1a. in what stage of the Competitive Life Cycle is Salesforce.com?
Sales fporce.com is in the maturity stage of the competitive lifecycles. Salesforce.com is currently a major brand in the CRM industry with over ten years and bigger competitors. Salesforce.com cash position is strong and Salesforce.com is currently a major disruptor in the industry that can easily set standards including prices and service quality (Paschen, 2017). Salesforce.com has the experiences and the resources to defend its market position and expand to new territories especially in the emerging markets by virtue of its strong brand and online presence. Salesforce.com's revenue is also relatively stable and they can easily predict their five-year revenue based on the pattern of their past five years revenue.
Salesforce.com's position in the market also means that Salesforce.com has to aggressively engage in research and development to diversify or reinvest in the business. Salesforce.com has started to branch out into new verticals for sustainability and further growth as the next phase may be characterized by decline. There are also opportunities in the PaaS offerings and artificial intelligence which is a new field that Salesforce.com can branch out into before they get stuck as the CRM sector is currently less profitable.
b. What are the most significant barriers to entry that competitors face? Explain
While the market is currently characterized by intensive competition from other established brands, Salesforce.com's main advantage is that there are also barriers to entry. Never the less, it is important to note that the barrier to entry is relatively low (Paschen, 2017). The barriers to new entry include the cost of entry as the new entrants have to invest in expensive equipment and marketing. The competitors have to further invest in the end to end CRM as sales force currently has the most complete cloud-based customer relationship management suite that covers newt application, automated sale forces services, cursor services, digital marketing and e-commerce (Fisher 2017). The competition has to invest more than the $2.8 billion Demand ware technology that Salesforce.com acquired to compete effectively which is not possible with the competitors. Secondly, competition is making the market less attractive as the competitors are already established companies with massive resources which help them achieve economies of scale and reduce the prices to bear minimal. New entrants will not find the market attractive as there is less to be earned.
2. Sales Cloud Analysis
a. What are the 5 key moat considerations that Salesforce.com must address in this market?
MOAT refers to Salesforce.com's ability to sustain competitive advantages over its competitors to remain profitable and protects its market share from the competitors. The five key MOAT considerations that Salesforce.com must address include:1) Network Effect, 2) Intangible Assets, 3) Cost Advantage, 4) Switching Costs, and 5) Efficient Scale.
The network effects are the effects where Salesforce.com has customers using their networks and they network becomes valuable for the other entire user. Salesforce.com's current platform may be end to end but there are other features that Salesforce.com does not provide that would be an added advantage (Fatima & Azam, 2016). The economic MOAT is the costs of switching providers. Salesforce.com should improve its service portfolio so that the customs do not have to incur costs when switching. For example, Salesforce.com should invest in functionality to the platform via both internally developed and acquired technology. Which it is not currently providing and the customer would have to incur costs when they switch from the competitors because Salesforce.com's services are still limited. Another source of MOAT is the intangible assets that Salesforce.com does not have. Salesforce.com should patent its services to block competition. Salesforce.com can also leverage its brand strength to price its services as premium being the patent holder (Nelson, 2016).
The efficient scale is Salesforce.com's source of competitive advantage. Salesforce.com recently acquired a sales force automation applications that can only be used by Salesforce.com to ahead controlling advantage in the market. Salesforce.com should leverage its sales force automation applications prevent other competitors enter the market niche. Salesforce.com pioneered the cloud-based delivery model for the software and the cloud-based delivery model has enabled Salesforce.com to rapidly gain share against Siebel CRM and other competitors. It can still leverage the technology to improve efficiency in service delivery.Salesforce.com also has a cost advantage by virtue of its scale of operations (Hampton and Stratopoulos 2015). Salesforce.com's economies of large-scale and the recently acquired technology can enable Salesforce.com to reduce prices to its customers lower than its competitors thereby drive revenue and growth.
b. Which of these are most important? Explain
The network effect is the most important MOAT as Salesforce.com needs to lock-in all its customers by providing seamless CRM services. Salesforce.com's sales cloud has that capability but Salesforce.com is not leveraging its sales cloud effectively (Nelson, 2016). Its current market share indicates that it has a better hold of the market that other competitors and it can drive growth and revenue further if it can increase the range of services it offers using the sales cloud. Salesforce.com stated that it expects "Sales Cloud to generate roughly $4.5 billion in annual subscription revenue by 2020, or roughly 27% of total subscription sales" which shows that it is currently underutilized.
