Cisco Systems is an American-founded, multinational company, headquartered in San Jose in California. The company specializes in the designing, manufacturing, and the sales of networking equipment. The company began trading at the Dow Jones Exchange on June of 2009. The corporation is also listed in other stock growth exchanges, including the Russell 1000 Index and S & P Index. The company operates in the Networking equipment industry, serving customers internationally. Cisco Systems Inc. Romania is among the subsidiaries of the umbrella company. It is among the corporation’s European Sales offices, which are in many ways similar to the SMEs operating in the Romanian market. As an entrepreneur within the Romanian market, the company holds the sole role of discovering the market for networking products. This market can only be exposed through a thorough exploration of the needs of the Romanian market. After doing that, the company is supposed to position itself in a manner meets the needs identified within the market. For that reason, the threats of both internal and external environments have to be borne, towards tapping into the potential of the market. This paper will explore the internal and the external environments – enhancing or limiting the success of the company in Romania.
Segments of the general environment that influence Cisco Systems in Romania
The external environment that an organization encounters is comprised of both a competitive environment and a general environment. The competitive market is comprised of the markets and the general industry, in which the organization in question identifies with and where it competes. The general environment is also called the macro-environment. This is the case, because the changes that take place in this environment affect specific industries as well as the firms operating within the particular environment. Despite the fact that, holding other conditions constant, the competitive environment influences companies in a more immediate and direct manner, the general environment influences the competitive environment to a large extent. The components of the general environment include the following: economic, political, social and the technological spheres.
According to Cavescu (2011), Romania is a country, which is characterized by high levels of organized crime groups. These Romanian crime networks are actively engaged in the counterfeiting of popular products, especially those produced by reputable companies. The high prevalence of counterfeiting among organized crime groups can be traced to the fact that the penalties imposed on the offenders are not as severe as those imposed on the offenders of other crimes. For example, the penalties are lower than those imposed on human trafficking and drug trafficking offenders, despite the fact that the profits drawn from the criminal activities are similar. Caunic and Prelipcean (2012) pointed out that Romania is an established center and market to different types of counterfeit products – because it has grown into a transportation center and a destination with a ready market. The prices offered in the Romanian market are favorable, which attracts more inflow of counterfeit products and the production of the same. From the study Caunic and Prelipcean (2012), it was concluded that Romania is an established origin, point of transit and a destination market for counterfeit products.
Citing the economic environment within the Romanian market, it is clear that the economic and the technological spheres of the market are likely to impair the company to a large extent. With regard to the general economic environment, Romania has matured as a market for counterfeit products, where transport channels and distribution networks are fully established. For this reason, the economy of the region is greatly dependent on the supply of cheaper counterfeit products, which are readily available. As a result, this presents a huge challenge to Cisco Systems, as they are forced to sell their genuinely produced networking products at the unreasonable prices offered by the informal market (Caunic and Prelipcean, 2012). Further, Cisco Systems is forced into the production of lower quality products, so that the returns can sustain further production. However, this shift will have a long term effect on the company, as the reputation of its products will decline, which could negatively affect the outlook of the company from a customer’s perspective. In the short as well as in the long term, the company may be forced to break into the established counterfeit market, which will require enormous investments in the areas of marketing. An example of the strategies that could be used to break into the Romanian market could include advertising, which is likely to draw a portion of customers from the informal market (Cavescu, 2011).
Another sphere of the general environment, which is likely to affect Cisco Systems – both in the short and in the long term is the infiltration of counterfeit technology. The threat to the company is that despite staging and managing entry into the Romanian market, counterfeit producers will manage to counterfeit their products (Caunic and Prelipcean 2012). As a result, they are likely to tarnish the reputation of the company’s products at the market or slow the pace of technological innovation and development, due to the resultant, limited consumption of the company’s networking products. Due to the developed nature of the counterfeit market, the company also faces the threat of being phased-out by the highly innovative counterfeit producers marketing their products in Romania. These producers could be from Romania or those from outside the country, who could develop on the technological models of the company to overthrow its established market (Cavescu, 2011).
