Case Study

Case
Study

Cisco

Description

At one time, Cisco Systems Inc was expected to become the world's first trillion-dollar company. Its business model was based on a virtual supply chain with apparently limitless capacity, and an emphasis on high customer reliability. Cisco referred to this approach as global virtual manufacturing.

But when the telecoms industry hit a downturn, Cisco was one of the worst affected - perhaps in part because of the high gearing that had served it well on the way up. Customer orders fell, production orders continued to go out, raw-parts inventory increased by more than 300% between the third and fourth quarter of 2000. Cisco was forced to write down $2.25 billions.

According to Lakenan, Boyd and Frey, "Cisco simply wasn't able to scale up or down as quickly as it thought it could."

Source: "Why Cisco Fell: Outsourcing and its Perils", by Bill Lakenan, Darren Boyd & Ed Frey, Strategy+Business Third Quarter 2001.

Sample Issues

Economics -- How does outsourcing affect profit: (a) in an expanding market, (b) in a contracting market.

Social Patterns -- What business relationships are implied by such concepts as the virtual supply chain or global virtual manufacturing? What is the nature of these relationships in the Cisco case?

Suggested Websites

www.strategy-business.com - Strategy+Business (Booz Allen & Hamilton)

veryard projects - innovation for demanding change

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