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Cisco Systems Company in Romania: Environmental Scanning Essay

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Updated: May 19th, 2020

Introduction

Cisco Systems Inc. refers to an American-founded multinational company, headquartered in San Jose, California. The company specializes in the designing, manufacturing, and the sale of networking equipment. Cisco Systems Inc. Romania is among the subsidiaries of the umbrella company. As an entrepreneur within the Romanian market, the company holds the sole role of discovering the market for networking products. This market can only be exposed through a thorough exploration of the needs of the Romanian market. Afterwards, the company is supposed to position itself in a manner that meets the needs identified within the market. For that reason, the threats of both internal and external environments have to be borne, towards tapping into the potentials of the market. This paper explores the internal and external environments enhancing or limiting the success of the company in Romania.

Segments of the general environment that influence Cisco Systems in Romania

The external environment comprises of both competitive and general environments. The competitive market is comprised of the markets and the general industry, in which the organization in question identifies with and where it competes. The general environment is also called the macro-environment. This is the case because the changes that take place in this environment affect certain industries, as well as the firms operating within a certain environment. Despite the fact that the competitive environment influences companies directly, the general environment influences the competitive environment to a large extent. The components of the general environment include the economic, political, social and the technological spheres.

According to Cavescu (2011), Romania is a country, which is characterized by high levels of organized crime groups. These Romanian crime networks are actively engaged in the counterfeiting of popular products, especially those produced by reputable companies. There is a high prevalence of counterfeiting among organized criminal groups. Sonic and Prelipcean (2012) pointed out that Romania is an established center and market to different types of counterfeit products. In this case, it has grown into a transportation center and a destination with a ready market. The prices offered in the Romanian market are favorable, which attracts more inflow of counterfeit products and the production of the same. From the study by Caunic and Prelipcean (2012), it was concluded that Romania is an established origin, point of transit, and a destination market for counterfeit products.

Citing the economic environment within the Romanian market, it is clear that the economic and the technological spheres of the market are likely to impair the company to a large extent. On the part of the general economic environment, Romania has matured as a market for counterfeit products. Thus, transport channels and distribution networks are fully established. For this reason, the economy of the region is greatly dependent on the supply of cheap counterfeit products. As a result, this presents a huge challenge to Cisco Systems as they are forced to sell their genuinely produced networking products at the unreasonable prices offered by the informal market (Caunic and Prelipcean, 2012). In the short and long terms, the company may be forced to break into the established counterfeit market, which will require enormous investments in the areas of marketing. An example of the strategies that could be used to break into the Romanian market could include advertising, which is likely to draw a portion of customers from the informal market (Cavescu, 2011).

Another sphere of the general environment, which is likely to affect Cisco Systems both in the short and long terms is the infiltration of counterfeit technology. The threat to the company is that, despite staging and managing entry into the Romanian market, counterfeit producers will manage to counterfeit their products (Caunic and Prelipcean 2012). The company also faces the threat of being phased-out by the highly innovative counterfeit producers marketing their products in Romania. This is due to the nature of the counterfeit market. These producers could be from Romania or those from outside the country, who could develop on the technological models of the company to overthrow its established market (Cavescu, 2011).

These two segments are likely to impair the networking products industry of Romanian companies. This is the case as the Romanian market has grown into an origin, transit point, as well as a market for counterfeit products that include networking products (Cavescu, 2011). For this reason, a larger part of the market will be attracted by the illegal market, which offers the products at low prices. The two segments are likely to slow the industry because the supply of counterfeit products is higher than that of legally produced products (Caunic and Prelipcean, 2012).

The Five forces of competition, which are most significant to Cisco Systems in the Romanian market

The five forces of competition, which shape industry competition include the following: the threat of new industry entrants, the bargaining power of suppliers, the existence of rivalry among competitors within the market, the threat presented by substitute products and the bargaining power of buyers. In the case of Cisco Systems, the two forces that are most significant include eliminating the threat of substitute products and dealing with the rivalry among industry players. In the case of Cisco Systems, it has been pointed that, towards eliminating the threat of substitute products, they should produce their products in exceptional ways (Cisco Systems, Inc., 2011). An example is the production of products that are fashioned to meet the needs of the company’s customers as opposed to mass-production without the target market in mind. Most importantly, the company, like before, is employing the architectural approach to capture market opportunities in the Romanian IT and communications industry.

