Strategic Management - Amazon, LV and Cisco

1. Table of Contents
1. Amazon.com...........................................................................................3
1.1 Introduction and Background ........................................................................................... 3
1.2 Main Products, Services and Business Level Strategy .................................................... 4
1.2.1 The Mission and Vision............................................................................................ 4
1.2.2 Products and Services ............................................................................................... 4
1.2.3 Evaluation of the Business Level Strategy ............................................................... 6
1.2.4 Critique...................................................................................................................... 8
1.2.5 Summary................................................................................................................... 9
1.3 Corporate Level Strategy ............................................................................................... 10
1.3.1 Financial strategy.................................................................................................... 10
1.3.2 Products and services diversification strategy ........................................................ 10
1.3.3 Globalization and Horizontal integration................................................................ 11
1.4 Competitive Advantages ................................................................................................ 11
1.4.1 Overall Cost Leadership.......................................................................................... 11
1.4.2 Wide Products Range.............................................................................................. 12
1.4.3 Technology differentiation – e-Commerce system, Kindle device and AWS ........ 12
1.4.4 Global Presence....................................................................................................... 12
2. Louis Vuitton........................................................................................13
2.1 Introduction and Background ......................................................................................... 13
2.2 Main Products, Services, and Business Level Strategy ................................................. 14
2.2.1 Evaluation of the Business Level Strategy ............................................................. 14
2.2.2 Critique.................................................................................................................... 16
2.2.3 Summary................................................................................................................. 18
2.3.1 Vertical Integration................................................................................................. 18
2.4.1 Strong Brand Positioning........................................................................................ 19
2.4.2 Rich History and Absolute Quality......................................................................... 20
2.4.3 Differentiation and Marketing Know-How ............................................................ 20
3. Cisco.....................................................................................................21
3.1 Introduction and Background ......................................................................................... 21
3.2 Main Products, Services, and Business Level Strategy ................................................. 22
3.2.1 Evaluation of the Business Level Strategy ............................................................. 22
3.2.2 Vision and Mission ................................................................................................. 22
3.2.3 Focused Differentiation Strategy ............................................................................ 23
3.2.4 Critique.................................................................................................................... 24
3.2.5 Summary................................................................................................................. 25
3.3.1 Inorganic Growth through Acquisition................................................................... 26
3.3.2 Challenges through Acquisition Strategy ............................................................... 27
3.4.1 Robust Inorganic Growth Strategy ......................................................................... 27
3.4.2 Wide Array of Products and Innovation ................................................................. 28

BMST5103 - Assignment – Amazon, LV and Cisco Nor Helmee Bin Abd Halim
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3.4.3 Superior Service Differentiation ............................................................................. 28
3.4.4 Strong Organization Structure, Culture and Leadership Team............................... 28
References...................................................................................................29

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1. Amazon.com
- The smile that goes from A to Z
tells that the company is willing to deliver any product, anywhere in the world.
1.1 Introduction and Background
“I knew it was big, but I had no idea how big”. This is the response given by one of fellow OUM-
MM students when asked about Amazon.com, the pioneer of e-commerce firm. Amazon is one of
the largest global online retailers alongside eBay, Hastings Entertainment, Wal-Mart Stores,
Target Corporation, Sony Corporation and Barnes & Noble. According to Hudspeth (2015) from
the MarketLine, reported that Amazon recorded revenues of $88,988 million in the financial year
ended December 2014. Amazon is much bigger in size than its closest competitor eBay, recorded
revenues of $17,902 million in the same fiscal year. The founder and CEO of Amazon is Jeff
Bezos, one of the best performing CEOs in the world today.
Jeff Bezos graduated from Princeton University with two Bachelor of Science degrees in
electrical engineering and computer science in 1986. He then spent eight years at Wall Street
before moved to Seattle and setting up his own company in his tiny garage in 1994. Bezos chose
Seattle as the company headquarters because of its large high-tech workforce and its proximity to
a large distribution center in Oregon. Bezos and few others then began building a website that
would sell books. Initial vision Bezos had in his mind was an online bookstore that could offer
millions more books to millions more customers than a typical bricks-and-mortar bookstore.
Amazon debuted as an e-commerce site, Amazon.com, in July 1995 and became the exclusive
book retailer on the Netscape and America Online websites. In the first month of its operation,
sold books to customers in 50 states and in 45 countries. The business model then expanded into
CDs, DVDs, toys, apparel and other goods (McGinn, 2015), (Hudspeth, 2015).
Last year, in 2015, Amazon.com was ranked among top 100 of America’s largest
corporations and it was also featured among top 10 global brands in the top 500 global brands

