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Exploring Cisco’s International Business Expansion: Strategies and Challenges

Jan 13, 2023 | 0 comments

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Jan 13, 2023 | Essays | 0 comments


Cisco systems is one of the earliest multi-nationals to engage in providing networking equipment. The company is currently headquartered in San Francisco but operates within more than 25 countries in the globe. Cisco first made history in the early years by designing routing software or the University of Stanford. At the time, little was known in terms of routing software and other networking mechanisms. This product catapulted the company into instant fame and drew a large target market for the still new company.  The growth of Cisco was one to be reckoned with. Within a few years of establishment, majority of networking companies are still struggling to get off their fit and make a semblance of profit. The market is saturated with various companies making the same product and appealing to the same consumer. However, Cisco came into the market at a time that the global industry was yet to understand and come to terms with the complexity of the networking software. The first registered router in 1987 by Cisco more than tripled the income for the company. Within the next five years, the company would become so large that it would be sold on the public market for more than $200 million.

Cisco’s growth to date can be attributed to the fact that the company has not lost touch with the market. The company still employees’ massive talent to predict future changes in the industry and also the tastes of the consumer. Towards the beginning of the 90’s for example, the growth of the internet changes and transformed communication industry.  In the past the company had relied heavily on routing devices and software for a large portion of their income. This demand of course declined drastically and this could have impacted heavily on the company perhaps even causing severe losses. However, Cisco it seems was prepared for the changes, with products such as modems access and GSR routers. With all other companies being caught unaware by the internet wave and with each of these companies struggling to finance research into viable products; Cisco immediately became a leader and not just a leader but a monopoly provider of the internet products.  (Hill 2002) shows that with the beginning of the millennium, the growth of internet was astronomical. Cisco having set a place for itself at the top of the market quickly became the most sort after company. He cites, the Forbes article in February 2000 naming Cisco the most valuable company of the century with a capital of $500 billion. Less than two decades after opening its doors, the company had moved from a little known industrial company in San Francisco to a giant company drawing not just the interest of investors globally but also interest of economic and political experts.

In the year 2006, the company began focusing more on growth in the global markets. For a while, Cisco had dominated the markets at home, but was still not a household name in the global markets. Seeking to be a trend setter once again, the company began seeking to reach the average consumer by humanizing their own campaigns.  Entry into the Asian region specifically into the Indian markets established the position of Cisco in the globalization markets. However, newer and other international companies have began challenging Cisco’ lucrative position as the number one network service provider. Of great concern is the presence of Alcatel- Lucent ad Huawei. Huawei has especially challenged the position of Cisco in Asian and Factors influencing job satisfaction among public sector employees: an empirical exploration. South African markets. These markets offer excellent growth opportunities because they are largely unexplored. Forbes in the year 2011, reported that a cut into the profits of the company, following a weakening hold on the markets. In fact the decline of profits forced Cisco to reduce its annual expenditure budget by at least $1billion.

Cisco has maintained a lead in the market by acquiring and maintain the talent in the industry. Perhaps the biggest and most effective acquisition came in the form of Stratacom. This is still touted as the biggest computer literacy. This will facilitate the introduction of the ICT curriculum in the college that is can be comprehended by the Dubbo teaching staff. The acquisition in the industry.  The interesting thing about Cisco’s acquisitions is that they do not divert the company from its major products and services, rather the extend the nature of services and products adding value into them. They allow entry into yet unexplored markets and provide resources needed to make necessary changes in technology and quality of services being provided.

Range Of Transaction Modes

Cisco continues to be the largest provider of network solutions. Even with challengers such as Huawei, the company continues to maintain a lead in the market. When Cisco establishes subsidiaries outside their market, they move from a domestic strategy phase to international strategy phase.   At the bargaining of entering the international markets, each subsidiary enjoyed relative freedom in terms of developing its own strategies and implementing the same. However, at the beginning of 2004, the company recognized that there was a serious dissociation in various subsidiaries. Consumers who entered the subsidiary do not get a similar experience in another subsidiary. As such the company sought to consolidate the transaction modes to ensure that all subsidiaries enjoy a strong market share.  However, will still consolidating the service provisions; the company also ensures adaptation of products to fit the local market peculiarities.

