Five Forces Analysis of ‘ Salesforce.

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Presented for Group Discussion -1

Group 4

Akanksha Shahi

Ali Khalife

Devina Tewari

Josiah Ott

Musharaf Khaj


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 (1) What is this product/service your group will select?

Salesforce- which is a cloud-based applica on so ware providing a comprehensive customer

and collabora on rela onship management system (or CRM) service to businesses of all sizes
and industries worldwide, and a technology pla orm for customers and developers to build
and run business applica ons. Salesforce is provided as a service that rms subscribe to, and it
operates on cloud servers. This is referred to as So ware as a Service (SaaS).

Product 13
Industries 14
Companies 1,50,000

(2) Who is the customer of this product/service?

Current customer
- Business-to-Business companies. Salesforce's customer mix re ects that of Industries such as
• Banks and Financial ins tu ons
• Retailers
• Online businesses
• Healthcare
• Manufacturers
• Academic ins tu ons
• Other Service industries
Some of the major companies are Razor pay, Spo fy, Walmart, Amazon Web Services, Toyota,
American Express.

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 b. Future customer
Salesforce's poten al customers could be several other ver cals such as SMB (small-mid-sized
business) online business and Enterprise customers which are typically in pursuit of a low entry
barrier, and high payo opportunity.

(3) Who is your compe tor of this product/service?

a.Direct compe tor
Direct compe tors are the most recognizable and are the companies you compete with the
most. You encounter these companies most in your win/loss analysis. They are typically in the
same category as you and o er very similar products and services. When evalua ng di erent
solu ons, poten al buyers compare competencies. Some of the major products directly com-
pe ng with salesforce are SAP, Oracle, Microso Dynamics, Sugarcell, Pipedrive and Zoho.

b. Indirect compe tor (subs tute product)

Replacement compe tors (also known as subs tutes) are the hardest to spot. They o en mes
provide a di erent product or service altogether that can be perceived as a subs tute solu on
for your same customer base in certain situa ons. Salesforce and HubSpot CRM are indirect
compe tors. HubSpot is primarily a marke ng automa on pla orm that added a free CRM (and
con nued to build it out). They both sa sfy the need for organized customer data and cus-
tomer connectedness, but HubSpot achieves connectedness through marke ng automa on
complemented by lightweight CRM func onality. Google Sheets would be an indirect compe -
tor to Salesforce. Both keep you organized and help you understand your customer base, but
they do so in very di erent ways.

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 (4) Who is the supplier (if any) of this product/service?

All most all the companies in the Applica on So ware industry buy their raw material from
numerous suppliers or ISV’s ( Independent So ware Vendor)

Bargaining Power of Buyers Bargaining Powers of Suppliers

Threat Of New Entrants Threat Of Substitutes

Threat Of Substitutes Bargaining Power of Buyers

Industry Rivalry

Threat Of New Entrants Bargaining Powers of Suppliers

Threats of New Entrants

Although the barriers to industry entry is low, with a few thousand dollars you can enter the
market, it is very hard to obtain a good posi on and maintain it for a longer me. Actually, the
threat level of new entrants for Salesforce.com in customer rela onship management services
is low. The rst reason is that such companies were able to establish very high-value brands
which in uence buyers to make decisions when buying their products. Second, with the experi-
ence they have gained since their founda on, these big players can not only maintain their po-
si on in the industry but also can change its shape, expand it and iden fy new direc ons and
trends.
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 Bargaining Power of Suppliers
All most all the companies in the Applica on So ware industry buy their raw material from
numerous suppliers. The number of suppliers in the industry in which Salesforce operates is a
lot compared to the buyers. This means that the suppliers have less control over prices and this
makes the bargaining power of suppliers a weak force. The product that these suppliers provide
are fairly standardised, less di eren ated and have low switching costs. This makes it easier for
buyers like Salesforce to switch suppliers. This makes the bargaining power of suppliers a weak-
er force. The suppliers do not provide a credible threat for forward integra on into the industry
in which Salesforce operates. This makes the bargaining power of suppliers a weaker force
within the industry. The industry in which Salesforce operates is an important customer for its
suppliers. This means that the industry’s pro ts are closely ed to that of the suppliers. These
suppliers, therefore, have to provide reasonable pricing. This makes the bargaining power of
suppliers a weaker force within the industry.

Bargaining Power of Buyers

The sales transac on in the so ware industry can be classi ed mainly into two groups: Busi-
ness-to-Business (B2B) and Business-to-Consumer (B2C). The number of Business-to-Govern-
ment (B2G) transac ons has been rapidly growing for a few years. The bargaining power of
buyers is di erent in di erent segments due to segment features and customer types. For ex-
ample, as in this case of collabora on so ware segment, the suppliers are only a few big play-
ers, the bargaining power of buyers is small or as the biggest CRM applica on company, Sales-
force.com reduces the bargaining power of customers signi cantly.The product di eren a on
within the industry is high, which means that the buyers are not able to nd alterna ve rms
producing a par cular product. This di culty in switching makes the bargaining power of buy-
ers a weaker force within the industry.

Threats of Subs tute Products or Services

Threat of subs tute products is very low because there are no other products that can subs -
tute so ware packages. One of the determinants threat level is the switching costs, which
refers to monetary or non-monetary e orts the customers have to incur to change the suppli-
ers or products. Switching costs in so ware industry especially in its CRM Segment are very
high and it is not only because of nancial reasons but also for non-monetary costs like adapta-
on period of employees to the new system, training process, restoring and customizing the
exis ng data in the new system.

The threat of established rivals

The applica on so ware industry growth now is more stable and smoother than in 1980s or
1990s but the number of market par cipants is growing steadily. This is leading to high rivalry
in applica on so ware industry. Especially in the last few years a lot of companies from devel-
oping countries entered industry and obtained good posi ons in local markets.
Fixed costs in the so ware industry follows an increasing trend and it is one of the most impor-
tant factors for high rivalry among companies which is trying to maintain their market shares.
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Five forces Analysis- ( Looking Forward)

Salesforce.com faces signi cant uncertainty stemming from the highly compe ve and rapidly
changing nature of the CRM industry. Thus far, Salesforce.com has excelled in this environment
by combining Scrum management philosophies with an aggressive acquisi on strategy to out-
innovate its much larger and less agile compe tors. Whether Salesforce.com can maintain the
current pace of innova on is an open ques on. Despite strong growth in revenue, Salesforce.-
com has seen its opera ng pro t margin deteriorate, placing it in the precarious posi on of
having both higher prices and lower margins than its rivals. And as cloud services are increas-
ingly commodi zed, the downward price pressure will only increase.
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