Analysis
Company background (Cisco Systems):
Cisco Systems is a world leading company in the switches and router market. Established in 1984 by a Stanford University couple, IT administrators Len Bosack and Sandy Lerner. Ina short period after founding, it became one of the most successful companies in high technology industry. In Cisco, manufacturing of its switches and router was outsourced, the company focused on core competencies: product design and development. Indirect sales and distribution through resellers became the major sales channel in the end of 1990’s; its “Value-Added Reseller” (VAR) was the most successful indirect sales channel strategy at that time. In later 1990s, Cisco had ever been the world’s most valuable company, …show more content…

In the enterprise accounts, although the competition was aggressive with its major competitors Extreme and Foundry, Cisco was steadily keeping the market leader position base on its technical advantage. The reputation and recognition were established among customers with its technology leadership and product reliability. There were far more competition in the SMB segment from its competitors such as Hewlett-Packard, Nortel, 3Com, and Huawei Technology. Most of the products provided to this market were midrange and lower-end routers. Since the expected fast growth in the future years, this market was very attractive to Cisco. Secondly, Telecommunication service provider market is a huge market with $50 billion. However Cisco only took a 5% share in the overall market. Its products and service were focusing on the $2 billion - $3 billion top end of the market. Cisco faced aggressive competition from Nortel, Juniper, Siemens, Alcatel, and Lucent. Juniper was the market leader with nearly a 30% share. Cisco was currently designing next generation products to seize a bigger position at the higher end. Thirdly, with the M&A of Linskys, Cisco became the market leader in the consumer market; it had doubled sales to about $800 million and took a 40% market share. The competition was still strong from NETGEAR and D-Link. The aggressive competition eroded its margins to barely half the levels of the