As Cisco is growing into a recognized multi-national company, they become more and more aware of the opportunities to be gained from integrating and creating a single strategy on a global scale. The global strategy involves a carefully structured single strategy rather than haphazard strategies spread over various strategies. The single strategy spreads across the entire network of subsidiaries, encompassing many countries simultaneously and leveraging synergies across many countries.  The term “simultaneous” is often used to indicate that most of the activities of the different subsidiaries are coordinated from the headquarters, in San Francisco in order to maximize global efficiency, which allows multinational firms to achieve the economies of scale and scope that are critical for global competitiveness, (Alon 2003 Venkateswaran 2012).

Moving from a domestic or international strategy into a more globalised strategy has not been an easy process and has created various strategic challenges.  The main challenge has been the development of a single strategy that can be applied into varying markets all over the world, (Roffey and Morkel 2001: Rugman and Hodgetts 2003), while at the same time maintaining the flexibility to adapt that strategy to the local business environment when necessary.  There are three ideal things to consider in the transaction strategy applied by the company. First is the degree of involvement and coordination from the headquarters. The different country locations are coordinated, planned and executed inter-dependently. It is notable however, that Cisco’s strategy has not been strongly coordinated and linked from the top. However, there has been significant coordination between the activities of the centre and those of the subsidiary companies. (Czinkota 1998, Adekola and Sergi 2007, Hill 2008 ) secondly standardization to the degree of product standardization and responsiveness to the local business environment.  Through his system, the products, services and processes of production across the various countries of operations. According to (Newlands and Hooper 2009)  the international strategy of transaction Cisco assumes that the subsidiary companies should respond to local business needs, unless of course there is a good reason as to why not. On the other hand, the global strategy as applied by Cisco should standardize its operations and products in all the different countries, unless again there is a good reason for not doing that as well.  The third important aspect is in terms of the company’s competitive moves. Culpan (2002), Peng (2009) and Avadhani (2010) conclude This is the extent to which the competitive moves are inter-dependent across the various countries of operations. The Cisco strategy executes competitive battles not on a country by country basis but rather on a global scale. While still addressing the unique competition and market characteristics presented by each country, the company seeks to have a standardized strategy through which they address competition. So far, the strategy has been based on the marketing concept that is ensuring that that the company products anticipate and meet the needs of the consumer way ahead of the competition.

For Cisco’s strategy to be global it does not require absolute standardization. Many companies have failed in this aspect. In an attempt to enter a global arena, companies focus more on creating uniformity and standardization and fail to focus on the uniqueness of the different markets. The result is that survival becomes difficult in some markets and quite impossible in others. Rather as the case study featuring Cisco shows it pays for the main elements of the core strategy to be standardized, coordinated and integrated consistently across countries, with varying degrees of adaptation to local market peculiarities when required. That is, as stated by (Bickerstaffe and Dickinson 1999 ) multinational firms look for the appropriate level at which each dimension or all dimensions can be pursued. Thus Boyce (2002) and DeToni and Franco (2011) conclude that the global transaction mode is the process of designing a coherent, coordinated, integrated and unified strategy that sets the degree to which a firm globalizes its strategic transactions in different countries through standardization of sales, configuration  and coordination of activities in different countries and integration of competitive moves from countries.


Cisco’s history begins in Stanford University, where the founder Leonard Bosack was in charge of the computer science department.  The professor with his colleagues first developed routers that were similar in structure and components to some that had been stolen in the university.  However, both colleagues were forced to resign from Stanford after accusations of theft and fraud arose against them. They went on to register the routers under their company name, and Cisco Systems began making a name in the market.  Within a year of opening its doors, the company was making millions, enough o acquire new staff and open branches in the country.

After five years, Cisco was a large enough company to go public. The decision to go public was consistent with the need to increase the capital base. The company needed a larger capital for the upcoming acquisitions. In addition, the ICT industry is renowned for many changes and in fact its own radical transformations year after year. Research and development is vital for the survival of any company. Acquisition of excellent research talent and the resources required to put the company on the right path towards development of ideal products all need excess capital. Based on this the company sold out in the public market, earning capital just shy of $250 million.  Beginning the year 1992, the company began expanding and making acquisitions that would later make entry into the international and global markets easier. In the beginning, acquisitions were considered that would allow Cisco diversification into newer areas of service provision. However, research showed potential to be found in the ICT industry. On this basis, therefore Cisco sought companies that would foster growth of the company without having to diversify into new industries.

