Cisco Case Analysis by Ric Stiekema S493698 What is your assessment of acquisitions as an entrepreneurial strategy?

For large companies it is hard to retain entrepreneurial people within their company (Morse, 1986). Bureaucratic large companies cant provide these entrepreneurial people with the right reward system and that is why they need to acquire independent subsidiaries (Morse, 1986). I agree with Morse (1968) that it is very hard for large companies to retain their entrepreneurial people so it is better to have independent subsidiaries. Chakravorti (2010) mentions the importance of associations that can benefit both the acquired firm as the large company that acquires it. This also supports my opinion that acquisitions can be a good entrepreneurial strategy. However I think that is also has to do with the industry the companies are in. In very disruptive industries it is very hard for large companies to cope with the rapid changes that occur (Chakravorti, 2010). Especially then an acquisition can be a good solution to cope with these changes.

Challenges According to Chakravorti (2010) there are some challenges that need to be considered to sustain the entrepreneurial characteristic of the acquired company: Strategy Challenges Incentives and Organizational Challenges Decision Making Challenges

To cope with these challenges there are 3 different resolutions that can sustain the important entrepreneurial characteristics of the acquired company namely: Adaptive Management Selectively Insulting Venture Alternative Support Models (Chakravorti, 2010) I think that other entrepreneurial strategies like Corporate Venture Capital (Chesbrough, 2002) and Ambidextrous Organizations (OReilly III & Tushman, 2004) are also good strategies for disruptive industries. In these strategies the entrepreneurial characteristics of the smaller companies are granted (Chesbrough, 2002; OReilly III & Tushman, 2004).

Conclusion In conclusion Acquisitions can be a good entrepreneurial strategy especially for companies in disruptive industries however there are a lot of drawbacks. Thats why I would prefer the Corporate Venture Capital and the Ambidextrous Organizations as entrepreneurial strategies. 1

What advice would you give Cisco Systems in this regard?

Corporate entrepreneurship has a positive influence on the performance relation (Zahra & Covin, 1995). This is why it is important that Cisco Systems continues to be entrepreneurial. I only think there are some things they could do better or different.

Challenges Like already mentioned in the previous part, there are several challenges that have to be solved to ensure the acquired entrepreneurial company can keep his entrepreneurial characteristics (Chakravorti, 2010). Cisco Systems has lots of experience in these acquisitions but there are still problems that could be managed better. For example, the problem with the Summa Fours employees that werent used to look up everything concerning Human Relations, on the web. This is a problem that will occur with more acquired companies because they are most of the time much smaller than Cisco Systems. This is something where Cisco Systems needs to work on and which could save them a lot of money because they wouldnt have to pay high incentives in order to keep the personnel. Through the experience Cisco Systems has with these acquisitions they could handle most of the challenges opposed by Chakravorti (2010) very well. Only minor problems occurred during the acquisition of Summa Four.

Independent Cisco Systems could also consider letting very entrepreneurial companies operate independently to ensure that the entrepreneurial culture will be maintained (Morse, 1986). The acquired company could then make use of the strengths Cisco Systems as a large company has and Cisco Systems could on the other hand benefit from the diversification of his portfolio (Chakravorti, 2010). Cisco Systems also increases the number of exit options of the small entrepreneurial company because it will be easier to spin it off for instance (Chakravorti, 2010).

Conclusion I would advice Cisco Systems to continue with acquiring they conduct now for their entrepreneurial strategy. They are good at it, which you can see from the financial data (Exhibit 1). Their net income is growing steady for over 5 years between 1994 and 1998. This proves that their strategy is working however I think they could do even better than this by trying to adapt the integration process more to the acquired company. I think they even can consider not fully integrating the acquired company and only share the strengths they both have.

Exhibit 1

Reference List
Chakravorti, B., (2010). A Note on Corporate Entrepreneurship: Challenge or Opportunity?. Harvard Business Review. 1-9.

Chesbrough, H. W. (2002). Making Sense of Corporate Venture Capital. Harvard Business Review. 4-11 OReilly, C. A., & Tushman, M. L. (2004). The Ambidextrous Organization. Harvard Business Review, 74-83.

Morse, C. W. (1986). The Delusion of Intrapreneurship. Long Range Planning. 19. 92-95.

Zahra, S. A. & Covin, J. G. (1995). Contextual Influences on the Corporate Entrepreneurship-Performance Relationship: A Longitudinal Analysis. Journal of Business Venturing. 10. 43-58