Salesforce Inc.’s External and Internal Analysis

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Introduction

Salesforce is a company that provides web-based customer relationship (CRM) applications to connect organizations and their clients. Today, this company is ranked high among the leading cloud computing and commercial networking organization (“About us,” 2020). Considering the success of Salesforce, it is important to conduct its strategic analysis and understand the relevance of investing in this company. This paper aims to present the external analysis through Porter’s Five Forces, SWOT, and forecasting tools. In addition, the internal analysis is to be performed based on core competencies, SWOT, and value chain analysis. Upon the completion of the analyses, recommendations regarding the investment will be provided.

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Factors Affecting Growth

The external environment of Salesforce significantly affects its performance. Since its’ paramount goal is to protect customers’ sensitive information, some government policies and laws can impact Salesforce in legal and political contexts. The use of CRM is economically-beneficial for organizations, which means that companies that understand this trend also improve the financial success of Salesforce (“About us,” 2020). As for the demographic and sociocultural segments, customer preferences differ depending on the target population, culture, and work-related attitudes. The technological segment has had an especially prominent impact since service and product innovations became demanded in the conditions of the modern tendency for constant development (Jenkins & Williamson, 2015). In terms of the global segment, the fact that Salesforce operates online leads to a lack of physical barriers, better communications, and extensive focus on research and development. Ultimately, the sustainability segment makes a positive impact as the solutions offered by Salesforce are associated with lower energy consumption and contribution to operational sustainability in general.

While the SWOT analysis includes an emphasis on both internal and external analysis, it seems to be essential to begin with the reflection on Salesforce’s strong and weak points. Among the strongest sides of the company, there are skilled workforce and unique products for customers (“About us,” 2020). These two factors provide Salesforce with the necessary brand loyalty and strong competitive force. In addition, the financial stability of the company ensures its market position despite potential economic fluctuations, allowing not only surviving but also succeeding. The elaborate technology and security protocols make the CRM of Salesforce demanded and trusted (Sneh & Krishna Prasad, 2018). In combination with a high level of scalability, the positive image of this company lead to the constant influx of customers, who value that their product is easily adjustable and can be implemented rapidly. Seasonality in billings, a relatively small size of the company, and the reliance on a single product are the weaknesses of Salesforce.

Along with the positive external environment that affects Salesforce’s growth, the company’s internal strategies are also effective. For example, the company’s leadership strives to discover the needs of customers that might seem hidden at first glance. Using big data, Salesforce collects feedback from its clients and works on addressing customer concerns (Sneh & Krishna Prasad, 2018). The customer success managers (CSMs) play a significant role in establishing proper relationships with customers and taking timely action to better understand their needs.

Innovations and Practices

The strategy of shared innovation is adopted in Salesforce as one of the leading innovative practices. By innovating in cooperation with customers, there is the greater opportunity to reveal the unmet needs and acquire additional market share. This strategy is realized through the close interaction with customers and collecting their opinions regarding Salesforce’s product. While paying attention to the attitudes of customers, the company also works towards improving its practices in an ongoing manner. Despite being launched more than 18 years ago, the company innovates likewise startups. The goal of transforming the industry in which the mentioned organization operates is the core value that is integrated into all departments of Salesforce. The practice of democratizing enterprise technology, Salesforce constantly develops in the cloud, mobile, and artificial intelligence technologies.

Salesforce operates in a highly competitive environment, with such key rivals as Oracle, Aplicor, Microsoft, and SAP. Applying Porter’s Five Forces tool, one can note that the prepackaged software internal rivalry in the industry is high as only 60% is taken by the mentioned leading companies (Sneh & Krishna Prasad, 2018). Smaller competitors offer specialized products, which creates threats to Salesforce. The possibility of the entrance of new rivals is also high due to relatively low costs for entry. Nevertheless, brand identity and expertise allow Salesforce to remain effective on the market. The supplier power can be evaluated as low: Salesforce uses Equinix as a supplier, which refers to the stable cooperation with a collocation company (“About us,” 2020). The threat of substitutes and buyer power is medium because all competitors offer similar prices and products. Compared to its rivals, Salesforce focuses on those enterprises that need advanced CRM functions. The creation of long-term contracts and product differentiation are two more competitive advantages of the mentioned company that helps it to be ahead of its rivals.

