Chapter 3-Minicase 1

Net Readiness at Cisco Systems

In preparation for answering the questions, review the Cisco web site.

1. How does each of Porter’s five forces apply to Cisco?

   Porter’s Five Forces are supplier power, threat of substitutes, buyer power, the degree of rivalry amongst competitors, and barriers to entry.

   By creating the Manufacturing Connection Online, Cisco has been able to create a successful link with all of its suppliers, controlling differing inputs, ordering volumes, and supplier concentrations. With Cisco Connection Online, Cisco has successfully created a supplier gateway. The benefits include ease-of-use, shorter delivery times, and immediate access to order status. By improving their delivery system whilst reducing the price to the consumer and shortening delivery time, Cisco suppliers have raised the barriers to entry, ensuring brand identity, access to distribution, and providing absolute cost advantages. Similarly, the threat of substitution is reduced, as customers are now disinclined to substitute, particularly in face of the increased customer service. Finally, being a leader in the industry and the value-added CRM services will reduce the influence of rivals.

2. The case emphasizes benefits to Cisco. How do suppliers benefit? How do customers benefit?

   Suppliers benefit by being better able to plan their own manufacturing schedules. Suppliers also are able to direct ship to customers, reducing travel of their wares, and hence reducing the chance for damage or loss. Suppliers also have more contact with their own customers, which can give the organization more defined and relevant input.

   Buyers benefit by increased customer relations. They can track their orders online, get quicker answers to problems, check availability of stock, and get value-added merchandise.

3. Are the initiatives in place at Cisco available only to such a high-tech company? Specifically, what difficulties would a more traditional company face in becoming Net ready?

   The initiatives in place can be extended to any company, provided that they have the financial resources and Internet connectivity. However, these initiatives may not be necessary and certainly may not be economical for many small and medium sized organizations. Many companies do not have the infrastructure to support such a complex web-based application, nor do they have the finances to establish them. Further, many do not have the need to incorporate as extensive a program as Cisco has developed. Other companies may have a very limited number of suppliers, and may sell only manufactured products (no need to drop ship from the upstream suppliers). Other companies may have fewer customers, or their customers may not be Internet-ready. They may have fewer employees, making the Cisco Employee Connection unnecessary. It's always advisable to scale the technologies to the organization as it exists, and as it will exist in the future.

4. How can Cisco use the knowledge it has acquired from internal implementation of these systems to fulfill its goal to be a network solution provider to its customers?

   Cisco’s systems can become a showcase for its suppliers (further enhancing benefits) and perhaps its customers (strengthening loyalty).