Businessmodel of Cisco

Customer Segments

Cisco has a segmented business model, with four customers groups who have slightly different needs and problems:

• Enterprise: This group consists of firms with multiple locations that have 1,000+ employees.
• Service Providers: This group consists of firms that provide data, video, voice, and mobile services to businesses, utilities, governments, and consumers.
• Commercial: This group consists of firms that have less than 1,000 employees.
• Public Sector: This group consists of non-private entities such as federal, state, and local governments, in addition to educational institutions. ### Value Proposition

Cisco offers two primary value propositions: brand/status and accessibility.

The company has a well-known brand, having been in existence since 1984 and maintaining a large global footprint of 400 offices with 70,000 employees. It has a market capitalization of $129 billion, making it one of the most valuable firms, and its products are often seen in movies and on TV shows.

The company sells its products through a wide variety of channels, making them more accessible to customers who might have difficulty finding or obtaining the items; these range from direct sales to service providers and resellers. It also markets its offerings to a large range of industries.

Channels

Cisco sells most of its products through its channel partners, who include systems integrators, resellers, service providers, and distributors. The remainder of its items is sold through direct sales.

The company also markets its offerings on its website, as well as through numerous training programs and events such as conferences, trade shows, and webinars.

Customer Relationships

Cisco’s customer relationship is primarily of a personal assistance nature. The company offers a wide range of support services to assist customers with the use of their products, including deployment and migration. It also offers phone and e-mail support.

That said, there is also a self-service component as its website has a detailed Support section answering many potential questions.

Key Activities

Cisco’s business model entails designing and developing its various lines of products. Actual manufacturing is outsourced to contract manufacturers, who offer services such as printed-circuit board assembly, product repair, and product assembly.

The company is not involved in long-term contracts with any particular provider, and it has the option of renewing its agreements on an as-needed basis.

Key Partners

Cisco offers two types of partner programs:

• Solution Partner Program: This program enables companies to integrate their solutions into Cisco’s technologies and architectures, and then sell these combined solutions to customers. Specific members include technology partners and independent software vendors. They fall into one of three tiers: Solution Partner, Preferred Solution Partner, and Strategic Solution Partner. Cisco provides these firms with marketing, technical, and sales resources.
• Channel Partner Program: This program enables companies to take Cisco’s products and services as is and then sell them to customers. Its members include systems integrators, resellers, service providers, and distributors. Distributors sell to resellers, systems integrators, and service providers. The latter two groups then sell directly to end users and typically provide support services. Cisco provides them all with a variety of resources as well to facilitate these transactions. ### Key Resources

Cisco’s main resource is its research and development staff, whose members design and develop products and services for manufacture by contract companies.

It also has intellectual property in the form of proprietary software on memory chips used to configure products per customer needs.

Further, it relies heavily on sales/marketing staff for selling purposes and training staff to guide customers on how to use products.

Cost Structure

Cisco has a value-driven structure, placing an emphasis on quality and personal service as its employees have many interactions with customers.

Its biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are in the areas of research and development and administration.

Revenue Streams

Cisco has two revenue streams:

• Products: These fall into the following categories: Switching, Next-Generation Network (NGN) Routing, Collaboration, Service Provider Video, Data Center, Wireless, Security, and Other Products.
• Services: These are offered along with products and include Strategy and Analysis, Assessment, Design, Validation, Deployment, Migration, Product Support, Solution Support, Optimization, and Operations Management.