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2015, and was also ranked among the top three US retail brands in the top 50 US retail brands
2015 list released by multiple sources include Fortune 500, Forbes and Millward Brown. Today,
the market valuation of the company is worth $204 billion, with an approximately of 154,100 full-
time and part-time employees. (Marketshare, They, & Be, 2015), (Amazon.com SWOT, 2015),
(Amazon.com Annual Report, 2014), (Amazon, 2014), (Millward Brown “2015 Top 100 Brand”,
2015).
1.2 Main Products, Services and Business Level Strategy
As one of Internet commerce pioneers in the 1990s, the company strived to set the standard for
web businesses to compete with thousands more dot-com companies across the globe. With that,
Bezos’s strategic planning was to develop a web site as customer friendly as possible and
innovative through the use of technology to all types of customers. The main approach adopted by
Bezos is overall cost-leadership strategy alongside technology differentiation and customer
orientation. (Amazon.com Annual Report, 2014), (Amazon.com “Encyclopedia”, 2004).
1.2.1 The Mission and Vision
The mission of the Amazon is “To be earth’s most customer centric company’ to build a place
where people can come to find and discover anything they might want to buy online” and the
vision is “To leverage technology and the expertise of our invaluable employees to provide our
customers with the best shopping experience on the Internet”. The customer is almost everything
to Bezos and therefore he keeps the company focused on providing exceptional service to
customers.
1.2.2 Products and Services
In 1999, due to heavy competition and price wars with two other main competitors, namely Barnes
& Noble and Borders, Bezos expanded the business to sell other kinds of products using the
backbone of his website and the company. (Amazon.com “Encyclopedia”, 2004). Bezos could see
another online business that could make an impact was music CDs. He knew that books and CDs
were a good fit with each other, so in the same year, he announced his company’s intention to
become the “earth’s biggest book and music store”. According to Hill and Jones (2009), the

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company used its IT competencies to widen its product line by selling music CDs and this strategy
works well, and Bezos continues to expand his product range since then.
1.2.2.1 Amazon Kindle
One of the popular products ever produced by Amazon is Kindle e-reader device. The concept
behind the product was to make the user read the books in a completely new way and the user can
use this handy device to read books of any size instead of carrying bulky books. It was launched
in 2007 in the US market. Within hours, all units were sold out and remain out of stock for six
months. The Kindle e-reader is Amazon’s portable reader that wirelessly downloads books, blogs,
magazines and newspapers to a high-resolution electronic paper display that looks like real paper.
The reading materials are downloadable from its store called Kindle Store. (Hudspeth, 2015).
Figure 1.0 exhibits the products and services rendered by Amazon.
Figure 1.0 – Amazon Products and Services
1.2.2.2 Amazon Web Services (AWS)
Cloud computing has become one of the most discussed IT paradigms of recent years. One of the
differentiation strategies applied by Amazon is through technological differentiation. According

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to Amazon annual report (2014), they had spent over a decade and millions of dollars building and
managing the large-scale, reliable, and efficient IT infrastructure that powered one of the world’s
largest online retail platforms. Amazon launched Amazon Web Services (AWS) in 2006 so that
other organizations could benefit from Amazon’s experience and investment in running a large-
scale distributed, transactional IT infrastructure. Today, the company runs a global web platform
serving millions of customers and managing billions of dollars’ worth of commerce every year.
Figure 1.1 exhibits the AWS infrastructure.
Figure 1.1 – AWS platform
1.2.3 Evaluation of the Business Level Strategy
An article titled “Business Level Strategy” wrote by Alan S. Gutterman (2011), supported the
notion about Amazon operates based on hybrid strategy, low-cost and technology differentiated
strategy. The firm is competing in a large target market, regardless of demographic differences as
long as they are connected to the Internet.

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1.2.3.1 Low-cost and Differentiation
Gutterman (2011), added that Amazon’s strategy of selling books over the internet simultaneously
created a differentiated and low-cost competitive advantages that has significantly challenged the
existing bookstores in the market. Taking Kindle store as an example, more than 60% of the
1,000,000 books are offered at a fixed price of $9.99 or less and Amazon even offers several books
free to read on Kindle devices. (Amazon.com “Company Profile”, 2015). From the differentiation
strategy perspective, Amazon’s online catalog of literally every available book in the English
language provides choices for customers that could not be matched by even the most specialized
book store.
In addition, Amazon used its elaborate and innovative IT structure to dramatically reduce
costs associated with procurement, marketing and distribution of books and at the same time
created opportunities for customers to obtain the same discounted pricing offered by bookstores
along with the convenience of shopping from their home or office with “prompt delivery”. “Prompt
delivery” here means, the book or reading material can be read from the e-reader, the Kindle upon
purchase confirmation. (Alan S. Gutterman, 2011).
1.2.3.2 Market Development
China and India are the two big growth markets today. As reported in the Amazon Annual Report
(2014), Amazon made a debut in India on June 2013 and China in 2004 through acquisition of
local company, Joyo.com. With a huge population and increasingly web-connected shoppers from
these countries, Amazon.com took the challenge and enter the market especially in India. On the
first day of operations, Amazon.com received nearly 10,000 orders and the site offers over 15
million products for India market today. By invading India, the e-commerce giant has become the
largest marketplace in the country. However, Amazon is struggling in China as the market share
is strongly dominated by Alibaba, the local company and the direct competitor of Amazon.
1.2.3.3 Organization Structure, Culture and Leadership
As cited in many business journal articles, the CEO of Amazon, Jeff Bezos is the man who shaped
Amazon.com’s culture. Former Amazonians would describe Bezos as hardly the dream boss,

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uncomfortable and adversarial (Business Journal, 2013), but at the end of the day, the bottom line
is more important to him. In the Amazon culture, there is always a better way to do things.
Bezos is a believer of small teams, the “Two Pizza Rule”; if a team cannot feed with two
pizzas, and it’s too large. With him, independent thought should prevail over groupthink. In the
Amazon, team members are limited to five or seven members only, depending on the task. Jeff
believes, small team is more efficient to generate more ideas in line with its differentiation strategy.
Another behavior of Bezos is he is not a fan of complacency and also does not tolerate with
incompetency. Amazon promotes open communication and transparency within the organization
which also drives the competitive advantages, especially in the customer experience area.
Amazon promotes a strong leadership style led by the CEO, also has a strict organizational
culture and a lean organizational structure to support the business level strategies. It sounds like
Amazon employed a rigid way of managing an organization, but it has been proven to be successful
in any ways they do their business.
1.2.4 Critique
In a book wrote by Michael Porter “Competitive Advantage: Creating and Sustaining Superior
Performance” (1985), mentioned that powerful competitive approach in the market is to be low-
cost producer as many buyers are price-sensitive. Lower cost is used as a basis to either
underpricing competitors and gaining market share or earning a higher profit margin selling at the
lowest price.
This strategy, however, has a drawback as cited in the Business Insider article, “Former
Amazon Employee Explains How the Company’s Business Model Really Works”, (2013). The
author stressed out that Amazon is profitable in its retail operations, but losing money overall
because it’s investing heavily in another area to expand the business globally and to strengthen the
e-commerce technology differentiation which has been the bread and butter for the company. This
statement is also supported by many market analysts including the recent company profile prepared
by MarketLine where Amazon was running at a loss in the first decade of its operation.
(Amazon.com “Company Profile”, 2015).

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In terms of its differentiation strategy through design, quality and the use of technology
and e-commerce system, the risk associated to it is inability to keep with rapid technology changes
as well as avoiding e-commerce service failure. Many empirical studies include (Parkhurst, 2013)
and (Tan et al, 2016) used none other than Amazon.com e-commerce failures as an example of
how bad the business impact resulted from such failures. On August 19, 2013, Amazon.com was
down for mere forty minutes, which causing the online retail giant lost sales of $4.72 million. The
research further elaborated that shoppers who encountered any form of e-commerce service failure
will no longer purchase from the faulty website, some would switch to a traditional retailer and
others will notify friends and family of the negative experience. Due to such experience, customers
may be reluctant to engage in future online transactions and the firm unable to attract new
customers.
As such, it is imperative for responsible business units covering R&D and engineering
teams to be more proactive rather than reactive in ensuring the system is operating perfectly. The
given example is just one example, focusing on system failure. Online system should be available
24x7 and any downtime in between will jeopardize the brand image as well as the business
competitive advantages.
1.2.5 Summary
In summary, Amazon’s strategy is in-line with the corporate goal where customer experience is
utmost important to the firm. Amazon believes by selling items at a lower price would make the
firm generate more income as they would continue selling items and increase sales volume. The
use of advanced technology is indeed improves the customer online shopping experience as well
as customer’s satisfaction with the overall service provided by Amazon. The company delivers as
what they promised “Premium Products at Non Premium Prices”.

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1.3 Corporate Level Strategy
1.3.1 Financial strategy
It was never an easy ride for Amazon to be what they are today. The firm did not make any profits
until early 2000s when the firm had finally become profitable. The outcome was already forecasted
by the CEO of the firm when he mentioned that he did not expect his company to become profitable
for several years. (Hill & Jones, 2009). Due to the fact that Amazon was the first major dot-com
retailer, the firm received a huge amount of free national publicity. Book sales quickly picked up
and Amazon became a model for other dot-com companies. Within six months, he had to search
for additional capital to fund his growing venture. As book sales skyrocketed, the CEO decided
the best way to raise more capital would be to take the company public and issue stock. As a result,
on May 1997, Amazon.com’s stock began trading on the NASDAQ stock exchange. (Hill & Jones,
2009), (Amazon.com “Company Profile”, 2015). (Amazon.com Annual Report, 2014).
1.3.2 Products and services diversification strategy
The Amazon Associates program is one of the key growth strategy created by Amazon. Any
business or person that operates a website can become affiliated with Amazon by putting an official
hyperlink to Amazon’s website on its own website. The associate will receive a commission from
Amazon if a referral results in a sale. The program generated large hits to the Amazon website and
has increased sales volume. Today, millions of associates signed up with Amazon and the program
itself has been replicated by many other dot-com companies. (Hill & Jones, 2009).
In 1999, Amazon had a major competition in the industry with bricks-and-mortar
bookstores where they began a price war that resulted in falling book prices. This was the moment
when Amazon realized the current resource and technology infrastructure could do more than just
selling books online – it could be used to sell other kinds of products. Amazon started products
diversification strategy by selling music CDs. The strategy was well accepted by customers as they
now have an option to music CDs instead of just books. (Hill & Jones, 2009). From year 2000 on,
Amazon expanded their storefronts and began to sell a wider range of electronic and other products
such as cameras, DVD players, MP3 players, clothing, apparels, software, toys, baby products,
jewelry, beauty products, watches and the list go on.

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1.3.3 Globalization and Horizontal integration
Amazon was again made full use of its core competency - technology to go a step further by going
global. In 1996, the first overseas virtual company was established after Amazon acquired a strong
local company called Bookpages.com and renamed it as Amazon.co.uk. Soon after that, Amazon
Australia, New Zealand, India, Germany, France, Canada, China and Japan. In Germany, the same
strategy was used like in the UK. It acquired a new online venture called ABC
Bucherdienst/Telebuch.de and created Amazon.de in 1998. (Hill & Jones, 2009).
According to Hill and Jones (2009), the strategy, then expanded by acquiring many smaller
companies to further strengthen its distinctive competencies in IT and to develop more kinds of
web-based IT commercial services that it could sell to both brick-and-mortar and online
companies. As an example, in 1998 Amazon bought a free service Internet Movie Database
(www.IMDb.com). Amazon transformed the site into a commercial venture by adding features
like search function to find DVDs and make related suggestions to encourage additional purchases.
Other examples of other companies acquired by Amazon are Exchange.com, specialized in hard-
to-to-find book titles, hard-to-find music titles at MusicFile.com, PlanetAll.com, Junglee.com,
A9.com, a search engine company and many more. (Hill & Jones, 2009), (Amazon.com “Company
Profile”, 2015). (Amazon.com Annual Report, 2014).
1.4 Competitive Advantages
Based on the above justification, we may conclude that Amazon is successful due to several
competitive advantages as follows:
1.4.1 Overall Cost Leadership
As cited by Gutterman (2011), Amazon has successfully executed a low-cost strategy in many
aspects of its business model. As a result, Amazon is charging extremely low price to its customers.
Low prices have become the main competitive advantage of the company. The strategy of selling
books via the Internet is the easiest example of how Amazon is implementing a low cost strategy
as compared to the typical bricks-and-mortar bookstores.

