Merger and Acquisition Cisco Mini Case Study Questions At the end of chapter in the textbook, there is a mini-case that follows the review questions for th

Merger and Acquisition Cisco Mini Case Study Questions At the end of chapter in the textbook, there is a mini-case that follows the review questions for the chapter. For chapter 7, read the mini-case and answer the questions at the end of the case. Your answers will be graded for completeness and accuracy. 600 words. Mini-Case
Strategic Acquisitions and Accelerated Integration of Those Acquisitions are a Vital Capability of Cisco
Systems
Cisco Systems is in the business of building the infrastructure that allows the Internet to work. As the
Internet evolved, however, Cisco’s business was required to change with this evolution. As part of its
advancement, Cisco Systems has used an acquisition strategy to build network products and extend its
reach into new areas, both related and unrelated. In the beginning, digital connectivity was important
through e-mail and Web browsing and searches. This evolved into a network economy facilitating ecommerce, digital supply chains, and digital collaboration. Subsequently, the digital interaction phase
moved Cisco into developing infrastructure for social media, mobile and cloud computing, and digital
video. The next stage seems to be “the Internet of everything” connecting people, processes, and data.
This will require the basic core in routing, switching, and services, as well as large data centers to
facilitate visualization through cloud computing. Video and collaboration as well as basic architecture of
the business will be transforming to become the base strategic business blocks. Furthermore, the need
to have strong digital security will be paramount.
Cisco has entered many aspects of the business in which it competes through acquisitions. For instance,
in 2012, Cisco acquired TV software developer NDS for $5 billion. NDS Group develops software for
television networks. In particular, its solutions allow pay-TV providers to deliver digital content to TVs,
DVRs, PCs, and other multimedia devices. It provides solutions that protect digital content so that only
paid subscribers can access it. Because of Cisco’s customer-driven focus, it has sought to help its
customers capture these market transitions and meet their particular needs. Of course, Cisco also builds
the routers that allow video data and e-mail communications to come together through their blade
servers (individual and modular servers that cut down on cabling). These routers and servers support
cloud computing for the mobile devices that deliver the video that NDS software enables on desktop
and mobile devices.
Also in 2012, Cisco purchased Meraki for $1.2 billion. Meraki provides solutions that optimize services in
the cloud. For instance, it offers mid-sized customers Wi-Fi, switching, security, and mobile device
management centrally from a set of cloud servers. For instance, if you are a guest at a university or
other company campus it supports, you can bring your own personal device into the network, which
allows guest networking and facilitates application controls. It manages the firewall and other advanced
networking services to protect security as well.
John Chambers, Cisco CEO, has helped the firm move through the many transitions noted earlier. In the
IT sector, 90 percent of acquisitions fail. However, as Chambers notes, “although Cisco does better than
anyone else, we know that a third of our acquisitions won’t work.” Chambers worked for companies
that did not successfully make transitions. Wang Laboratories missed a transition, and after experiencing
this as an executive, Chambers learned to have a “healthy paranoia.” He adds, “more than anything, I’ve
tried to make Cisco a company that can see big transitions and move.” One way they do this is to “listen
to the customers very closely” to understand the necessary changes.
As Cisco makes the transition into the all-everything network, not only must it manage the cloud, but it
also must provide service to the mobile devices that work in cellular networks. Accordingly, Cisco also
acquired Intucell, a self-optimizing network software developer, for $475 million. It likewise acquired
Truviso, Inc., a provider of network data analysis and reporting software, for an undisclosed price
(Truviso was partly owned by venture capital firms and was headquartered in Israel). Most recently,
Cisco acquired Ubiquisys, which cuts cellular carriers’ costs “by shifting traffic from congested towers to
more targeted locations inside an office, home or public space, which also boosts the service’s
reliability.” This shifting-traffic approach is especially efficient when seeking to improve “coverage in
crowded areas such as stadiums, convention centers and subway stations.” These acquisitions help
cellular network customers manage their products in the network more efficiently in the delivery of
data, e-mail, and video services. As you can see, for this series of acquisitions, Cisco has used
acquisitions strategically to move into new areas as its environment changes, to learn about new
technologies, and to gain knowledge on new technologies as it experiences these transitions.
