Cisco Tailors its Strategy to Meet the Specific Requirements of Economies in Emerging Markets
February 09, 2009
By Jason Deign
How do you create a single business strategy to address a group of 132 countries over six regions, 60 languages and 23 time zones? This is the challenge confronting Cisco® in its Emerging Markets theater, which covers nations as diverse as Russia, Saudi Arabia and Mexico.
Emerging Markets was created in 2005 as part of a Cisco reorganization designed to provide a better level of support to the company's customers around the world.
The restructure recognized that a large number of markets worldwide, which were not at the time major customers for Cisco, could nevertheless grow significantly in the future.
This grouping became Emerging Markets, a swathe of countries stretching from Russia and the Confederation of Independent States across Eastern Europe and the Middle East to include Africa and the whole of Latin America.
"There is no doubt that there is still huge growth potential in Emerging Markets"
These nations tend to have very different characteristics to the developed countries which Cisco deals with elsewhere in the world, says Paul Mountford, president of the theater.
"In developed markets you have high-tech industries and services, distributed wealth, legacy infrastructure, transparent government, incremental development and so on," he points out. "In Emerging Markets, the reverse is true.
"We see low-tech industries and services, concentrated wealth, little or no infrastructure, less transparent governments and customers moving straight to the latest, most advanced technologiesa term we call 'leapfrogging'referring to legacy systems or the installed base."
Nevertheless, for all their common features, Mountford admits that it would be impossible to fit such a large number and range of nations into a single neat category.
Instead, he says: "We have broken Emerging Markets down into different economy types and looked at where they are in terms of development."
Using a composite model based on a variety of economic indicators, Cisco has identified five separate stages of country development:
- The local power phase, characterized by leadership challenges.
- The direction/vision phase, where the challenge is to achieve economic openness.
- The base build-out phase, where the main constraint on growth is speed of development.
- The efficiency and total supply chain phase, which exhibits challenges in terms of domestic or diversity limits.
- Expansion, diversification and innovation, where the main challenge is openness.
Evidently, some of these phases are more reliant on network infrastructure development than others.
In particular, countries in the direction/vision and base build-out phases tend to be heavily engaged in large-scale IT deployment projects, and even more so if they have energy-based economies which allow them to provide high levels of funding.
"These countries need to diversify beyond oil or gas and often have other issues they need to tackle," says Mountford. "We go in with six things in mind: education, healthcare, public safety, economic development, national security and reforms and regulations."
This list might seem slightly beyond the remit of a technology supplier but it highlights one of three strategies being employed by Cisco in Emerging Markets: the company is focusing not just on supplying networking equipment, but on helping with country transformation.
Cisco is already carrying out country transformation projects in Chile, Turkey and South Africa, but, says Mountford, "It takes a long time. We have been doing it for three years, and Chile is probably the best example so far; we helped to devise the digital agenda there."
The second strategy that Cisco is adopting in Emerging Markets is the creation of replicable business models: out-of-the-box development packages that can be used to stimulate particular sectors and can be adapted to new markets with a minimum of fuss.
Mountford says it has taken the company a while to get this right, but it now has a range of replicable business models to do with things such as rural connectivity, airports, public safety and security, healthcare, education, real estate and so on.
In Turkey, for example, Cisco has created a business model for small-to-medium sized businesses, whereby 30,000 suppliers and outsourcers have been connected to 7000 exporters via WebEx collaboration tools.
This business model, currently being piloted by Turk Telecom, the Turkish textile industry and Cisco, along with a group of retailers, is expected to move into commercial implementation in the near future.
The final pillar of Cisco strategy for Emerging Markets is simply to increase coverage. The theater includes many countries where the company previously had scant or no presence, but that is now changing: the number of employees has nearly tripled as the theater enters its fourth year.
Cisco is also extending its presence in Emerging Markets in other ways, for instance by creating new Networking Academies, to help increase the number of skilled engineers in the theater, and Cisco Entrepreneurship Institutes, which help foster enterprise creation by imparting courses on how to start and manage a business.
Over a six-week program, entrepreneurs go through a variety of modules and then emerge with a business plan, significant knowledge and perhaps even Cisco technology to help start their own company.
This high level of investment reflects Emerging Markets' growing importance for Cisco as a business. When the theater was established in August 2005, it accounted for just eight percent of bookings. In three years, this had risen to 13 percent, a 50 percent increase.
"There is no doubt that there is still huge growth potential in Emerging Markets," says Mountford, "to the point where we probably will not be able to call some of them Emerging anymore in a few years' time."
Jason Deign is a freelance journalist located in Barcelona, Spain.
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