausted clip and resources developing them.

Cisco had complete and thorough orientation-programmes, specialized preparation for sections like gross revenues, and ongoing preparation for all employees. A Cisco employee, on norm, attended six preparation categories a twelvemonth, a tierce of which were web-based.

The punctilious choice procedure and the investing in developing that were offered were patterns that differed from those in other companies. ( Scientific Management Taylor 1985 )

“ Integrity ”

When asked about the rules that underpinned many of Cisco ‘s policies, employees frequently mentioned trust. Authorization, communicating, invention and hazard pickings are clearly all large parts of our civilization. Stevenson & A ; Gumpert ( 1985 ) entrepreneurial features.

How much trust to give to employees was a subject of treatment early in Cisco ‘s history. They decided from the get go that if we trusted our employees, we were non traveling to make policies for the bottom.2 % of the employees alternatively were traveling to make guidelines for directors to make the right thing, the support theory has an of import deduction for direction in accomplishing organisational aims. ( Viller & A ; Hartman 1991 )

Cisco was prepared to supply the context in which 1 makes the right determination by act uponing certain parametric quantities. Once hired as an employee, Cisco trusts that the person has non joined this company in order to steal and that the employee as an person has the company ‘s best involvement and that the person will try to do the best determination possible given all the back uping information.

( Mcgregor 1964, Theory Y )

The determination to swear employees laid the footing for relationships, trust worked between directors and their employees. Employees were thought to believe that everyone was back uping each other working towards that one same end.

Directors had to do certain that they were supplying employees with the right information, the right support bearing in head non to smother room for executing and free drama. Employees had to believe that their directors were merely and just, that proper crystalline systems of occupation allotment and publicities were in topographic point.


Cisco was besides actively prosecuting federal authorities related concern in the country of cyber security and cooperation between public and private sectors. The company appointed former white house cyber security adviser Melissa Hatway as a adviser to liaison with the authorities governments. She helped the company place the merchandise line that could be utile to the authorities. ( Favorability influence Kotter & A ; 1979 ; Harcourt2003 Political activity direction pg.91 )

“ FINAL Act ”

Cisco came out of the 2001 recession stronger, leaner and more agile. All its policies are working good and are considered to be plants in advancement, Cisco continually seeks to better and accommodate.

By the clip Cisco faced the recession of 2008, it had built up its strategic confederations, based on the coaction theoretical account. Councils and boards were in topographic point -councils looked at US $ 10 billion chances and boards took attention of US $ 1billion chances, during which Cisco was able to put on other companies, for illustration WebEx Communications Inc to back up its Telepresence undertaking.

( Bloomberg 2008 )

As an illustration during the recession Cisco focused on bing clients and noticed their demand for substructure ascents on many of the bing platforms-as the universe processes so much more informations, bing platforms suffered from wear and tear and overall inability in back uping its concerns. Cisco predicts that by twelvemonth 2013 substructure upgrading was likely to make US $ 50 billion. ( CISCO 2001 )

It is in my adept sentiment that Cisco ‘s theoretical account is an inspiration to other organisations, Cisco bounced back from recession stronger, leaner and meaner ( series of acquisitions ) . Naturally every theoretical account adopted by any one organisation is a continual work in advancement, nevertheless when aided by such unfastened systems, it has the ability to entree itself and rapidly do adjustments-whenever they may originate or all of a sudden come.

Cisco focused itself around its clients ( externally ) , they listened to their demands and wants, they engaged them exhaustively, they designed forums within the functional groups to hash out differences in merchandise design-the clients had a voice within the strategy of things, their feedback was earnestly considered.

Internal to Cisco they created schemes easing unfastened communicating, staff authorization and their human resource is managed efficaciously, expeditiously and reasonably as possible. Cisco aspires to engage the right staff for the company-forward thought and extremely motivated persons. Cisco so believes in supplying them with the right tools to upgrade and ‘keep on top of their field ‘ , Cisco does non follow a punitory signifier of direction, they believe that they have hired the right individual for the occupation Cisco empowers, topographic points faith and allows the individual to ‘have a existent spell at the undertaking at manus ‘

What Cisco aims to accomplish is what I like to believe a intercrossed system. The term loanblend was originally coined by Peter Keen in the mid 1980s, but received its most precise and most quoted definition by Michael Earl: ” A individual with strong proficient accomplishments and equal concern cognition or frailty versa… . loanblends are people with proficient accomplishments able to work in user countries making a line occupation, but adept at developing and implementing IT application thoughts ” ( Peter Keen 1980 )

Cisco is a company for the future-it seems good cognizant of this and it knows how to acquire at that place as seen above. The importance placed on preparation, unfastened communicating internally and on their environments ( mega and undertaking ) , human resource- and the demand for uninterrupted consciousness, systems are in topographic point to maintain them in cheque.

How the hereafter may blossom, will at that place be a dual dip? Will at that place be a planetary meltdown? No 1 can to the full foretell apart from watching and listening closely for the marks ( stock market, cardinal involvement rates, etc ) . Cisco is making what it can and must make, it has exhaustively engaged its clients and clients, it created a extremely synergized working environment where their staff are empowered and entrusted in doing the best determination for the hereafter of the company. They are puting in engineerings and technological companies that are future oriented they are puting themselves in the hereafter today. They are constructing a Cisco hereafter for the universe. A Cisco you and I necessarily will necessitate and desire.

Mentions and Suggested Readings

Lake herring: Scheme is Recession Proof, Reuters, January 08, 2008.

Dr. Jay R. Galbraith: How to pull off in a Down Turn, www.cedma-europe.org, August 2009

DotCom Bubble, www.wisegeeks, August 2010

Ellen McGirt, How Cisco ‘s CEO John Chambers is turning the Tech Giant Socialist, www.fastcompany.com, November 25,2008

Cisco ‘s CEO On How To Weather The Downturn, www.fastcompany.com, December 01,2008

At Cisco, “ Downturn ‘ Screams Long-Term Opportunity, www.businessweek.com, March12,2009

Stephen Lawson, Cisco ‘s Chambers Sees Hope After Recession, www.pcworld.about.com, May18,2009

Andy Greenberg, Cisco Preps for Recover, www.forbes.com, November02,2009.

Reshaping Cisco, The World Harmonizing To Chambers, World Wide Web, economist.com, August27,2009

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