In the process of this rapid change, Cisco has developed a distinct ability to integrate acquisitions. When
Cisco contemplates an acquisition, along with financial due diligence to make sure that it is paying the
right price, it develops a detailed plan for possible postmerger integration. It begins communicating
early with stakeholders about integration plans and conducts rigorous post-mortems to identify ways
“to make subsequent integrations more efficient and effective.” Once a deal is completed, this allows
the company to hit the ground running when the deal becomes public. Cisco is ready “from Day 1 to
explain how the two companies are going to come together and provide unique value and how the
integration effort itself will be structured to realize value.” The firm does not “want the [acquired]
organization to go in limbo,” which can happen if the integration process is not well thought out. Also,
during the integration process, it is important to know how far the integration should go. Sometimes
integration is too deep, and value that was being sought in the acquisition is destroyed. Sometimes it
may even pay to keep the business separate from Cisco’s other operations to allow the business to
function without integration until the necessary learning is complete. “Cisco learned the hard way that
complex deals require you to know at a high level of detail how you’re going to drive value.”
Sources: L. Capron, 2013, Cisco’s corporate development portfolio: A blend of building, borrowing, and
buying, Strategy & Leadership, 41(2): 27–30; D. FitzGerald & S. Chaudhuri, 2013, Corporate news: Cisco
doubles down on small-cell transmitters with Ubiquisys, Wall Street Journal, April 4, B7; T. Geron, 2012,
Meraki-Cisco deal a boost for Sequoia, Google-connected VCs, Forbes, November 19, 18; R. Karlgaard,
2012, Cisco’s Chambers: Driving change, Forbes, February 22, 68; A. Moscaritolo, 2012, Cisco to acquire
TV software developer NDS for $5 billion, PC Magazine, March 1; B. Worthern, D. Cimilluca, & A. Das,
2012, Cisco hedges bet on video delivery, Wall Street Journal, March 16, B1; R. Myers, 2011, Integration
acceleration, CFO, 27: 52–57.
Case Discussion Questions
1. Of the “Reasons for Acquisitions” section in the chapter, which reasons are the primary drivers of
Cisco’s acquisition strategy?
2. Of the acquisitions Cisco has completed, which ones are horizontal acquisitions and which ones are
vertical acquisitions? Which of these acquisitions do you believe have the strongest likelihood of being
successful and why?
3. Explain John Chambers’ views about acquisitions. How have his views affected the nature of Cisco’s
acquisition strategy?
4. Describe the core plan Cisco has in place to guide the integration of an acquired firm into its
operations. What are the strengths of this plan, and what are its potential weaknesses?
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STRATEGIC MANAGEMENT
Competitiveness & Globalization
Concepts
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STRATEGIC MANAGEMENT
Competitiveness & Globalization
Concepts
12e
Michael A. Hitt
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Robert E. Hoskisson
Rice University
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Brief Contents
Preface, xv
About the Authors, xxii
Part 1: Strategic Management Inputs
1.
Strategic Management and Strategic Competitiveness, 2
2.
The External Environment: Opportunities, Threats, Industry Competition,
and Competitor Analysis, 38
3.
The Internal Organization: Resources, Capabilities, Core Competencies,
and Competitive Advantages, 76
Part 2: Strategic Actions: Strategy Formulation
4.
Business-Level Strategy, 108
5.
Competitive Rivalry and Competitive Dynamics, 142
6.
Corporate-Level Strategy, 172
7.
Merger and Acquisition Strategies, 204
8.
International Strategy, 236
9.
Cooperative Strategy, 276
Part 3: Strategic Actions: Strategy Implementation
2
108
308
10. Corporate Governance, 308
11. Organizational Structure and Controls, 344
12. Strategic Leadership, 382
13. Strategic Entrepreneurship, 416
Part 4: Preparing an Effective Case Analysis
C-1
Name Index, I-1
Company Index, I-20
Subject Index, I-23
vi
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Contents
Preface xv
About the Authors xxii
Part 1: Strategic Management Inputs 2
1: Strategic Management and Strategic Competitiveness 2
Opening Case: Alibaba: An Online Colossus in China Goes Global 3
1-1 The Competitive Landscape 7
1-1a The Global Economy 8
1-1b Technology and Technological Changes 10
Strategic Focus: Starbucks Is “Juicing” Its Earnings per Store through Technological Innovations 11
1-2 The I/O Model of Above-Average Returns 14
