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Salesforce SWOT Analysis: 6 Factors Affecting the SaaS Company

PESTLEanalysis Team
PESTLEanalysis Team
Table of Contents
Table of Contents

Our Salesforce SWOT Analysis reveals insights about one of the leading cloud-based companies that provide SaaS, evaluating its strengths and weaknesses.

Imagine if software-providing companies didn't exist; What would the world be like? Probably no computers, smartphones, smart TVs, or software-containing devices would exist. That's horrible.

The usage of software is indeed essential in today's world. However, conventional software companies made it difficult for people to buy the original software and then download it on their devices.

Soon when the cloud-based software companies were introduced, they made it easy for the users to use software by providing SaaS. Since Salesforce is considered one of the leading cloud-based companies that provide SaaS, today we will conduct Salesforce SWOT Analysis to get some insight about the company.

Before proceeding with the company's SWOT analysis, it is essential to look at the history of Salesforce. Salesforce was established in 1999 by an employee of Oracle, which was considered one of the software companies.

Salesforce was made with the idea of providing software to the masses in the most efficient way over a cloud computing system. Initially, this idea was mocked by the orthodox software companies until Salesforce launched its first product, which was customer relationship management software.

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Salesforce's CRM software has gained popularity since it was very efficient, user-friendly, and affordable. Soon after its product got recognized worldwide, Salesforce experienced growth.

As a result of this growth, Salesforce decided to go public in 2004. The company generated $110 million from the IPO as the stocks of Salesforce were traded at $17.25 on the first day. After the IPO, the company continued to grow.

Salesforce worked hard in the upcoming years and managed to generate revenue of more than $1 billion in 2009. In addition, the company successfully became the first cloud computing company to generate more than $1 billion of annual revenue with the help of 55,000 customers who used the company's CRM tool.

Currently, Salesforce is considered among the top software companies in the world. In 2022, it managed to generate revenue of $26.49 billion. In addition, the cloud-based software company has spread its operations over the years.

The company initially started with a small number of employees back in 1999. However, currently, Salesforce employs 73,541 workers to look after its operations. The software company currently has a market cap of $149.8 billion, which shows how big the company has become over time.

Products of Salesforce

After discussing Salesforce's history and current operations, let's focus on what the software company offers.

Salesforce has developed several products over the years. Since Salesforce targets businesses, the products they offer are all business related. For example, Salesforce offers a Sales product that analyses and organizes all the data related to the sales of a business.

Since Salesforce offers products needed in different industries, it categorizes its products based on industries. For example, the financial industry has products used in finance, such as Banking, Insurance, and Wealth and Asset management tools.

Now that we have discussed the product line of Salesforce. Let's proceed further and carry out a Salesforce SWOT analysis to find out the internal and external factors that impact the operations of Salesforce.

However, before we proceed to the SWOT analysis, it is essential to know what SWOT analysis is. SWOT analysis is the short form for any organization's strengths, weaknesses, opportunities, and threats.

A SWOT template represents all the internal and external factors that impact any organization in a very precise manner that is easy to understand.

Now that you know what SWOT analysis is let's conduct a Salesforce SWOT analysis.

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Strengths of Salesforce

All the organizations possess strengths that help them consolidate their position in the market. This is the first section of the SWOT analysis. In this section, we will have a look at what strengths Salesforce possesses.

One of the Leading Software Company

In any industry, there are certain advantages that top players enjoy, such as a high market share and a vast customer base. These advantages act as a strength for the companies in the top position.

Similarly, since Salesforce is considered one of the top software companies, the cloud-based company has the advantage of holding a significant market share. Besides that, since it is among the top companies, this means that Salesforce has a massive customer base. Currently, Salesforce is providing service to 150,000 businesses across the globe.

Diverse Portfolio

Companies spend a lot of money and time developing a diverse portfolio since it is necessary to expand a business.

Salesforce is one of the most well-known software companies regarding CRM tools and services. The company's products and services are aimed at helping businesses manage customer relations and sales. The details of their offerings can be found on their website. So do search up the "products" option in the navigation bar.

