Cisco Case
Cisco Systems: New Millenium – New acquisition strategy
The case deals with the acquisition policy implemented by Cisco, by giving some real samples. The most interesting point concerns the way Cisco acquired companies during 90s with 4 main goals: a shared vision, shareholders’ satisfaction, motivating value added for employees, shareholders, customers and partners and a perfect “chemistry” (P.9).
Contrary to the global trend of big companies’ acquisition, Cisco was involved in smaller companies, based on selection criteria (presented below) which fit the company’s needs and strategy: * Small companies: the advantage is that those companies are start-ups coming with new disruptive Ideas highly complementary with Cisco’s businesses. * Limited number of employees (but engineers as the large part of them): Cisco gives a huge importance to skilled people, because as they say, those people are the real asset which permits to increase future market shares, So people retention becomes one of acquisitions’ main goals (success driven by a very low turnover compared with the industry). * Very entrepreneurial systems focused on fast growing: the need to grow by forming part of Cisco is one of the motivating arguments to have win-win negotiations. On the other hand, this kind of companies is not risk adverse and promises future benefits to their owners. * Geographical proximity: for large acquisitions, it permits to shorten lost time and get directly to the real acquisition’s implementation in order to share the distribution channels (cost reduction) and obtain the new product earlier. * Comparable cultures and visions: since acquisition leads to the integration of the acquired company to the group, it is necessary to have the same vision of the future strategy and cultures which can be merged to obtain a coherent unit.
Last, the company’s strength resides in its ability to decentralize decision making by creating a new business unit at
The case deals with the acquisition policy implemented by Cisco, by giving some real samples. The most interesting point concerns the way Cisco acquired companies during 90s with 4 main goals: a shared vision, shareholders’ satisfaction, motivating value added for employees, shareholders, customers and partners and a perfect “chemistry” (P.9).
Contrary to the global trend of big companies’ acquisition, Cisco was involved in smaller companies, based on selection criteria (presented below) which fit the company’s needs and strategy: * Small companies: the advantage is that those companies are start-ups coming with new disruptive Ideas highly complementary with Cisco’s businesses. * Limited number of employees (but engineers as the large part of them): Cisco gives a huge importance to skilled people, because as they say, those people are the real asset which permits to increase future market shares, So people retention becomes one of acquisitions’ main goals (success driven by a very low turnover compared with the industry). * Very entrepreneurial systems focused on fast growing: the need to grow by forming part of Cisco is one of the motivating arguments to have win-win negotiations. On the other hand, this kind of companies is not risk adverse and promises future benefits to their owners. * Geographical proximity: for large acquisitions, it permits to shorten lost time and get directly to the real acquisition’s implementation in order to share the distribution channels (cost reduction) and obtain the new product earlier. * Comparable cultures and visions: since acquisition leads to the integration of the acquired company to the group, it is necessary to have the same vision of the future strategy and cultures which can be merged to obtain a coherent unit.
Last, the company’s strength resides in its ability to decentralize decision making by creating a new business unit at