Towards eliminating the threat presented by the informal players within the Romanian networking industry, the company specializes in the installation of their products at establishments where the informal, criminal producers cannot access. For instance, at the Romanian market, it has dominated the installation of networking products at public institutions, established enterprise centers, and at telecommunication companies (Cisco Systems, Inc., 2011). Despite their placement at the Romanian market, the company diversifies its activities towards the creation of new markets within the European block.

As a result, the Romanian subsidiary is not dependent on the Romanian market alone, but also the upcoming markets surrounding the region. The company has also focused on the production of highly next-generation oriented products as opposed to the production of traditional products like most other industry players do. Another strategy used by the company to address these threats is that of investing. The company has invested in the supply of products and developing software, as well as offering services to their customers (Cisco Systems, Inc., 2011). Other strategies used include investing in privately held companies for diversification, making alliances, and entering into acquisitions, which widen its market coverage and influence.

The strategies that Cisco Systems can employ to address inter-industry rivalry and the threat of substitute products in the near future in the Romanian market

The company can invest in the development of strategic alliances. This can help it create collaborations that foster industry advancement and accelerate the creation of new markets. Through this strategy, the company’s outreach will be larger than that of industry competitors. Therefore, the company will be able to eliminate or lessen the threat they present. Through such alliances, the company will benefit from technology exchange, joint sales and marketing, product development, and the creation of new markets (Massey, 2000). Through these advantages, the company will produce products that are better, faster, cheaper and more accessible to the Romanian customer (Cisco Systems, Inc., 2011). Towards eliminating the challenge of substitute products, Cisco Systems should invest in the improvement of product performance, price reduction, and the introduction of new products, especially those with price-performance benefits (Massey, 2000).

Through this strategy, the Romanian market will embrace the products of the company, over the substitute and counterfeit products. The company should also direct resources towards the reduction of its production cost, and provision of value-added features like reliability, security, and investment protection. Through this strategy, the company will realize product differentiation, which will aid in reducing inter-industry competition (Blundell-Wignall and Atkinson, 2009). Other strategies that the company could employ include increasing market presence, conforming to all standards, and engaging in intensive market and product research. Thus, it can develop products that fully meet the needs of its Romanian customers (Massey, 2000). The company will be able to eliminate the threat of industry players, as well as that of substitute products, including counterfeits across the Romanian market by employing these strategies.

External threats and the opportunities available to Cisco Systems

The external threats facing Cisco Systems in the Romanian market include the intense competition from other industry players, and the company’s dependence on its suppliers. Others include the move of consolidating the American telecommunications industry, and the threat of substitute products, especially the counterfeit products – local and imported (Cisco Systems, Inc., 2011). The external opportunities that the company can benefit from include the increased opportunities for strategic alliances and acquisitions (Adepoju and Famade, 2010). Other opportunities include the increasing demand for unified communication models, the expansion of the enterprise security market, and the continual rise of new product markets due to the uptake of IT and Internet use locally and internationally.

Among the threats presented, the threat of counterfeit products is the most serious. In addressing this threat, the company should invest in market presence, as well as the development of products that are fully differentiated and value-based on the Romanian market (Adepoju and Famade, 2010). In complementing these moves, the company should also work on reducing the costs of production in order to pass the reduction to the Romanian customer, who is likely to go for the counterfeit products. The best opportunity available to the company is the continually expanding network-products market due to the uptake of IT. In response, the company should invest in the creation of new strategic alliances and acquisitions. This will expand its coverage, as well as expand its market-creation efforts (Adepoju and Famade, 2010). These strategies will help the company take advantage of the upcoming market, and benefit from it in the short and the long term. The company will eliminate the domination of counterfeit IT products in the Romanian market by employing these strategies (Cisco Systems, Inc., 2011).

Opinion on the Corporation’s greatest strength and most significant weakness

The company’s greatest strength revolves around the productive partnerships formed, including strategic alliances and acquisitions. This strength allows the company to develop new products and enhance existing ones (Adepoju and Famade, 2010). An example is the merging of virtualization and the cloud, which improved the access of internet-based services (Cisco Systems, Inc., 2011). The strength also enables the company to respond to the dynamic needs of customers. The strategy to keep benefiting from this strategy includes researching the market for new opportunities and potential business partners.

The most serious weakness of the company is its vulnerability to counterfeit market, which intensify the level of threat from substitute goods (Adepoju and Famade, 2010). In addressing this weakness, the company should work on developing products and services that are fully differentiated from those of its competitors, as well as counterfeit ones. However, most important in eliminating the threat is the tactic of increasing market presence, which will increase customer confidence in the company’s products (Cisco Systems, Inc., 2011).

The company’s resources, core competencies and capabilities

The company’s resources, both tangible and intangible include manufacturing facilities, the established distribution network, employees, technological know-how, innovative competence, the firm’s reputation and their brand name (Hitt, Ireland and Hoskisson, 2013). Among the company’s capabilities are the development, and the sharing of information across the human capital. These could be characterized by functional expertise and the unique skills held by employees (Cisco Systems, Inc., 2011). The core competencies of the company include the strategic deployment of capabilities and resources towards fostering innovation. The core competencies of the company have been developed over time.

Where the resources, capabilities and the core competencies of the company can be used to create in the value chain

The value chain of Cisco Systems is characterized by five levels of organizational functions. This can be affected by the resources, capabilities and core competencies to improve competitive advantage. These include inbound logistics where the collection services are executed; operations, where product quality is determined, and outbound logistics, where order delivering is made (Adepoju and Famade, 2010). The two other levels include sales and marketing, where pricing is done, and lastly, there are services where customer concerns are addressed (Hitt, Ireland and Hoskisson, 2013). The company can employ the three vital resources to improve the level, to which they meet the dynamic needs of customers. For example, at the operations level, the company can employ its production machinery optimally, share vital information across all production centers, and deploys the necessary human expertise to produce excellent products (Adepoju and Famade, 2010).

Conclusion

Cisco systems Inc. is an American, multinational company headquartered in San Jose, California. At the company’s subsidiary in Romania, the business environment is much like that of SMEs due to the nature of the Romanian economy. The company is faced with challenges in both the external, as well as the internal environment including the economic climate of Romania. The strategies that the company can employ to address these areas of challenge include the creation of strategic alliances, as well as the differentiation of its products from those of competitors. The most pressing threat to the company is the threat of substitute products, and the most open opportunity is the possibility of creating new and valuable business alliances. Among the resources, core competencies and the capabilities of the company include technological know-how, information sharing, and the strategic deployment of resources and capabilities.

References

Adepoju, T., and Famade, O. (2010). The application of strengths, weaknesses, opportunities and threats (SWOT) analysis for managing vocational and technical education (VTE) Programs for improved efficiency in Nigeria. Educational Research and Reviews, 5 (7): 354-361.

Blundell-Wignall, A. and Atkinson, P. (2009). Origins of the financial crisis and requirements for reform. Journal of Asian Economics, 20(5): 536-548.

Caunic, I., and Prelipcean, G. (2012). Characteristics of the Romanian counterfeit markets. IPEDR, 31(1): 176-179.

Cavescu, A. (2011). Romania: The economic impact of counterfeiting and new anti-counterfeiting strategies. Building and enforcing intellectual property value, 130.

Cisco Systems, Inc. (2011). , Inc: 2011 Annual Report. Web.

Hitt, M., Ireland, R., and Hoskisson, R. (2013). Strategic management: Concepts and cases: Competiveness and globalization. Mason, OH: South-Western Cengage Learning.

Massey, P. (2000). Market Definition and Market Power in Competition Analysis: Some Practical Issues. The Economic and Social Review, 31(4): 310-312.

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