Cisco

Cisco Systems:

1990 1995 2001

Objectives Product adoption Gain market share rapidly Deal with market share slow down

Customer Large corporate Also small and medium size business Small office

Home office

Home networking

Channel Direct (sales force) Transitioning to VARS Addition of retailers and Internet channels

Big and small vendors

Grade A

- Dynamic, adaptive, flexible

- 3 - tier reflects value - added

- Demand pull

- Training school, certification, support

- Compensation linked to end-user satisfaction

- Enhance channels profitability

Grade C

- Too many dealers

- Multiple channels undermine VAR position

- Expansion to lower products/markets/channels inconsistent with Cisco's value adding capabilities

- May open opportunities for competitors

Channel Conflict

 Large VAR partners serving important customers

 Telecom companies entering the fray as distributors

 Cisco's online retailers

 Able to use Cisco's direct website

Solution to channel management

 In general four strategies

 Set product/boundaries

 Set market / customer boundaries

 Promote price convergence

 Compensate for cost -to -serve difference

Telecom Problem - two strategies applicable

 Construct penalties or incentives to level the playing field

 Rationalize distribution intensity

 What Cisco did

o Provided a better handle on channel partners

o Communicated good faith efforts

Channel conflict

 Large VAR partners serving important customers

* Telecom companies entering the gray as distributors

 Cisco's online Retailers

 Able to use Cisco's direct website

Problem:

How should Cisco distribute VoIP (voice over IP)?

Alternatives: