July 19, 2014
1. What was the primary issue facing Cisco in 2001 that led to their poor performance and large stock price drop? The top executives of Cisco believed that they were immune to domestic and international economic forces and had continued to build their inventory believing business would not slow down.
2. Analyze and evaluate this issue as well as other issues identified in the case study that Cisco did not address and conditions worsened. Cisco in their efforts to stay the world's largest data networking equipment maker kept stock piling their inventory. Cisco outsourcing was a big part of the problem because the suppliers of parts for Cisco did not want to be the ones to tell Cisco they were wrong about building their inventory. By having so much inventory on hand when the economic downturn happened Cisco had to write off $2.25 billion in inventory. What that means is that the inventory that had to be written off had been devalued to $2.25 billion 2 Cisco also believed completely in their own software that was supposed to foresee any economic issues it did not warn them of the potential economic crisis. Cisco obviously did not have a contingency plan in place in case of a crisis.