The core competencies of Salesforce involve strong leadership and the reliance on customer success. As stated on the company’s official website, “our customers’ success is critical to our growth and we’re committed to succeeding together” (“About us,” 2020). Mitel, Kone, Amazon Web Services, and Adidas can be mentioned among the main customers. The talents of people working for Salesforce are emphasized as well. There are experienced executives and the brightest minds that strive to make the product the exact match regarding the needs of customers.

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In terms of the value chain analysis, it should be clarified that Salesforce has one supplier that provides materials and information regarding the final product. The strategies that are adopted by this company are specific and relevant to its market position, which improves its decision-making. It should also be pointed out that marketing and sales are based on the differentiation from competitors to convince customers that Salesforce’s product is the best one (Sneh & Krishna Prasad, 2018). In addition, human resource management and technology development are at a high level.

Speaking of the current news and trends, it should be stated that Salesforce concentrates on trusted AI-powered tools and introduces an enhanced virtual selling suite. These improvements are assumed to make the experience of customers more comprehensive. The adaptation to the new selling landscape is another area to which Salesforce links the favorable developments. In addition, the company speaks about and invests in environmental sustainability, considering the negative impacts of climate change and calling for an immediate action. The shared commitment to sustainability is regarded as the promising way to build a better society and achieve actual changes.

Another area of development is the cooperation with other companies, for example, Humana, providing health services to help patients and medical specialists to improve their health outcomes. In particular, Salesforce’s API-led connectivity using MuleSoft will be chosen to provide personalized and connected healthcare (“Humana selects Salesforce”, 2020). This trend is associated with the growing use of mobile and telemedicine, which require a care coordination platform to integrate information about patients. Salesforce’s technology will allow equipping care teams with the awareness of a patient’s environment, lifestyle, and social factors, which are critical for proper assessment and future treatment (“Humana selects Salesforce”, 2020). The connectedness of this system would contribute to the cooperated work of various care professionals, which will improve the health of thousands of patients.

Salesforce pays significant attention not only to its customers but also employees. According to the official website, the company calls people to Salesforce to become trailblazers, which means being innovators, leaders, and those who build a better world for others. For all the candidates and employees, inclusive experience and accessibility are declared to be the top priority. The company also provides non-profit donations, focuses on the wellness of employees, covers their fundamental health needs, and supports family relationships.

Predictions / Outlook for Future

Speaking of opportunities for Salesforce, one should discuss the factors that affect its growth. In particular, the extension of the CRM market is the first factor that can increase the revenues of the company due to the fact that the market is not yet saturated. The international expansion is another factor that serves the opportunity to penetrate other countries, while 70% of the profits currently come from the US (Sneh & Krishna Prasad, 2018). Looking for the future, it is possible to take advantage of launching complementary products to make customer experience richer and more flexible. For instance, the synergy with some of the competitors can give an impetus to new products and their faster delivery to clients. This innovative solution is likely to transform the contemporary perception of Salesforce, making the company closer to its customers (Jenkins & Williamson, 2015). Taking into account that cloud computing becomes more and more required, the proposed opportunities seem to be feasible to implement in terms of the identified trend.

For Salesforce, the threats are associated with the reduction in profits and growing competition on the market. Due to low costs for the entry of new companies, it is important to be ready for fierce rivalry and work on competitive advantage (Sneh & Krishna Prasad, 2018). More to the point, the existing competitors have resources to invest in cloud computing development and offer complementary products. The position of Salesforce, thus, can be undermined by the above threats in a long-term perspective.

Conclusion

To conclude, Salesforce is a successful company that provides the CRM product to various customers, thus promoting effective interaction between them and their clients. This paper revealed that the external environment can be characterized by strong competition among the existing rivals, low industry entry costs, and investments in technology development. Salesforce’s strong points are the skilled workforce and demanded product provision, and its opportunities refer to expansion and complementary products. Therefore, the investment in Salesforce is a rational and viable decision as the company has favorable options to increase its revenues and grow significantly. The focus on encouraging investors and strategic partnerships are the recommendations for Salesforce.

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References

About us. (2020). Web.

Humana selects Salesforce to deliver connected, personalized healthcare. (2020). Web.

Jenkins, W., & Williamson, D. (2015). Strategic management and business analysis. 2nd ed. Routledge.

Sneh, M. S., & Krishna Prasad, K. (2018). Analysis of business strategies of Salesforce. com. International Journal of Case Studies in Business, IT and Education (IJCSBE), 2(1), 37-44.

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