1-3 The Resource-Based Model of Above-Average Returns 16
1-4 Vision and Mission 18
1-4a Vision 18
1-4b Mission 19
1-5 Stakeholders 19
Strategic Focus: The Failure of BlackBerry to Develop an Ecosystem of Stakeholders 20
1-5a Classifications of Stakeholders 21
1-6 Strategic Leaders 25
1-6a The Work of Effective Strategic Leaders 25
1-7 The Strategic Management Process 26
Summary 28 • Key Terms 28 • Review Questions 29 • Mini-Case 29 • Notes 30
2: The External Environment: Opportunities, Threats, Industry
Competition, and Competitor Analysis 38
Opening Case: Are There Cracks in the Golden Arches? 39
2-1 The General, Industry, and Competitor Environments 41
2-2 External Environmental Analysis 43
2-2a Scanning 43
2-2b Monitoring 44
2-2c Forecasting 44
2-2d Assessing 45
2-3 Segments of the General Environment 45
2-3a The Demographic Segment 45
2-3b The Economic Segment 48
2-3c The Political/Legal Segment 49
2-3d The Sociocultural Segment 50
2-3e The Technological Segment 51
2-3f The Global Segment 52
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vii
viii
Contents
2-3g The Sustainable Physical Environment Segment 53
Strategic Focus: Target Lost Its Sway Because Tar-zhey No Longer Drew the Customers 54
2-4 Industry Environment Analysis 55
2-4a Threat of New Entrants 56
2-4b Bargaining Power of Suppliers 59
2-4c Bargaining Power of Buyers 60
2-4d Threat of Substitute Products 60
2-4e Intensity of Rivalry among Competitors 60
2-5 Interpreting Industry Analyses 63
2-6 Strategic Groups 63
Strategic Focus: Watch Out All Retailers, Here Comes Amazon; Watch Out Amazon, Here Comes
Jet.com 64
2-7 Competitor Analysis 65
2-8 Ethical Considerations 67
Summary 68 • Key Terms 68 • Review Questions 68 • Mini-Case 69 • Notes 70
3: The Internal Organization: Resources, Capabilities, Core
Competencies, and Competitive Advantages 76
Opening Case: Data Analytics, Large Pharmaceutical Companies, and
Core Competencies: A Brave New World 77
3-1 Analyzing the Internal Organization 79
3-1a The Context of Internal Analysis 79
3-1b Creating Value 81
3-1c The Challenge of Analyzing the Internal Organization 81
3-2 Resources, Capabilities, and Core Competencies 84
3-2a Resources 84
Strategic Focus: Strengthening the Superdry Brand as a Foundation to Strategic Success 85
3-2b Capabilities 88
3-2c Core Competencies 89
3-3 Building Core Competencies 89
3-3a The Four Criteria of Sustainable Competitive Advantage 89
3-3b Value Chain Analysis 93
3-4 Outsourcing 96
3-5 Competencies, Strengths, Weaknesses, and Strategic Decisions 96
Strategic Focus: “We’re Outsourcing that Activity but Not That One? I’m Surprised!” 97
Summary 98 • Key Terms 99 • Review Questions 99 • Mini-Case 100 • Notes 101
Part 2: Strategic Actions: Strategy Formulation 108
4: Business-Level Strategy 108
Opening Case: Hain Celestial Group: A Firm Focused on “Organic” Differentiation 109
4-1 Customers: Their Relationship with Business-Level Strategies 112
4-1a Effectively Managing Relationships with Customers 112
4-1b Reach, Richness, and Affiliation 113
4-1c Who: Determining the Customers to Serve 114
4-1d What: Determining Which Customer Needs to Satisfy 114
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Contents
4-1e How: Determining Core Competencies Necessary to Satisfy Customer Needs 115
4-2 The Purpose of a Business-Level Strategy 116
4-3 Types of Business-Level Strategies 117
4-3a Cost Leadership Strategy 118
4-3b Differentiation Strategy 122
Strategic Focus: Apple vs. Samsung: Apple Differentiates and Samsung Imperfectly Imitates 126
4-3c Focus Strategies 127
4-3d Integrated Cost Leadership/Differentiation Strategy 129
Strategic Focus: RadioShack’s Failed Focus Strategy: Strategic Flip-Flopping 130
Summary 134 • Key Terms 135 • Review Questions 135 • Mini-Case 135 • Notes 136
5: Competitive Rivalry and Competitive Dynamics 142
Opening Case: Does Google Have Competition? Dynamics of the High Technology
Markets 143
5-1 A Model of Competitive Rivalry 146
5-2 Competitor Analysis 147
5-2a Market Commonality 147
5-2b Resource Similarity 148
Strategic Focus: Does Kellogg Have the Tiger by the Tail or Is It the Reverse? 150
5-3 Drivers of Competitive Behavior 150
5-4 Competitive Rivalry 152
5-4a Strategic and Tactical Actions 152
5-5 Likelihood of Attack 153
5-5a First-Mover Benefits 153
5-5b Organizational Size 155
5-5c Quality 156
5-6 Likelihood of Response 157
5-6a Type of Competitive Action 157
5-6b Actor’s Reputation 158
5-6c Market Dependence 158
5-7 Competitive Dynamics 159
5-7a Slow-Cycle Markets 159
5-7b Fast-Cycle Markets 161
5-7c Standard-Cycle Markets 162
Strategic Focus: The Ripple Effect of…
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