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1.4.2 Wide Products Range
In the latest company profile prepared by MarketLine (Amazon.com “Company Profile”, 2015),
reported that Amazon delivers the most extensive product range amongst other online retailers.
Amazon India, for example, offers 20 million products from over 21,000 sellers.
1.4.3 Technology differentiation – e-Commerce system, Kindle device and AWS
Amazon, is known to be the pioneer of e-commerce system in the dot-com era. The website and
the e-commerce system (such as 1-Click system) provided by Amazon is convenient, user friendly,
secured and reliable. Customers perform online shopping via Amazon.com with peace of mind
and always return to do next purchase. The Amazon e-reader, Kindle device is one of the greatest
inventions of Amazon. Apart from the series of products, the AWS service, including cloud
computing service has served thousands of online entrepreneurs and businesses. AWS operates
from twelve geographical regions across the world. (Amazon.com “Company Profile”, 2015).
1.4.4 Global Presence
Today, under the international business segment, Amazon is available in twelve different countries
across the world through UK, Germany, France, Japan, Italy, China, Spain, Brazil, India, Australia,
Mexico and The Netherlands. Amazon sees higher potential to grow the company in the
international segment and therefore they invested more in this segment.

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2. Louis Vuitton
Some usually associate LV brand with luxury leather bags, the iconic Monogram Canvas of
“Speedy”, “Neverfull”, “Galliera” and “Alma” are the famous design to name a few. Matter of
fact, LV is more than just selling leather bags. The brand is famous with its LV monogram which
is featured on most of its products ranging from luxury trunks, leather goods, ready-to-wear, shoes,
watches, jewelry, sunglasses and accessories.
LV is a French fashion house founded by Louis Vuitton in the eighteenth century who is
originally a luggage maker or malletier. In 1858, Louis Vuitton introduced a modern luggage
which is flat-bottom trunks that could be stacked as opposed to the rounded trunks that were
popular at the time. The innovation went frenzy all over France and other luggage makers, started
to imitate Louis Vuitton’s design. The invention is the key point of success for the LV brand today.
(LVMH “Company Profile”, 2015).
The parent company of LV, LVMH Moet Hennessy Louis Vuitton is led by Bernard
Arnault, the CEO of the firm. It is headquartered in Paris and primarily operates in Europe, Asia
and the US. The firm was established in 1987 after a successful merger between Moet Hennessy
and Louis Vuitton. The firm is worth an estimate $24.7 billion and has been named as the most
valuable brand in the luxury sector as recently announced by the research group Millward Brown
and WPP. The firm has dominated the luxury sector for many years since 2006 and ranked 34th in
brand value across all industries. (Millward Brown “2015 Top 100 Brand”, 2015).

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2.2 Main Products, Services, and Business Level Strategy
The LVMH group comprises of multiple brands in six different products and services; 1) fashion
and leather goods, 2) selective retailing, 3) wines and spirits, 4) perfumes and cosmetics, 5)
watches and jewelry, and 6) other activities and holding companies. LV brand is the leading name
in the “Fashion and Leather Goods” category. This category includes trendy clothing and luxury
accessories typically refer to products such as handbags, wallets, shoes, and belts made out of high
quality leather. The brand’s products frequently display its highly-recognizable LV monogram.
LV is famous for its handbags collection. The well-known design includes “Speedy” and
“Neverfull”.
LV also offers services like repair and restoration, and customization orders like
personalization of the handbag by hot stamping initials, engraving, and so on. This small service
has made the brand for appealing to the customer in regards to its lifetime repair guarantee
(LVMH, 2015). Apart from the outstanding LV brand, the business group is also dealing with at
least seventy other famous brands including TAG Heuer, Bulgari, Donna Karan, Loewe, Marc
Jacobs, Christian Dior, Fendi, Kenzo and many more. (LVMH “Company Profile”, 2015).
2.2.1.1 Focused Differentiation Strategy
LV celebrated its 160th anniversary in 2014 and one of the key success factors for the firm
championing its high reputation in the segment is because of its focused differentiation strategy.
The strategy refers to an action plan developed by LV to produce goods and services for a specific
group, in this case for LV is medium to high income customers that perceive as being unique in
ways that are important to them. Theoretically, the strategy employed by LV is quite challenging,
but as the leader and long history of success, LV manages to sustain growth via its strong
differentiation strategy and competitive advantages to outperform other competitors in the market.
2.2.1.2 Product and Pricing
LV emphasizes highly on product quality which provides customers with superior quality, prestige
and exclusivity. In the marketplace example, there are many handbags made of leather with design,

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look and feel are matched with ones produced by LV. But why customers in the target market
prefers LV over other products is merely because LV never compromised its product quality.
Therefore, LV able to price the LV brand at a premium price. In a different perspective, LV has a
strong belief in prohibiting bargain sales, never marked down, ever. (Nagasawa, 2009).
Throughout a long history, LV has not held a bargain sale. The simple reason is because LV
commitment to “absolute quality” and “attention to fine detail”. These elements answer the
question of the premium pricing policy applied by LV.
2.2.1.3 Differentiation
Apart from product quality, materials used, professional labor to make up its product
differentiation strategy, LV offers custom-made or personalization request as part of its service
offering. As cited in many business magazines and celebrity magazines, many celebrities and
personalities ordered custom-made handbags and other leather goods from LV. On one occasion
where LV translates the service into an opportunity by commercializing one of the custom-orders
by an actress into LV’s product lines. Over time, due to wear-and-tear, the leather goods require
servicing, cleaning or repairs. LV provides repair and restoration service to its customer. The LV
products' value will not degrade significantly and can be re-sell as “used” items. Using Japan as
an example, there are second-hand shops selling branded items including LV products at
reasonable price. Customer may opt to keep or sell their collection to these shops after refurbished.
According to Nagasawa (2009), LV’s repair service is famously renowned as a service
which wins over the trust of customers and provides a sense of stability to the brand strength. The
example of service differentiation strategy given above has increased customer satisfaction as well
as increased brand loyalty. Customers will not switch brands, but will return to buy more LV which
eventually adding up statistic of loyal customers.
Another key differentiation is its distribution channel strategy where LV only offers a
limited distribution strategy. The typical business strategy would create broad distribution
channels, but LV prefers its customers to feel that LV is such a valuable product by limiting the
number of its stores to only in the luxury shopping areas. On top of that, LV has 100% control

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over all its distribution channels in almost all geographies to ensure the management is updated on
every detail of company activities from product creation, marketing, sales and so on.
LV employs a unique culture internally to complement their business strategy. Unlike other MNCs,
LV hires local people to lead the branch where they operated. They don’t assign French to manage
a shop in Japan, where he or she has less cultural knowledge about the host country. Another
example of unique culture is LV encourage leavers to rejoin the company, simply put, to learn
from the market competition and come back. (Shipilov and Godart, 2015). Such culture improves
differentiation in term of customer service as well as better understanding of local culture improves
the revenue growth as local managers know when to launch aggressive marketing strategy and so
forth.
2.2.2 Critique
The apparent risks associated with premium pricing and “absolute quality” differentiation are
threats of substitutes, rivalry and imitation. However, LV is not impacted by the first two threats
due to strong customer brand loyalty. The customer is less sensitive to price as long as the product
can satisfy their needs. Referring to Porter’s generic strategies (1985), the key success factor in
differentiation strategy is to make the product either very difficult or very expensive for rivals to
replicate the product. He mentioned that when a product is deemed to be very high in quality added
with aesthetic element for its contemporary design (difficult and expensive), companies can
confidently command a premium price in the market they are competing and at the same time it
increases buyers loyalty index based on the product offerings.
In a study on “crisis impact on luxury product in Japan” conducted by (Tamura et al, 2012),
concluded that the post crisis of March 2011, the terrible earthquake, tsunami and nuclear
catastrophes, it took only a few months for Japanese consumers to back to their normal “luxury”
and “stylish” life. Japan is known for its street fashion and has been recognized by the world for
its sense of style and avant-garde. The study indicated that there are many factors contributing to

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the comeback, but one of the reasons is “trust and confident” of the product which is highly
regarded to brand loyalty.
Due to LV’s expensive price tag, absolute quality, strong brand image and so forth, the
biggest risk in pursuing differentiation strategy is counterfeit goods or imitation. This issue affects
the sales of LV products badly and tarnishes the brand image. Low on quality could hurt customer
loyalty when they buy such products by mistake.
According to Nagasawa (2009), “Excellent goods are being counterfeited”. LV does not
neglect the care and upkeep needed to protect its brands. In fighting the counterfeiting issue, LV
has listed out number of policies and principles to keep the issue at bay. Some of the principles are
1) Enlighten campaigns – by conducting seminar and symposium related to intellectual property
(IP), 2) Distribution of Warning Notices – to companies like Rakuten the Japan largest e-commerce
site, eBay, Amazon and so on, 3) Registration of Trademark and Designs, 4) Appraisals of
authenticity at second-hand store, 4) Mass media awareness – “genuine or fake, spot the
difference”, 5) Product identification through serial numbers with a name affixed to it and many
more. It shows that LV is serious in combating counterfeit issue mainly to protect its brand image
and revenue growth. Figure 2.1 distinguishes fake and real LV handbag.
Figure 2.1 Fake and Real
LV has to put a significant amount of efforts and resources to combat counterfeit LV products thus
protecting the brand image. Asia is known to be the highest counterfeit product issue. As a

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mitigation to the risk, LV opened up boutiques in China, Japan and India, at the same time
leveraging Asia’s large market. (Nagasawa, 2009), (LV “Company Profile”, 2015).
2.2.3 Summary
In summary, LV is taking advantage of their own creativity and brand identity to form its
competitive advantages and confidently position its brand in luxury and premium segment.
Avoiding price wars are part of the firm’s policy, strict pricing policy which indirectly giving a
strong message to customers that LV products is an “absolute quality” as the primary competitive
advantage. The overall strategy is seen to be as effective as its target market attracted to the strategy
and LV has proven by championing the luxury and leather goods segment for many years.
The main corporate level strategy employed by LV, in dominating the luxury and leather goods
segment is via vertical integration. According to Delpal (2014), a company is said to be vertically
integrated when it is present at several successive stages of the production process of a product.
The strategy was initiated by former CEO of LV, Yves Carcelle. According to Vanessa Friedman
(2014), the greatest contribution of the late LV’s CEO, in the industry was identifying the value
of “extreme verticalization” and control to a luxury brand. It was the biggest strategy for LV of
owning their manufacturing and all their stores – total control of everything.
2.3.1 Vertical Integration
By implementing vertical integration strategy, the firm has extraordinary information about its
customers or “big data”, being the buzzword today. The strategy also enables the firm to shape its
image and inventory. The strategy drives the brand exclusivity and positioning as for an example
given earlier, where LV products never went on sale and never sold “in airports” to maintain
premium and luxury status.

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2.3.1.1 Backward and Forward Vertical Integration
An academia and French economist, Franck Delpal (2014) wrote in his journal titled “Vertical
Integration in Luxury Companies” mentioned that LV is the leader in the vertical integration
movement. Achievements made by the firm are adding new tannery in Belgium, controlling the
manufacture of leather good in more than twenty production plants in France, Spain, USA and
Italy. The primary reason for backward vertical integration employed by LV is to serve fast-
growing demand and to maintain “absolute quality” especially leather goods – handbags and shoes.
The strategy is even more obvious in forward vertical integration. Managing and
controlling all distribution activities are much more thorough. The explanation for this strategy is
to secure the firm’s good execution at the production stage is also replicated at the distribution
stage. Delpal (2014) states that one of the objectives of this strategy is to guarantee of the best
service during and after-sales, and for a better knowledge of customers.
The vertical integration movement led by Yves Carcelle has also seen as rapid expansion
of the firm. In the 1990s, the firm started acquisitions spree. The firm added new tannery in
Belgium, controlling the manufacture of leather goods in more than 20 production plants in France,
Spain, US and Italy. Between 2003 and 2010, more than 100 new stores, including one in
Ulaanbaatar, Mongolia. Today, the late CEO is remembered as “the Christopher Columbus of
luxury”.
Based on the above justification, LV has a number of competitive advantages which can be
summarized as follows:
2.4.1 Strong Brand Positioning
LV is the best among the best as reported by Millward Brown “BrandZ” ranking. The brand has
been dominated the luxury category since a decade ago. LV has an established identity and value
perception. Despite economy downturn, LV still able to sell their products without mark downs to
boost up sales due to its strong brand position. The brand image is valued as being prestigious,

20
exclusive and unique by its loyal customers and supporters. The strong base of LV brand
positioning, lead to other opportunities, it enables the firm to penetrate quickly into new markets.
Asia market for instance Japan, China and India have been a major success story.
2.4.2 Rich History and Absolute Quality
LV has been in the luxury segment for more than 160 years. It is one of the oldest fashion houses
in the world. The product is easy to recognize by its famous initials, LV and monogram canvas.
The leather goods are “absolute quality”, added by innovation, craftsmanship, association with art
and architecture made up a perfect combination to constantly champion the premium and luxury
segment. Furthermore, The LV products have been the flagship brand among all other businesses
run by the LVMH group.
2.4.3 Differentiation and Marketing Know-How
Product and service differentiation distinguish LV from its competitors. The key success has been
mentioned a few times earlier from its high quality of raw materials use, repairs and restore,
custom-orders services and the firm’s innovation in its marketing know-how further strengthens
the brand position in the market. Deploying total-control strategy of its business operations by not
relying on third party gives another competitive advantage to the firm as the management holds
the “big data” from the manufacturing stage up to its clientele activities.

21
3. Cisco
San Francisco “Golden Gate Bridge”
Cisco Systems is a global leader in data networking for the Internet, but some may wonder what
and where Cisco is originated. Cisco is not an acronym, but it is an abbreviation of the city name,
San Francisco. Ironically, the logo is also based on the design of San Francisco’s Golden Gate
Bridge. According to John Morgridge, the 34th employee of Cisco when he joined as President and
CEO in 1988, the founders decided on the name and the logo while driving to Sacramento to
register the company. They saw the Golden Gate Bridge framed in the sunlight and that is how
Cisco logo was born. (Cisco Blog, 2012).
December 1984, two former computer scientists Leonard Bosack and his wife Sander
Lerner founded Cisco Systems. Both of them were in charge of the Stanford University computer
science department. They started off the wrong way by stealing the university’s multiple protocol
router software which they used to experiment with building their own router. They managed to
build exact replicas of Standford’s router named “Blue Box”. In July 1986, Bosack and his new
collaborator Kirk Loughheed were forced to resign from Standford on charges on copyright
violation and theft. It was not a show-stopper for them when they created their own Cisco IOS and
steadily making sales nearly 2 million a month in 1987. This seminal breakthrough, played a major
role in fueling the growth of the Internet.
In 1990, the firm went public as Cisco Systems, Inc. The firm operates worldwide global
presence in America, Europe and Asia Pacific supported by more than 74,000 employees. In the
fiscal year 2014, the firm recorded revenues of $ 47 million. The achievements are resulted from
the firm’s robust inorganic growth strategy through acquisitions. Today, Cisco is the leading
supplier of networking systems, products and services, as well as the leading network solution
provider in the world. (Cisco “Company Profile”, 2015).

