Cisco (CSCO) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Cisco (Germany)

Based on various researches at Oak Spring University , Cisco is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, technology disruption, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Cisco

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Cisco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cisco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cisco operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Cisco can be done for the following purposes –
1. Strategic planning of Cisco
2. Improving business portfolio management of Cisco
3. Assessing feasibility of the new initiative in Germany
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cisco

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Strengths of Cisco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Cisco are -

High switching costs

– The high switching costs that Cisco has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Low bargaining power of suppliers

– Suppliers of Cisco in the Technology sector have low bargaining power. Cisco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cisco to manage not only supply disruptions but also source products at highly competitive prices.

High brand equity

– Cisco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cisco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Effective Research and Development (R&D)

– Cisco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Cisco staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Analytics focus

– Cisco is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Communications Equipment industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Ability to lead change in Communications Equipment

– Cisco is one of the leading players in the Communications Equipment industry in Germany. Over the years it has not only transformed the business landscape in the Communications Equipment industry in Germany but also across the existing markets. The ability to lead change has enabled Cisco in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the Cisco are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Operational resilience

– The operational resilience strategy of Cisco comprises – understanding the underlying the factors in the Communications Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Strong track record of project management in the Communications Equipment industry

– Cisco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– Cisco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cisco has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Highly skilled collaborators

– Cisco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Equipment industry. Secondly the value chain collaborators of Cisco have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Communications Equipment industry

– Cisco has clearly differentiated products in the market place. This has enabled Cisco to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Cisco to invest into research and development (R&D) and innovation.

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Weaknesses of Cisco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Cisco are -

High cash cycle compare to competitors

Cisco has a high cash cycle compare to other players in the Communications Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High operating costs

– Compare to the competitors, Cisco has high operating costs in the Communications Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cisco lucrative customers.

Employees’ less understanding of Cisco strategy

– From the outside it seems that the employees of Cisco don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Ability to respond to the competition

– As the decision making is very deliberative at Cisco, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. Cisco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Skills based hiring in Communications Equipment industry

– The stress on hiring functional specialists at Cisco has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

No frontier risks strategy

– From the 10K / annual statement of Cisco, it seems that company is thinking out the frontier risks that can impact Communications Equipment industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Compensation and incentives

– The revenue per employee of Cisco is just above the Communications Equipment industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Interest costs

– Compare to the competition, Cisco has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Workers concerns about automation

– As automation is fast increasing in the Communications Equipment industry, Cisco needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Products dominated business model

– Even though Cisco has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Cisco should strive to include more intangible value offerings along with its core products and services.

Slow decision making process

– As mentioned earlier in the report, Cisco has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Communications Equipment industry over the last five years. Cisco even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

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Cisco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Cisco are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Communications Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cisco can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Cisco can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Leveraging digital technologies

– Cisco can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cisco can use these opportunities to build new business models that can help the communities that Cisco operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. Cisco can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Cisco can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cisco to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Cisco to hire the very best people irrespective of their geographical location.

Learning at scale

– Online learning technologies has now opened space for Cisco to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Building a culture of innovation

– managers at Cisco can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Communications Equipment industry.

Buying journey improvements

– Cisco can improve the customer journey of consumers in the Communications Equipment industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Using analytics as competitive advantage

– Cisco has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Cisco to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cisco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Better consumer reach

– The expansion of the 5G network will help Cisco to increase its market reach. Cisco will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Cisco to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Cisco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats Cisco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Cisco are -

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Cisco.

Environmental challenges

– Cisco needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Cisco can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

Easy access to finance

– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cisco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Cisco will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Stagnating economy with rate increase

– Cisco can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Communications Equipment industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Cisco can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Cisco prominent markets.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Cisco business can come under increasing regulations regarding data privacy, data security, etc.

Technology acceleration in Forth Industrial Revolution

– Cisco has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Cisco needs to keep up with the evolution of technology in the Communications Equipment sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

High dependence on third party suppliers

– Cisco high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Consumer confidence and its impact on Cisco demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Communications Equipment industry and other sectors.

Regulatory challenges

– Cisco needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Communications Equipment industry regulations.

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Weighted SWOT Analysis of Cisco Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Cisco needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Cisco is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Cisco is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Cisco to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Cisco needs to make to build a sustainable competitive advantage.

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