Early strategy comparison

From the 2 firms’ early strategies we can see that, Cisco benefited from the rise of large-scale development of the Internet. This company was founded in 1984, after listing in 1990, Cisco entered the ‘global top 500’ and in 2000 it surpassed Microsoft to become the company with the highest market value. In just ten years to become the world’s leading companies, only Microsoft and Intel did. But different with them, Cisco neither followed the path which “let the consumers adapt products” nor established strong R&D centers or large-scale factories, but take a consumer-centric “four-wheel” drive strategy.

The turnover of Huawei topped 10 billion Yuan for the first time in 1999, scored to 22billion Yuan in 2000. Although Huawei ranked tenth in China’s high-tech industry, but its profits ranked first.

During the downturn in the telecommunications market in 2001, Huawei's sales have increased to 25.5 billion Yuan, profits of 2.7 billion Yuan, the profit is still ranked first. From the performance perspective, Huawei and Cisco differ greatly because of different starting points of the two, which is the direct cause of two different strategies. But as Chinese typical technical firm, Huawei represents the prevailing situation of Chinese high-tech enterprises, reflecting the lack of Chinese science and technology. From one hand, it seems Huawei is undoubtedly a success.

Cisco linked suppliers and manufacturers, this support its rapid expansion, but the problems appeared when network economy decrease. The reason lies in the management of this system is highly autonomous. At the beginning of every year, under the overall goal, each person or group negotiated targets for next year, once the target set, what kind of resources and how these resources will be mobilized is decided by individual or group. Similarly, customers can be anywhere to order under the network, this order will be transferred to the United States, while the production or delivery instructions of the relevant parts will be send to the factory or supplier. Thus 55% of the product has not via Cisco, but directly to the user's hands from the supplier. With this set of systems, Cisco product cycle thus shortening one to three weeks, profit margins is about 15 % higher than competitors, 45% fewer on inventory, 25% faster to make new products reach the market than the opponent , failure rates down to 2 %. However, due to supply and demand sides of this system is not fully controlled by Cisco, once the delivery became long, users will sometimes be repeated two or three times to order, and the system will automatically accept the order, the result will be formed in a short time the entire supply chain and production chain repeat procurement and production, resulting in a backlog of parts and products.

ZHOU Yang