22
3.2 Main Products, Services, and Business Level Strategy
The primary product of Cisco from the beginning is the internetworking router, a hardware device
incorporating software that automatically selects the most effective route for data to flow between
networks. The firm rapidly evolved and the profile today includes designs and sells lines of
networking products, provides consultation services and delivers integrated solutions to develop
networks around the world primarily building the Internet.
Cisco groups its products and services in various categories; 1) Switching, 2) Next-
Generation Network (NGN) Routing, 3) Collaboration, 4) Service Provider Video 5) Data Center
6) Wireless, 7) Security and 8) Other Products and Services. In addition to Cisco’s product
offerings, it provides a range of service offerings, including technical support services and
advanced services like cloud computing, mobility and analytics.
Cisco switching and routing products are the largest and most profitable segments within
the industry, carrying flagship products like “Catalyst Series”, “7000 Series”, “2000 Series” and
many more from various sub-category. Under collaboration portfolio, the firm integrates voice,
video, data and mobile applications on fixed and mobile networks. Service Provider Video
provides end-to-end digital video systems and digital interactive. Under services, the firm provides
technical support services which help customers to ensure Cisco products operate efficiently,
remain available and benefit from the most up-to-date system software, and help customers protect
their network investments and minimize downtime for systems running critical applications.
(Cisco “Company Profile”, 2015).
3.2.2 Vision and Mission
The vision of the firm is “At Cisco, our vision is to change the way people work, live, play and
learn” and the mission is “to enable people to make powerful connections-whether in business,
education, philanthropy, or creativity.

23
3.2.3 Focused Differentiation Strategy
The history of the early days of the firm prompted the primary strategy of the firm – differentiation
strategy. The invention of the first multiprotocol router and its ability to support more network
protocols were the key differentiation advantage over other router manufacturers. The niche
market focused on universities, aerospace industries, high-end corporate network and government
agencies or can be divided into three main segments; 1) Enterprise, 2) Service Providers, 3)
Small/medium business.
3.2.3.1 Product Leadership
The firm maintains as a key player in each segment is through innovative activities by Cisco’s
R&D teams, engineering teams, and complemented by alliances and customers. Cisco preferred to
use its internal R&D teams for product development and the majority of its products developed by
its internal R&D teams. However, due to rapidly changing markets, the firm understood that the
firm is not able to cope with the demand and therefore the firm decided to go ahead with the
partnership or through acquisition (Bower, 2001), (Paulson, 2001) which will be discussed further
in corporate level strategy. Through all the efforts and investment the firm allocated in this area,
Cisco products have been the key source of the firm’s competitive advantages to stay ahead of its
competitors in all segments they are competing.
3.2.3.2 Service Differentiation
As the business grows, the customer database is also expanding rapidly. Let’s put aside the
technical service differentiation which is already proven to be best in the market. In a different
perspective, Cisco provides top-notch customer service experience. Cisco has not only sold
products, but provides end-to-end service from design stage, implementation and customer
support. The firm takes full advantage of data collected through social media and customer
application to provide personalized experienced in a variety interactive formats. Cisco builds
alliance thru Cisco partners to ensure customer service is well taken care of and to stimulate
consistency among the partners, Cisco values their partners by giving a service excellence award.
This shows Cisco is not only money making company by selling, but also provide the best
customer service support. (Cisco “Company Profile”, 2015).

24
As mentioned by Gutterman (2011), there are correlation between organizational structure, values
and culture, and leadership style with the business strategy. In June, 2015, Cisco announced the
new leadership team. As cited in Business Insider (2015), the new CEO, Chuck Robbins said the
team will move to a flatter leadership team designed for the speed, innovation and execution that
is required of them over the next decade. The structure is seen to be more suitable in support of
the business strategies.
The other important values and culture emphasized and championed by former CEO, John
Chambers is the introduction of “culture badge”. Each employee must carry his or her culture
badge at all times while working. This card tangibly emphasizes the commitment of senior
management and the company as a whole to the values that have led to their phenomenal success
and a reminder that the ultimate goal is customer success. Again, it is in line with the differentiation
strategy employed by the firm. (Stefanek, 2004).
Figure 3.1 – Culture Badge
3.2.4 Critique
Competitors in this segment would gauge Cisco and will try as much as they could to beat Cisco.
It’s not easy but nothing is impossible. Primarily banking on differentiation strategy for a
technology company like Cisco won’t guarantee sustainability if the business units responsible for
R&D and engineering do not keep a close watch on the latest trend and customer’s needs.
Technology becomes obsolete overnight and therefore, it is imperative for Cisco to continuously

25
invest in product development and innovation activities. The situation is more a less the same like
Amazon.com who is also applying the same technology differentiation strategy. Competitors can
easily replace Cisco if they able to produce new product with better features, functionality, and at
a cheaper price.
Being a Networker myself and a big fan of Cisco, the introduction of Huawei (China)
networking products which has similar qualities, features and functionality with lower price has
indirectly impacted my purchasing decision. Other customers who have the same interest would
do and think the same thing. Huawei, in the early days of their existence, is already sending a
signal to all players in the industry that a low-cost company can make a big difference too.
In an article written by Morehouse, O’Meara, Hagen & Huseby (2008), Huawei
Technologies, a little-known Chinese start-up entered the networking industry in 1998 with a goal
to match Cisco products quality and performance. Operating in a cheap labor country together with
strong support from the Chinese government, they launched their products with seventy percent
reduced cost compared to Cisco. Huawei’s business strategy is a low-cost strategy, but at the same
time producing feature-rich network equipment. Since its debut, it has cut Cisco’s market share in
China to less than forty percent.
The Huawei snippet was a wake-up call for Cisco, even a high-tech firm with strong brand
identities are not safe from low-cost rivals. Low-cost competitors like Huawei exploits their cheap
labor advantage, inexpensive technologies (product) and partnerships (e.g. customer support)
to break down the barriers and rewrite the rules of competition.
3.2.5 Summary
As depicted in Figure 3.2, the firm is supported by its strong internal business function in the value
chain to maintain as market leader in the industry. According to Stefanek (2004), their key success
of the firm lies in its strong global communication capabilities between internal departments,
suppliers, partners worldwide and customers. The success is also supported by strong and vocal
leadership team together with strong internal culture as briefly discussed earlier.