The growth of Cisco as a company has been one to be reckoned with.  Cisco’s partners and subsidiaries have continued to reign in the market, leading in terms of service provision and access to quality products.  The company maintains a high customer base, which is re-assured by the after service assurances granted to the customers. The Cisco Company using this strategy has managed entry into the new markets such as Asia and Africa. Here, they have introduced and explored new possibilities in networking. With an initial poor performance in African and Asian markets, Cisco’s management learnt valuable lessons. Whereas focus had centered on providing standardized products, the new markets forced the company to reconsider. During the early millennium Cisco lost a good portion of the market to competitors including Huawei. In 2004, Cisco re-entered the markets using strategies that were now structured and more suitable to the specific markets. However, the subsidiaries are still an extension of the central office and headquarters allowing only for a little maneuvering. The maneuvering allows the subsidiaries to respond actively and effectively to the challenges in the specific market. This is not the end; Cisco continues to plan for more structured investments, entry into new markets and possibilities of acquisitions.

Major Acquisitions

Majority of Cisco’s subsidiaries come in the form of acquisitions through either public purchases or private arrangements.  ICT in itself is shrinking the distances and eliminating boundaries within the business itself.

Strata com: continues to be the largest acquisition in the industry to date. Stratcom made a name and drew the interest of Cisco through the ATM software.  However, the only important thing to note about this acquisition was not in the ATM software but rather in the Wide Area Network (WAN) equipment.  analysis shows that the project was entirely beneficial. The major areas of expenditure for the project were on transport, Acquisition of the company, allowed Cisco to take and make an impact in the business switching business. Using the company resources, Cisco entered the business of ensuring stronger networking. There have been several reports indicating increased globalization in the access of WAN services. At the top of the game of course is Cisco. Although at the time of the acquisition majority of the critics felt that Cisco did not need to add to its portfolio, with time this has proven to have been the right track for the company to take.

Cerent Corporation: Cisco actively pursued and subsequently succeeded in purchasing this company. For a long time, Cerent has maintained the lead in its own targeted market using its first product. This product is the Cerent 454. After acquisition of the company, this product was fast improved using the newly acquired talent. At the end of the year, the same product was rolled out as the Cisco 154154. Cerent, allowed entry into a new transaction level, consumers and customers could now access the product on a global and international level.  Cerent continues to be the most expensive purchase of a company attempted successful by Cisco. The surprising fact was the ability of Cisco to go into such highly priced negotiations even though Cisco itself was still considered a young company. Many in fact, felt that the end of Cerent was near after the Cisco purchase. However, the company devoted many resources and much of its talent into turning Cerent from just a national to an internationally recognized company. The business unit purchased through Cerent has grown into a billion dollar unit, much feared and offering serious competition to other companies in the market.

Linksys: was acquired in 2003. This was a different company from those that Cisco frequently sought out. The main reason was because it was a small company in itself. However, it provided a unique aspect to Cisco by allowing the company entry into the home network business. Today majority of networking s carried out in homes, with even a greater majority of home networks expected in the future. The purchase of Linksys was in fact a strategic move that competitors had failed to anticipate. By gaining the home market, once again, Cisco became a number one network provider for the average consumer. With the increase in talent and resources, Cisco manufactured and brought into market the Cisco Valet, a product that remains unequaled in the ICT market.


Wibbeka (2009) and John (1997) define internationalization as the increased presence of a company within international operations.  Ideally the patterns of internationalization take three forms that is the U model, the I model and finally the network approach.  Cisco has advanced and directed the internationalization process more towards the U-model. The idea is to increase the level of knowledge with regard to processes while at the same time reconsidering the commitment of various resources. According to (Martin and Chaney 2006) a firm in the u model also known as the process model, begins by exporting products directly to a particular range of countries, this is then followed by exportation through independent producers within the country and finally, see tin up of a manufacturing company within the country. Looking into the establishment of Cisco manufacturing and distribution centers, one gathers that Cisco’s expansion is not only directed but seemingly structured into this model.  Countries of operations are groups according to their similarities and challenges they offer the company.