3. Service Cloud Analysis
a. Briefly summarize how Porter's Five Forces apply to this market.
Salesforce.com launched its branded Service Cloud offering in 2009 and the benefits that have accrued include personalized oversight for all users. The Omni- channels customer feedbacks are more effective as all the channels are unified under one platform. Salesforce.com provides the clients with a complete view of the asocial media, email, web forms, call centers, and SMS messaging (Nelson, 2016). One of the main advantages that Salesforce.com has is its source of competitiveness and its complete understanding of the competitive industry. Salesforce.com can make use of Porter's five forces to analyze the industry competitiveness. For example, the bargaining power of the buyer and the supplier, the threat of new entrants, threats of substitution are the factors that determine the industry competitiveness.
Salesforce.com can use the framework to analyze how each of the competitive forces influences Salesforce.com profitability thereby develop or redesign its strategy to increase its competitive advantage and how to sustain its profitability. Additionally, Hampton & Stratopoulos (2015) argued that it is important to note that the buyer power dimension would be used to examine how the increasing buyer power can affect its profitability by driving prices down or demanding for more or higher discounts as well. On the other hand, the supplier power would be examined to determine how each of Salesforce.com's suppliers can demand higher prices for the services they deliver to Salesforce.com. If the suppliers have more bargaining power, they can force Salesforce.com to pay more or sell the same technology to their competitors (Nelson, 2016). The threat of substitutes refers to the availability of other companies or products in that compete for same customers. These are threats because the customers have alternative providers (Adilov & Alexander, 2006). Salesforce.com can use such knowledge to design products with qualities such as those of the competitors or improve the quality of their service offering. Finally, the competitive rivalry analysis would help in determining the number of competitors, the service offering, the cost of switching, as well as the level of customer loyalty.
b. What are the most important competitive advantages that Salesforce.com has in this market? Explain.
Sale force has price and feature set leader which mean that its service offering is competitively priced and the features are also incomparable to those of its competitors. Secondly, Salesforce.com's service cloud has a community functionality that the competitors do not have. This is a source of competitive advantage for Salesforce.com exploit and gains a competitive edge over its competitors. Salesforce.com's differentiated services are aligned with the clients budget with the offering such as lightning unlimited is dependant in the client's usage behaviors.
4. Marketing Cloud Analysis
a. Briefly summarize the Lay of the Land in this market.
Salesforce.com's marketing cloud was achieved by Salesforce.com through acquisition and integration. Salesforce.com purchased Exact Target in 2013 which has since served as Salesforce.com's products backbone and its core digital marketing platform. The cloud has enabled Salesforce.com's clients to build, target, monitor, analyze, as well as automate Omni-channel marketing campaigns (Nelson, 2016).
b. What are the most important customer advantages to doing business with Salesforce.com?
The main customer advantages are the vertical differentiation and integration provided by the suite. Salesforce.com provides the customer with end-to-end CRM suites. The multichannel marketing platform enables the customer to capture and utilize data from all channels thanks to the cloud products. The clients do not have to work with other customer relationship management cloud service providers.
Adilov, N., & Alexander, P. (2006). Horizontal merger: Pivotal buyers and bargaining power. Economics Letters, 91(3), 307-311. Doi: 10.1016/j.econlet.2005.09.008
Fatima, Z., & Azam, M. (2016). A study of salesforce control systems and sales forcemotivation. The Marketing Review, 16(4), 357-371. Doi: 10.1362/146934716x14636478977917
Fisher, C. (2017). New Technologies for Mobile Salesforce Management and CRM. American Journal Of Industrial And Business Management, 07(04), 548-558. Doi: 10.4236/ajibm.2017.74040
Hampton, C., & Stratopoulos, T. (2015). Financial Reports Based Proxies for Bargaining Power of Buyers and Sellers. SSRN Electronic Journal. Doi: 10.2139/ssrn.2650793
Nelson R. (2016). May the Force Be With You: Wide Newest Software Empire -Moat Salesforce.com. Is The market is discounting growth opportunities and operating leverage for this software leader? Morningstar Equity Research
Paschen, J. (2017). Choose wisely: Crowdfunding through the stages of the startup lifecycle. Business Horizons, 60(2), 179-188. Doi: 10.1016/j.bushor.2016.11.003
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