26
Figure 3.2 – Cisco Value Chain
Telecommunication Network Equipment Industry Value Chain
Research
And
Development
Sales
and
Distribution
CustomersEngineering
Production
and
Manufacturing
Marketing
Cisco is considered to be the best-in-class acquirer of high-tech companies by industry experts as
well as corporate strategy practitioners. According to Toppenberg et Al (2015), acquisitions have
been an integral component of Cisco’s corporate strategy. After three decades, the firm has grown
by 70,000 employees and revenues of $47 billion. The growth has been achieved through the
acquisition and integration of 179 business units. (Cisco “Acquisitions”, 2016).
3.3.1 Inorganic Growth through Acquisition
According to Toppenberg et al (2015), the aggressive acquisition activity started in 1993 through
1999 during the early Internet era and the growing popularity of corporate in-house intranets. The
demand for a complex variety of networking solutions skyrocketing and the firm realized that they
would not able to cope internally all technologies needed, which resorted Cisco to external
sourcing and the relentless pace of acquisitions.
Cisco announced the first acquisition of Crescendo Communications, the switching
company in 1993. Cisco leveraged the company they just acquired and made $500 million revenue
just eighteen months after acquisition. Based on this successful first experience, Cisco acquisition
strategy focused mostly on small acquisitions only believing that larger, and more mature
companies are difficult to integrate. From one acquisition in 1993 and three in 1994, Cisco
increased the pace of deals to complete ten acquisitions in 1995 and 1996. The largest of which
was StrataCom, Inc.
Over time, the acquisition process rendered by Cisco becomes matured and recent larger
acquisitions include Scientific-Atlanta ($6.9 billion), WebEx ($3.2 billion), Tandberg ($3.3

27
billion) and NDS Group ($5.0 billion). Former CEO of Cisco mentioned that Cisco typically makes
acquisitions to gain access to complementary products or to innovative technologies and associated
capabilities. He added that it is clear the role of acquisition integration is to drive growth in the
company. (Toppenberg et al, 2015).
3.3.2 Challenges through Acquisition Strategy
Post-acquisition is one of the well-known issues faced by Cisco. Using StrataCom acquisition
experience, two major challenges were encountered. The first one was integrating the existing
product line with the one from acquiring firm. In this example, Cisco had to discontinue its existing
ATM product which had upset the existing customers and demoted the Cisco employees of the
division developing these products. The second challenge was the sales compensation schemes
mismatch between Cisco and StrataCom sales team, which resulting the departure of several key
members of the StrataCom sales team. (Bunnel, 2000).
It was a good lesson learned by Cisco in its growth and expansion experiences. In spite of
the small glitch, Cisco continued its blistering acquisition pace in 1997 and 1998, announcing
fourteen more deals. In 1999 it became more acquisitive by snapping up 18 more companies and
the list goes on.
Based on the above justification, we can conclude Cisco has multiple competitive advantages.
3.4.1 Robust Inorganic Growth Strategy
Cisco has a very good reputation when comes to acquisition strategy. It’s not only the networking
leader, but also expert in acquisition strategy as many IT leaders and other market frequently seek
Cisco’s advice on acquisition integration. (Cisco “Acquisitions”, 2016). The firm has made
hundreds of acquisitions from 1993. Through past experiences, the firm acknowledged that the
most critical and important challenge to successful acquisition is integration. The firm has a long
history of integration, achieving best practices through continuous learning and deep experience.

28
3.4.2 Wide Array of Products and Innovation
As cited by Business Insider (2015), the new CEO, Chuck Robbins is repeatedly highlighting that
Cisco has eighteen different product categories. It could be an indication that the new CEO might
look to trim or consolidate the wide array of the products. The firm is ranked in the top 20 of
valuable brand under technology category shows that the firm is offering a reliable product.
Switching segment is the flagship business of Cisco which contributed almost one third of the
firm’s revenue. ((Millward Brown “2015 Top 100 Brand”, 2015). Furthermore, the former CEO
of the firm, John Chambers highlighted that innovation is what drives all markets and transforms
industries. Therefore, the firm invested heavily in product development and innovation to be a
competitive advantage.
3.4.3 Superior Service Differentiation
Cisco provides end-to-end service and not just only selling hardware. As mentioned earlier, one of
the key success factors of the firm has been the ability to keep the customer experience always at
the highest level. This behavior was inherited from the first president and CEO of the firm, John
Morgridge. As the first CEO, he ran the business with an emphasis on strong customer focus.
Listening carefully to the customer is also one of the core values underlying Cisco’s success.
3.4.4 Strong Organization Structure, Culture and Leadership Team
Many times the former and incumbent CEO were mentioned in this paper. It is because the
contribution of the former CEOs in shaping up the firm to what it is today is priceless. Each CEO
has their own unique ways of managing the firm but the ultimate goal is always the same – to meet
the bottom line. The leadership team is very sensitive to the dynamic of the market change and
demand, they act and adapt changes accordingly to ensure the firm is still competitive and stay
ahead of their competitors in each segment they competing.
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