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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
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
Core Corporate Networking Gear
Market Share
>70% for enterprise account segment Nearly 40% for SMB or commercial account Undisputed market leader 5% share in overall market 25% in top end of market Market leader with nearly 40% share
Competitors
Extreme and Foundry HP, Nortel, 3Com, Huawei Technology
Telecommunications
50
Consumer Market
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Situation Analysis
Routes to Market
Channel
Direct IT consultant and system houses (IBM ,HP) Large telecommunication service providers(SBC)
Sales Contribution
10% 25-30% 25-30% All
Target Customer
Corporate Customers Customers of carriers
30-35%
<10% <10%
Demand generation was done by account managers and system engineers using a high touch approach
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Situation Analysis
Channel Reengineering
Prior to Dot Com Bubble burst Post Dot Com Bubble burst
Approach
Volume Based
Value Based
Number of Resellers
6,000
3,000
CCIEs Requirements
Incentives
Customer Emphasis
Hardware
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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 doesnt create inter-channel conflict
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VoIP Telephony
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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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 Ciscos trustworthiness in addressing dealers concerns about the loss of business in a tough competitive environment
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Coordination strategies
Alternatives Available
Set Product Boundaries Channel differentiation characterized by product specifications and dimensions Set Market Boundaries Channel differentiation attributed to buying process of end customers
Compensate for cost differences Reduction in leakages across channels through cost compensation and value incentive programs i.e., penalties or incentives
Reduction of price difference among channels for same products by pushing the discounts to the end of purchasing cycle
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Evaluation of Alternatives
Set Product Boundaries Product differentiation is already existing in the portfolio of Cisco's products Since products are not substitutable among themselves, products are quite well differentiated Set Market Boundaries Direct supply of products to large enterprises; also distribution of products through two tier distributors e.g.: Tech Data
Promote Price Convergence Currently the difference in discounts offered at various level in pyramid is small (2%) It is focused more on volume rather than value generated (in terms of engineering qualifications) by the channel partner
Compensate for cost differences Existing pyramid model lacked fair distribution of rewards for high qualified channel partners than box movers
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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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