Group one: consists of Europe, Middle East, Africa and Russia. These countries may seem to lack any common ground. However, their similarities arise in the fact that they do not possess a manufacturing unit but rather more of distribution centers. The countries though far from each other in terms of economic growth have each provided a unique opportunity for growth. They possess resources that indeed bring down the cost of distribution including labor. However, they also pose a challenge in terms of lax markets, with low demands on products.

Group two: Asia, Japan and china: these countries have seen the greatest progress in terms of technology. Each of them enjoy a full processing plant within their borders. Such processing factories, research and development centers have been equipped with fast growing and creative talent. Entry into these countries has however been challenged by increased saturation of other ICT companies.

Group three: America, Canada and Latin America: this countries have provided the base upon which Cisco has grown. Here, the company enjoys large, loyal customer base.  There is little challenge from competitors but it is not as widely felt as the countries in group one. Further, the company is highly recognized in these countries, where it attracts not just a large portion of the market but also a wide network of talents.


Expand markets and increase sales:

There is a general belief that there are several ICT markets in the globe, all converging around the world. These markets provide an ideal opportunity for growth. The increase of Gross National Product in the developed markets while providing an ideal opportunity for incoming expenditure also provides the challenge of increased competition. With majority of the international markets becoming more saturated, the company seeks new opportunities for growth and expansion. According to (Kotabe and Helsen 1998), The convergence of markets allows a customer in America and one in Africa to enjoy the same quality of products.  In the ICT industry, there of evidence that the customer tastes and preferences are converging globally. The internet has allowed access to knowledge, while at the same time social media has brought convergence in customer culture. In this arena, the world is quickly becoming a single market. Companies that have considered and entered the market before will therefore enjoy a stronger position.

Controlling of costs

For the past decade, Cisco has become concerned with increased costs of production. This coupled with challenges brought on by competitor’s lowered prices for similar products have forced the company to reconsider the expenditure account. One key factor that has influenced the entry of the company into the global arena is the global scale economies. Whereas some countries such as the developed countries, costs of production maybe high due to increased costs of labor and other factors; in others such as the Asian markets, the same costs are driven down by readily available labor at much lower costs. (Thomas and Inkson 2003 and Hill 2005) state that economies of scale occur when a product or a process can be performed more cheaply at greater volumes than at lesser volumes. Products offered by Cisco are standardized across the countries; this means increased volume of production lowers the cost of production.  In the industry it has become quite difficult for multi-nationals to differentiate themselves and cost becomes key in achieving and sustaining a competitive advantage.

The cost of the production process has a strong impact on the profits being recorded in the company. With more and more companies entering the market, the lower the cost the higher the profits recorded. With concern for resources directed at production increasing, there is need for the company to seek newer resources. In an effort to identify the lowest cost of resources, the company has entered the global markets. International markets are not only targets for the finished products. More often than not, companies tend to settle in markets where they can also access vital resources including unique talent, (Bjerke 1999). According to (Lan 2005, Hockley 2010) Governments attempting to encourage investment in their countries pass laws with attractive tax returns and percentages, cheap labor costs and cheap technology.  The relationship is therefore mutual; on the one hand the companies enjoy lowered costs of production and access to cheap resources. On the other hand, the governments increase the employment rates and income circulation in the country. This has proven efficient in attracting companies such as Cisco who are seeking lower costs of production.


The entry of the internet has forced majority of the companies to consider diversification into various other lines of production. Cisco for example had for a while remained a string company rooted on networking businesses. Recent changes in the tastes and demands of the consumers however, have led the company into new products and especially those designed for mobile devices and also home networks. The product differentiation is an attempt by the company to reduce the risk it takes in introducing and entering new markets. The company has maintained a strong foothold in the American markets. However, recent fluctuations in the prices coupled with the recent economic crisis led the company to consider diversification of products. Each country has proved to have specific needs which can be addressed using newer and more identified products. The result is that the company is likely to enjoy an increase in profits with less fluctuations on the same. (Elashwami and Harris 1998, Condon 2002 ) raised concern with regard to this strategy, citing that the company would be forced to commit more of their profits and capital towards research and development of the new products. Further, such products are likely to draw the interest of the company from the original services for which they are renowned for. The result is that failure and weakening of the company structure would imminent. (Hoffman 1994) countered that such costs including the capital expenditure would be well worth it, if proper research is carried out onto the right product. With the right product, addressing the specific gap in the market, profits would increase exponentially. This is especially the case if such products are differentiated within the same line rather than diverse products in various industries.  Maintaining diversification within the same industry allows for similar diversification of the costs of production.


