Management Cisco Systems

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Case Assignment, Chapter 6 (Short Answer)
Management
What Would You Do?
Cisco Systems, Palo Alto, California.
Your board of directors wants to know: How should Cisco grow? Your response was, “Well, the way we’ve grown in the past is. . . .” “No. That’s not the question. Looking backward is easy. How should we grow in the future? Should we build or buy?” And with the next board meeting in only 3 months, you don’t have much time to come up with the answer. Cisco started in 1984 as the plumbers of the Internet by making the switches and routers that direct data traffic over corporate networks and then later, the Internet. Its products weren’t sexy, but every company with an expanding network needed them. So Cisco became the
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Should we focus on products that businesses buy? After all, that’s who we sell to now. Or, should we take our expertise in routers and switches and focus on consumer products? Finally, while Cisco is growing 15 percent per year, that’s down significantly from the 40 percent growth that we’ve had since inception, save for 2001. So we need to identify high-growth markets and products that we could design and build.
If we grow by purchasing technology firms with already established products or services, should we stick to our knitting by buying firms with products and services closely related to our existing business? Or should we diversify by buying firms that are very different from our basic business, routers and switches? For instance, Cisco has the opportunity to acquire a firm that specializes in technology security (spam, viruses, malware, and other Internet threats), an area in which it has no experience. What’s more likely to work and be less risky, buying firms with similar products or services (like Cisco’s) or buying firms with different products or services? Basically, should Cisco move beyond its core business? Finally, if we do decide to buy firms with already established products or services, how can we make sure those acquisitions work? Study after study shows that most mergers and acquisitions have no better than a 50–50 shot of working. In other words, buy another firm, try to merge its products and services and culture and

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