Thursday, February 23, 2012 Case Analysis:
CISCO Systems: Managing the Go-to-Market Evolution
Group 5
ROHIT NATH | GAURAV PATANGE | MANGESH PATIL
MAHTAAB KAJLA | SACHIN KUMAR
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
enterprises
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
Lucent
5% share in overall
market 2 NETGEAR and D-Link
25% in top end of
market
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
Channel
25-30% Customers of carriers
Direct
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
3,000
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
networks
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
incentives
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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
differentiated
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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Recommendations
Keep a minimum threshold sales volume level at each level of
pyramid
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
workforce
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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Questions?
Thank You
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