Cisco’s global management structure is one to be reckoned with. The structure includes a CEO at the top of the company. The CEO is selected by a board and voted on by the shareholders. Each CEO has specific performance requirements which they must adhere to. It is to be noted however, that unlike many multi-nationals Cisco’s CEO does not enjoy much freedom. Decisions are frequently regulated and tested before being out in place. This is perhaps why not much change has been made in each tenure, with each and every CEO. Not a singular change can be traced back to a particular CEO. Changes are more gradual than sudden. From the CEO, there are various executives in charge of the different departments and subsidiaries.  (Trompenaars 1994, Stonehouse 2004) criticize the stand of Cisco with regard to the selection of executives running subsidiaries. The company has become renowned for importing their own talent from the headquarters to run subsidiaries as opposed to finding local talent and training them. From the executives, the company becomes more lenient in the selection of the business managers. The business managers are in direct contact with the consumers running direct lines of production, distribution and even after sales care.  The standardization dimension expressed by () defines the global management as offering similar products through a similar structure in the company.  However, for this strategy to continue being beneficial, the company needs to identify and make minor adaptations to local peculiarities. The company integrates the needs of the market with the organizational structure. For example within the Asian markets, much focus has been grated towards identification of local innovations which lead to improvement of Cisco products. With recognition of such products as having been locally sources, the market has become more receptive of the company.

(Wolfe 1999) shows that addressing the peculiar needs of the market through the organizational structure may pose some slight challenges. The challenges include identification of ideal talent, human resources that not only understand the products and services but also the standardization measures set by the company. (Mole 2003) identifies a similar challenge, where the company may find ideal human resources on the ground but then  such resources fail to capture the nature and need for standardization as set by the company.

Human resource management

(Wood 2006) indicates that multi-nationals fall into three major categories and these are: the first who select executives and majority of the managers from the home country; the second who consider employees only from the parent company home and the host country and finally a third category who take on a more international perspective and consider employees from any nationality. Cisco surprisingly seems to fall in the first category. (Laurie 2001) cited executives of the company defending the chosen strategy of relying on executives from the home country, despite presence of talented executives in the host country.  The idea is that these executives are able to transfer the strategy that has worked for the company with fewer challenges. They have already mastered such challenges, can expect them and address them effectively. Further, this system has paid off in terms of offering challenging opportunities for executives back at home which in turn increases productivity.

However, the company has recently recorded growing concern of difficulty in entry to some international markets. Consumers are not responding to marketing and advertising strategies simply because they feel that the company has no interest in growing local talent. The result is that the company is re-structuring in an attempt to move more towards an international outlook. However such a policy can be proven to be quite expensive, in addition such strategy would take a long time to implement. The ideal idea would be to move more towards a combination of home and host country labor especially in the managerial positions. This is a useful strategy especially where local firms have been acquired by the company. Hiring locals eliminates various challenges such as language barriers, expensive training methods because they have acquired the right skills and problems brought on by adjustment of the managers and their families. Relocation of executives from their home countries often posses the problems of adjustment and proves to be costly to the company as they attempt to make settlement easier.

Ethnocentrism versus geo-centrism

Cisco is one company that can be considered purely ethnocentric in nature.  The strategy began in the early years of internationalization. At the time, Cisco was unaware and unable to access the local talents to head subsidiaries. However, over time, the strategy has taken root commanding the human resource and executive recruitment policies. (Blenkhorn and Fleisher 2005) states that Ethnocentrism may seem like an offhand disadvantaged system to the naked eye. However, it possess some benefits top among them being that subsidiaries require very little supervision in the early stages of setting up. This is because those in charge are aware of, and equipped to handle each and everything as per the company regulations. (Mullins 2005) concurs by stating that many would prefer the company to head into a geo-centric view. However, such view can be quite expensive for the company to set up. Further with a geo-centric view, the new subsidiaries take much longer to become productive, as executives and personnel are undertaken through training and orientation. Should such a company face a challenge in this early stages, chances of losses are imminent because the staff is unaware on how to react to the challenges.

