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Published by shashank180693, 2019-05-15 06:46:58



Thursday, February 23, 2012 Case Analysis:

CISCO Systems: Managing the Go-to-Market Evolution
Group 5


Situation Analysis

 Company Introduction

 Leader in switches and router market and had followed a strategy of growth
through acquisitions

 Market capitalization greater than $500 bn in 2000
 Followed a market coverage model that contemplated approximately five tiers

customers based on opportunities available

 Image in the market

 Manufacturer of Highly reliable, innovative and quality products
 Highly regarded for the quality of company’s relationships with the reseller-

distributors or VARs

 Product Line

 Products available for all the layers of ISO-OSI model of communications but
layer 1

 Main line of switches were the Catalyst series
 Consisted of basic solutions for small businesses to high end solutions for large

 Price varied greatly from low end routers to high end routers

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Situation Analysis

Competitive Landscape

Market Market Share Market Size(in $bn) Competitors

Core Corporate  >70% for enterprise 20  Extreme and
Networking Gear account segment Foundry

Telecommunications  Nearly 40% for SMB  HP, Nortel, 3Com,
or commercial Huawei
Consumer Market account Technology

 Undisputed market 50 Nortel, Juniper,
leader Siemens, Alcatel and
 5% share in overall
market 2 NETGEAR and D-Link

 25% in top end of

 Market leader with
nearly 40% share

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Situation Analysis Sales Contribution Target Customer

Routes to Market 10% All
25-30% Corporate Customers
25-30% Customers of carriers
IT consultant and system houses 30-35% enterprise account , mid and
(IBM ,HP) small level businesses
Large telecommunication service <10% Small customers requiring
providers(SBC) standardize products
Traditional Value Added Reseller <10% SOHO

Direct Marketing Reseller (CDW)

Retailers (CompUSA)

Demand generation was done by account managers and system engineers using a
high touch approach

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Situation Analysis

Channel Reengineering

Approach Prior to Dot Com Bubble burst Post Dot Com Bubble burst
Volume Based Value Based
Number of Resellers 6,000

CCIEs Requirements One per every $10mn (Revenues) One per every $40mn (Revenues)

Incentives Based on number of units sold by Based on the specialization,
VAR expertise & customer satisfaction

Customer Emphasis Hardware Post sales services offered

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Problem Identification

To evolve the go-to-market strategy and to implement the customized pyramid
model, so that the new strategy doesn’t create inter-channel conflict

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VoIP Telephony

Market opportunity to tap the growing Competitors have better relationships

internet phone systems market with existing “voice” channels

Single network infrastructure to Degraded quality and unreliability is a
transmit audio, video and data lingering issue

Decreased maintenance cost of

High channel margins along with
possibility of increased revenues due to
services provided for maintenance

Due to huge cost advantages for end
users, it would automatically be
“pulled” by end users

Conclusion: VoIP Telephony has much more benefits than pit-falls. The demand for internet
based phone systems would increased due to cost advantages for end consumers and high
channel margins

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Motives to revamp the existing model

 To eliminate the “box movers” from the distribution channels

 Cisco choose to cut down the resellers to half by removing those who
lacked scale or value adding expertise

 To improve the profitability, working capital, Inventory and
other aspects of the business of channel partners

 Better handling of channel partners’ business model and their
customer service parameters

 Communication of Cisco’s trustworthiness in addressing
dealers’ concerns about the loss of business in a tough
competitive environment

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Coordination strategies Set Market Boundaries

Alternatives Available Channel differentiation attributed to
buying process of end customers
Set Product Boundaries

Channel differentiation characterized by
product specifications and dimensions

Promote Price Convergence Compensate for cost differences

Reduction of price difference among Reduction in leakages across channels
channels for same products by pushing the through cost compensation and value
discounts to the end of purchasing cycle incentive programs i.e., penalties or

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Evaluation of Alternatives

Set Product Boundaries Set Market Boundaries

Product differentiation is already existing Direct supply of products to large
in the portfolio of Cisco's products enterprises; also distribution of products
through two tier distributors e.g.: Tech
Since products are not substitutable Data
among themselves, products are quite well

Promote Price Convergence Compensate for cost differences

Currently the difference in discounts Existing pyramid model lacked fair
offered at various level in pyramid is small distribution of rewards for high qualified
(2%) channel partners than box movers
It is focused more on volume rather than
value generated (in terms of engineering
qualifications) by the channel partner

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 Keep a minimum threshold sales volume level at each level of

 Include VoIP in product portfolio and to avoid channel conflicts
majority of the sales should be through data VARs

 Best performing channel partner(s) should be rewarded at the
end of selling period to avoid price conflicts across the
channels(Alternative 4)

 Direct sales for core corporate networking gear market to
ensure high service levels by internally trained technical

 CCIEs support for small and medium businesses
 Exploit internet channel to reach home networking customers

and ensure efficient handling of small orders

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Thank You

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