SWOT Analysis of Salesforce.com 2018
Salesforce.com apart from being one of the top five cloud players is a leader in customer relationship management or CRM software. The brand has achieved healthy growth in the recent years. Despite being pitted against the toughest competitors in the cloud industry like Amazon, Microsoft & IBM, it has continued to grow. The cloud industry is not without challenges and apart from competition, advancements in technology also pose a tough challenge. However, salesforce.com has proved it is a different kind of company. It launched its first CRM software in 2000 and since then it has grown its range of services a lot. It has expanded its services into new areas and industries as well as introduced new features and platforms. Its revenue in 2018 climbed to 10.5 Billion dollars rising from 8.4 Billion dollars in 2017. Fiscal year at Salesforce.com ends on Jan 31, 2018. Its product portfolio consists of service offerings that include sales force automation, customer service and support, marketing automation, digital commerce, community management, collaboration, industry specific solutions and the Salesforce Platform, also referred to as the Customer Success Platform, which includes Trailhead, Einstein AI, Lightning, IoT, Heroku, Analytics and the AppExchange. Salesforce.com has grown quite popular as a provider of cloud based services. Read more about salesforce.com in this SWOT Analysis.
Leading position in CRM:
Salesforce.com is a leading CRM services provider of the world and considered to be one of the top five cloud players in the industry. Its is a leading provider of enterprise cloud computing solutions with a focus on CRM.
Brand Image and equity:
Salesforce.com has built a strong image in the market as a leading player in the cloud industry and provider of customer relationship management solutions. Its focus has remained on gaining the trust of the customers by providing reliable services and driving customer success through constant innovation. It has also retained heavy focus on social responsibility and continues to invest large sums in philanthropic activities. It has won several accolades for its excellent work environment and focus on sustainability too. Forbes declared it the innovator of the decade and Fortune ranked it as number one workplace as well as the 15th most admired company in the world. In a Barron’s ranking , the brand has acquired the second place among the 100 most sustainable companies.
Large product portfolio:
The brand launched its first CRM softwares in 2000 and since then has grown its range of services to enter into several new areas and industries. Its large range of services includes sales force automation, customer service and support, marketing automation, digital commerce, community management, collaboration, industry specific solutions and the Salesforce Platform, also referred to as the Customer Success Platform, which includes Trailhead, Einstein AI, Lightning, IoT, Heroku, Analytics and the AppExchange. Salesforce.com has grown quite popular as a provider of cloud based services. The large variety is also a reason behind the popularity of the brand’s services and platform.
Strong focus on innovation:
the brand has retained string focus on innovation. It was declared as the innovator of the decade by Forbes. It also spends a huge amount on research and development. The brand increased its R&D expenditure from 1.2 Billion dollars in 2017 to 1.5 Billion dollars for fiscal year 2018. Innovation is one of the core values at Salesforce.com. Moreover, innovation is all inclusive at Salesforce.com. Every year it releases hundreds of new features to all its customers. Its trailblazer community includes customers, innovators, technology disruptors and global shapers. It uses Ideas Exchange a forum to receive ideas from its trail blazer community. Last year, it invested heavily in AI and other innovations like Lightning and Trailhead.
Strong financial performance:
The financial performance of the brand has continued to improve over these years. Its revenue has kept increasing consistently over the last five years. From 6.7 Billion dollars in 2016, it increased to 8.4 Billion in 2017 to 10.5 Billion dollars in 2018. Gross profit of the brand has also increased consistently. It rose from 6.2 Billion in 2017 to 7.7 Billions in 2018.
Dependence on key markets:
The level of international expansion of Salesforce.com is limited. Its business is divided into three major segments by market regions. They include Americas, Europe and Asia Pacific. Asia Pacific accounted for less than 10 percent of its revenue in 2018. Europe also accounted for less than 20% of its revenue. Americas are salesforce.com’s biggest market which account for more than 75% of revenue of the brand. As such, the brand depends heavily on the American markets for revenue.
Heavy marketing and sales expenses:
The cloud industry is marked by intense competition and that has led to higher focus on innovation as well as marketing. Marketing expenses for a major part of the brand’s operational expenses. They have risen consistently over the last five years. From 2.2 Billion in 2014, marketing and sales expenses have increased to 4.8 Billion Dollars in 2018.
Strategic acquisitions and partnerships:
One important channel of growth for salesforce is acquisition. the brand has continued to several brands. It is a large list including MuleSoft and Datorama. Such acquisitions and partnerships with other brands will help to expand its range of services as well as reach new markets and customer segments.
Expanding product/service categories:
The brand can expand its product/service categories to serve new industries and markets. While it has a large range of service offerings currently, the brand can expand them further to grow its revenue.
The brand depends heavily on the American markets for revenue. Its presence in the Asia Pacific which includes Japan is limited. Asia Pacific market accounted for less than 10% of its revenue in 2018. The brand must focus on international expansion and growing its services and revenue in the less penetrated markets to find faster growth.
Upselling and cross selling opportunities:
Salesforce.com’s platform presents major cross selling and upselling opportunities. It can deepen its relationships with its existing customers further. Adding new functional areas and business units can hep the brand grow its relationships and business with the existing customers.
Competitive threat from major cloud players:
Competition is the cloud industry has grown intense. Salesforce is pitted against major players with high level of technological capabilities and resources. Some of its main competitors are the largest players in the technology industry like Microsoft, Amazon, IBM, SAP and Google. Intense competition leads to higher operational expenses including marketing and sales as well as research and development.
Regulatory pressures in the technology industry including cloud industry have increased. Privacy related concerns have increased worldwide. As salesforce notes in its annual report, “Privacy concerns and laws like the European Union’s General Data Protection Regulation, evolving regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our services and adversely affect our business”. Overall, the legal and regulatory net has kept growing tighter leading to higher pressure and increased compliance related costs and pressures.
Currency related and other risks in international environment:
Operating in the international market is full of risks including operational and economic. Being an international player subjects the brand to major risks including currency exchange rates. A stronger dollar means profits from international markets is affected.
- Salesforce.com annual report 2018