That being said, the challenges out forward by the market in terms of lack of support for subsidiaries, have forced the company to consider a change, albeit a slow one towards a more geo-centric view. This can be seen by the hiring of newer executives in the past two years, many of which are locally recognized. (Rudani 2011) highlights that companies such as Cisco are coming to the realization that the skills required to fulfill the same job differ from one location to another and the candidates are almost always affected greatly by the local culture and physical environment. With this in mind, there is a desire to integrate both ethno-centrism and geo-centrism and find or strike a balance.

Organizational control

Cisco is a wholly owned investment, where the parent company can shape the strategic direction of the subsidiaries,  (Mullins 2005)  cites that insufficient control can a limit a firm’s ability  to align the strategic direction of the partnership with its own strategy, and it can limit a firm’s ability to protect its interests in the partnership. There are two types of control that are exercised in Cisco and these are: strategic control and operational control.

As stated by (Rao 2001) strategic control is control over means and methods on which the conduct of the whole company depends for example control over how the capital is utilized, the setting of priorities and even the hiring of senior executives. On the other hand, operational control as defined by (Erskine 1991) is control over the process of production within the company, in the sense of determining how the employees of an organization perform their work, for example control of purchasing and quality control in the subsidiary branches.   For the past few years, Cisco’s organization control has been heavily influenced by the strategic priorities. The firm has prioritized customer satisfaction coupled with reductions of costs.  However, with each subsidiary culture and existing knowledge have influenced the approach to organizational culture.


Understanding the motives behind a firm’s decision to internationalize its business activities helps to explain why and how such a firm engages in international business activities. Cisco for example was compelled to make its first international move following the growing demand for ICT, and the increased availability of the internet and online market.  Companies often decide to internationalize without fully investing in a foreign location. However, a foreign investment is often considered much riskier and even more expensive. According to (Dunning 1997) there are four main reasons for such a move: natural resource seeking, market seeking, efficiency seeking and strategy seeking. (Schmidheiny 1992) states that majority of the companies begin the internationalization foreign investment with purposes of seeking new markets. However, as the process grows other reasons come into play. For example, Cisco’s movement into Canada and Latin America was purely to seek new opportunities for growth. On the other hand, over time the internationalization has taken a more efficiency prone aspect. The company has expanded with the main motive of finding cheaper resources through which the expenditure account can be cut down and in turn profits margin can be increased.

(Parhizgar 2002) through research has proven that first entrants into a market often enjoy a greater share and more stability than latter entrants. For instance Cisco has been able to reap considerable benefits and first mover advantages by expanding into Russia in the early 90’s.  At this time, the competitors of the company had not even begun considering such a move. The entry into Russia allowed the company to gain footing as the leader in network and router manufacturing. In addition, Cisco enjoyed the advantage of obtaining new technology from Russian and American government support raising majority of the barriers that late comers have had to endure.  However, this is not the only reason why Cisco has engaged in internationalization, the attractiveness of countries where business has been launched is also vital. (Sen 2002) states that the country’s host market must be desirable for business to encourage such a move. Cisco could be attracted because of the host country’s market size and potential. For example, the decision to enter India was based on the probability of growth as the country offers a high potential for income generation. In addition, the market also offers cheap labor and highly skilled workers which can greatly push the company into the next age technology.

All types of firms, multi-national, single country, small or large business need to undertake operational renewal constantly in order to regain control in those parts of the organization that are ageing and becoming uncontrolled. However, the Cisco study demonstrates that the control management cannot be easy when the firm is multi-national. Control becomes more complex and involves more stakeholders than just the local headquarters. (Millet and Wiesner 2000) cites that multi-nationals operate across several countries, which creates a complex and sometimes chaotic mix of management practices influenced by different national cultures and institutions. (Murray et al 2006) further indicates that some subsidiaries are more aware of the dynamics of the business environment and culture within their location and therefore are more likely to resist measures of control. In addition the attitude of the people with regard to control measures put in place by the company are also affected by a set of culture specific factors, norms and values which therefore adds another layer of complexity to control management. The different behaviors and attitudes of employees towards control management at subsidiary levels increase the potential for conflict between the centre and subsidiaries and may hinder the success of any strategy chosen by the company.


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