ba401 cisco inc,.acquisition
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CISCO CORPORATE OVERVIEW Husband and wife Leonard Bosack and
Sandy Lerner, both working for Stanford University, wanted to link disperate computer networks on campus together,so they develop the first “multiprotocal”.
Cisco’s technologies open up the potential to link disperate networks all the world
CISCO CORPORATE OVERVIEW(2) With an early foothold in the data
networking networking equipment market,Cisco become the market leader
Company’s product line had expanded to include a broad range of other networking solutions to offer customers an “end-to-end” network solution
Routers and Switches are still Cisco’s core product
CISCO CORPORATE OVERVIEW(3) In 1996 Cisco entered the $250billion
telecom equipment market, which was in significant change
Historically there had been 3 type of network Phone network for translating voice Computer network for transmitting data Broadcast network for transmitting video
• Advance in digitalization make it possible to transmit all three over one network
CISCO CORPORATE OVERVIEW(4) Cisco was competing with many rivals but Cisco
scored a victory when Sprint select Cisco to be the supplier of its new data and telephone network.
Cisco went public in 1990,closing its first day of trading with a market value of $222 million.
Just 8 years later, Cisco’s market value topped the significant $100 billion mark, reaching that mark faster than any company in history and stripping Microsoft of the previous record of 11 years.
BUSINESS STRATEGY•Assemble a broad product line in order to provide customers one- stop shopping for networking solutions.
•Systematize the acquisition process.
•Define industry-wide software standards for networking equipment.
•Pick the right strategic partners.
BUSINESS STRATEGY(2) An inherent part of
Cisco’s strategy was using acquisition and partnership to gain access to new technologies
CISCO’S MANUFACTURING PHILISOPHY AND ORGANIZATION
Structured as a highly centralized organization.
Only engineering and marketing were decentralized at the business unit level
Cisco own and operated three manufacturing facilities in San Jose. Tasman Walsh Silver Creek
CISCO’S MANUFACTURING PHILISOPHY AND ORGANIZATION(2)
Cisco’s heavily dependent on outsourcing. It would keep only the core business and outsource everything else to alliance partners
About 25percent of Cisco’s revenue and 50 percent of its unit volume was from external factories
Cisco did supply them to make sure that they met Cisco’s standards
CISCO’S ACQUISITION STRATEGY
Employee Retention
Follow-up on new product development.
Return on investment
EMPLOYEE RETENTION Cisco itself was the combination of 25 different
organizations. Cisco specifics of the transition plan to the needs
of the acquired company’s employees. co’s HR professionals went to great lengths to tailor
After the acquisition closed, Cisco’s HR team would spend another six to sevens on-site executing the transition plan.
For the employees of the acquired firm, working for Cisco required a number of significant changes to their compensation.
EMPLOYEE RETENTION(2) Every redundant person had the opportunity to
apply for any Cisco job opening world-wide over 300-600 job openings available at any one time
Employee turnover rate for acquisitions was only 8 percent, the same level as for Cisco’s long-term employees
About one in five Cisco employees and one-third of Cisco’s top management positions were filled by people who had come from acquired companies.
NEW PRODUCT DEVELOPMENT Cisco’s new product introduction(NPI)
process required both technical expertise and management talent
Cisco found that the most effective way to do was for the acquired company to adopt Cisco’s cross-functional, systematic NPI process
RETURN ON INVESTMENT With Cisco’s powerful sales
organization and third party distributors,they can sell the acquired company’s product in two-to five times ramp up in the acquired company’s volume
This is the key driver behind the significant groth in cisco’s revenue
TYPE OF ACQUISITIONS
software companies
pre-production hardware companies
small hardware companies shipping product
mature hardware companies
CISCO’S ACQUISITION INTEGRATION PROCESS
Before agreeing to the term of an acquisition, Cisco conduct thorough due diligence on the company
After the acquisition had closed, Cisco would move forward with postacquicition process
Use “scenario planning”
MANUFACTORING INTEGRATION TEAM
To manage the postacquisition process was to appoint one of the senior managers in the acquired company as the integration team leader
Cisco also had developed the “buddy system” approach. The buddy system involved appointing an experienced Cisco employee to be the “manager of the intangibles” in the acquired company, and swapping a handful of Cisco employees with employees from the acquired company. Both the manager of intangibles and the on-site Cisco staff would assist employees from the acquired company with questions regarding how to access information and get things done within the Cisco organization.
MANDATORY INTEGRATION STEPS
merging information system
• evaluating supplier • ascending outsourcing options • determining product lifecycles
aligning current process
implementing ongoing mathodologies
THE SUMMA FOUR ACQUISITION Summa Four is a leading provider of
programmable switches which will enable Cisco to offer value- added telephony applications to new and existing service providers as well as extending these services to IP (Internet Protocol) networks, which were able to transmit voice, data, and video.
SUMMA FOUR PRODUCT LINE
VCO/Series 80
VCO/Series 20
VCO/4k
SUMMA FOUR ORGANIZATION Project Alpha was still in the
development phase at the time of the acquisition, and over a year away from product launch Key reason behind Cisco’s interest in Summa Four
In September of 1998, the idea of being acquired by Cisco was still very new to Summa Four’s employees, but their exciting.
SUMMA FOUR ORGANIZATION(2) Summa Four’s plant compared favorably
to many of the other plants that Cisco had acquired. However, the plant used a homegrown, PC- based test system that was far less automated than Cisco’s Autotest system.
Summa four purchased approximately 5,000 individual parts from 250 suppliers, 85 of whom were new to Cisco
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