These two segments are also, very much likely to impair the networking products industry of Romanian companies. This is the case, as the Romanian market has grown into an origin, transit point as well as a market for counterfeit products, including networking products (Cavescu, 2011). For this reason, a larger part of the market will be attracted by the illegal market, which offers the products at lower prices. The two segments are likely to slow the industry, because the supply of counterfeit products is higher than that of legally produced ones (Caunic and Prelipcean, 2012).
The Five forces of competition, which are most significant to Cisco Systems in the Romanian market
The five forces of competition, which shape industry competition, include the following: the threat of new industry entrants, the bargaining power of suppliers, the existence of rivalry among competitors within the market, the threat presented by substitute products and the bargaining power of buyers. In the case of Cisco Systems, the two forces that are most significant include eliminating the threat of substitute products and dealing with the rivalry among industry players. In the case of Cisco Systems, (Cisco Systems, Inc., 2011) points out that, towards eliminating the threat of substitute products, they produce their products in exceptional ways. An example is the production of products that are fashioned to meet the needs of the company’s customers, as opposed to mass-production, without the target market in mind. Most importantly, the company, like before, is employing the architectural approach to capture market opportunities in the Romanian IT and communications industry.
Towards eliminating the threat presented by the informal players within the Romanian networking industry, the company specializes in the installation of their products at establishments where the informal, criminal producers cannot access. For instance, at the Romanian market, it has dominated the installation of networking products at public institutions, established enterprise centers and at telecommunication companies (Cisco Systems, Inc., 2011). Despite their placement at the Romanian market, the company diversifies its activities towards the creation of new markets within the European block. As a result, the Romanian subsidiary is not dependent on the Romanian market alone, but also the upcoming markets surrounding the region. The company has also focused on the production of highly next-generation oriented products, as opposed to the production of traditional products, like most other industry players do. Another strategy used by the company to address these threats is that of investing, not only in the supply of products, but also in developing software and offering services to their customers (Cisco Systems, Inc., 2011). Other strategies used by the company to address these areas of challenge include investing in privately held companies for diversification, making alliances and entering into acquisitions, which widen its market coverage and influence.
The strategies that Cisco Systems can employ to address inter-industry rivalry and the threat of substitute products in the near future in the Romanian market
The company can invest in the development of strategic alliances, as these can help it create collaborations that foster industry advancement and accelerate the creation of new markets. Through this strategy, the company’s outreach will be larger than that of industry competitors, therefore will be able to eliminate or lessen the threat they present. Through such alliances, the company will benefit from technology exchange, joint sales and marketing, product development, and the creation of new markets (Massey, 2000). Through these advantages, the company will produce products that are better, faster, cheaper and more accessible to the Romanian customer (Cisco Systems, Inc., 2011). Towards eliminating the challenge of substitute products, Cisco Systems should invest in the improvement of product performance, price reduction, and the introduction of new products, especially those with price-performance benefits (Massey, 2000). Through this strategy, the Romanian market will embrace the products of the company, over substitute and counterfeit products. The company should also direct resources towards the reduction of its production cost, and providing value-added features like reliability, security and investment protection. Through this strategy, the company will realize product differentiation – which will aid in reducing inter-industry competition (Blundell-Wignall and Atkinson, 2008). Other strategies that the company could employ include increasing market presence, conforming to all standards, and engaging in intensive market and product research, so it can develop products that fully meet the needs of its Romanian customers (Massey, 2000). By employing these strategies, the company will be able to eliminate the threat of industry players as well as that of substitute products, including counterfeits, across the Romanian market.
External threats and the opportunities available to Cisco Systems
The external threats facing Cisco Systems in the Romanian market include the intense competition from other industry players, and the company’s dependence on its suppliers. Others include the move of consolidating the American telecommunications industry, and the threat of substitute products, especially, counterfeit products – local and imported (Cisco Systems, Inc., 2011). The external opportunities that the company can benefit from include the increased opportunities for strategic alliances and acquisitions (Adepoju and Famade, 2010). Other opportunities include the increasing demand for unified communication models, the expansion of the enterprise security market, and the continual rise of new product markets due to the uptake of IT and Internet use locally and internationally.
Of the threats presented, the threat of counterfeit products is the most serious. In addressing this threat, the company should invest in more market presence, as well as the development of products that are fully differentiated and value-based in the Romanian market (Adepoju and Famade, 2010). In complementing these moves, the company should also work on reducing the costs of production, so that it can pass the reduction to the Romanian customer, who is likely to go for cheaper counterfeit products. The best opportunity available to the company is the continually expanding network-products market, due to the uptake of IT. In response, the company should invest in the creation of new strategic alliances and acquisitions, as this will expand its coverage – as well as expand its market-creation efforts (Adepoju and Famade, 2010). These strategies will help the company take advantage of the upcoming market, and benefit from it in the short and the long term. By employing these strategies, the company will eliminate the domination of counterfeit IT products in the Romanian market, and at the same time develop a long term market for its products at potential market areas (Cisco Systems, Inc., 2011).
Personal opinion on the Corporation’s greatest strength and most significant weakness
The company’s greatest strength revolves around the productive partnerships formed, including strategic alliances and acquisitions. This strength allows the company to develop new products as well as improve existing ones (Adepoju and Famade, 2010). An example is the merging of virtualization and the cloud, which improved the access of internet-based services (Cisco Systems, Inc., 2011). The strength also enables the company to respond to the dynamic needs of customers and emergent technological trends. The strategy to keep benefiting from this strategy is, basically, researching the market for new opportunities and potential business partners.
The most serious weakness of the company is its vulnerability to counterfeit market, which intensify the level of threat from substitute goods (Adepoju and Famade, 2010). In addressing this weakness, the company should work on developing products and services that are fully differentiated from those of its competitors as well as counterfeit ones. However, most important in eliminating the threat is the tactic of increasing market presence, which will increase customer confidence in the company’s products (Cisco Systems, Inc., 2011).
The company’s resources, core competencies and capabilities
The company’s resources – both tangible and intangible – include manufacturing facilities, the established distribution network, employees, technological know-how, innovative competence, the firm’s reputation and their brand name (Hitt, Ireland and Hoskisson, 2013). Among the company’s capabilities are the development, and the sharing of information across the human capital. These could be characterized by functional expertise and the unique skills held by employees (Cisco Systems, Inc., 2011). The core competencies of the company include the strategic deployment of capabilities and resources towards fostering innovation. The core competencies of the company have been developed over time.
Where the resources, capabilities and the core competencies of the company can be used to create in the value chain
The value chain of Cisco Systems is characterized by five levels of organizational functions – which could be informed by resources, capabilities and core competencies to improve competitive advantage. These include, inbound logistics, where collection services are executed; operations, where product quality is determined and outbound logistics, where order delivering is made (Adepoju and Famade, 2010). The two other levels include sales and marketing, where pricing is done; and lastly, there are services, where customer concerns are addressed (Hitt, Ireland and Hoskisson, 2013). The company can employ the three vital resources to improve the level, to which they meet the dynamic needs of customers. For example, at the operations level, the company can employ its production machinery optimally, share vital information across all production centers, and lastly deploys the necessary human expertise to produce excellent products. This shows that the three core areas can be employed at the operations levels to optimize the quality of products as well as ensure the optimal utilization of the available resources (Adepoju and Famade, 2010).
Cisco systems is an American, multinational company headquartered at San Jose, California. At the company’s subsidiary at Romania, the business environment is much like that of SMEs, due to the nature of the Romanian economy. The company is faced with challenges in both the external as well as the internal environment, including the economic climate of Romania. Among the segments of the general economy that affect the company profoundly are the technological and the economic spheres. Among the five forces of competition, those that are most significant to the company include the threat of substitute products and the rivalry existing among industrial competitors. The strategies that the company can employ to address these areas of challenge include the creation of strategic alliances as well as the differentiation of its products from those of competitors. The most pressing threat to the company is the threat of substitute products, and the most open opportunity is the possibility of creating new, more valuable business alliances. Among the resources, core competencies and the capabilities of the company include technological know-how, information sharing, and the strategic deployment of resources and capabilities. These valuable inputs can be used to add value to the company’s value chain, for instance, in the area of improving product quality.