Salesforce was initially created by two co-founders in 1999 who wanted to create a company focused on customer relationship management systems. Since then, it has increased its range of products and services. For example, some of the top products offered by Salesforce are Sales Cloud, Service Cloud, Marketing Cloud, etc.

Increasing Revenue

Every company aims to increase its revenues annually. However, it's not that simple. Businesses that are doing very well can manage to increase their revenue each year only by increasing their sales.

Salesforce is among those very few companies that manage to increase their revenue each year significantly. A 24% to 29% increase has been observed in Salesforce's annual revenue for the past three years. This continuous increase in revenue depicts growth in sales of Salesforce.

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Weaknesses of Salesforce

Weaknesses mark the drawbacks of a company that holds it back from getting successful. In this section, we will look at some weaknesses hindering Salesforce from achieving further success.

Dependence on One Region

Businesses tend to expand their operations in different countries to minimize the risk by reducing their dependence on one country for revenue. Salesforce is an American-based country.

But that doesn't mean that the software company doesn't generate revenue from anywhere else besides the US. Salesforce's total revenue is the sum of Asia's, Europe's, and America's revenue.

However, Salesforce generates a significant percentage of its revenue from the US. This can be risky because if the US market goes down in the future for some reason, the company will lose the majority of its revenue.

Increasing Marketing and Sales Expenses

In today's world, businesses pay great attention to marketing since good marketing techniques bring them more business. Software companies generally spend more on marketing since they don't have a tangible product to show.

Salesforce, one of the biggest software companies, spends a significant amount of money on marketing, due to which its sales expense is increasing yearly. In the current year, Salesforce spent $11.85 billion on marketing and sales.

Suppose the marketing and sales expenditure keeps increasing the same way. In that case, the profit margins of Salesforce will shrink, which can be alarming for the company.

High Employee Turnover Rate

A high turnover rate means the number of employees leaving a job is high. Companies with a high labor turnover rate tend to suffer because a lot of money is spent every time they go through the recruiting process. Moreover, having a high turnover rate dents the reputation of a company.

Salesforce has a high turnover rate. It has a reputation for frequently laying off employees. This means that the company would often spend a lot of money on recruiting, increasing its expenses, and lowering its profits.

Opportunities Present for Salesforce

Every business looks for opportunities to expand its operations and generate more revenue. If a company wants to grow, it must avail of the opportunities. Let's look at the opportunities that are present for Salesforce in the market.

Mergers and Acquisitions

Companies avail every opportunity to expand their operations. They form mergers and acquire small companies to penetrate and increase their market share. Mergers and acquisitions also reduce market competition, which is beneficial for companies.

Like any other company, Salesforce also has the opportunity to expand its operations by forming mergers and acquiring small companies. In the past, Salesforce has acquired companies like Datorama and MuleSoft for growth purposes.

Similarly, Salesforce can acquire more companies in the future to increase its market share and customer base.

Expanding Internationally

Companies looking to expand their operations in different parts of the world to increase their revenue through sales. No matter how many countries a company operates in, there is always an opportunity to tap some untapped markets.

Salesforce is a multinational software company. It has operations outside the US too. However, the company is still very dependent on the US in terms of revenue. Salesforce has an opportunity to tap some untapped global markets that could benefit the company.

For example, Salesforce can target developing economies or countries where IT is growing, for example, Pakistan and India.

Expanding the Portfolio

Expansion of the portfolio is significant for businesses to dominate the market. When a company diversifies its products and services, it enters new markets. As a result, new revenue streams are formed, which benefits companies.

Salesforce can diversify its portfolio by offering new products. For example, Salesforce can also enter the hardware industry to diversify its portfolio.

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Threats faced by Salesforce

All companies face different sorts of threats from the external environment. These threats must be addressed timely before they affect the company adversely. In this last section of the SWOT analysis, we will look at some of the threats that Salesforce faces.

Increase In Competition

All the companies consider competition in the market a threat since higher competition leads to low profits. Similar to other industries, competition in the SaaS industry has increased over the years.

Salesforce is facing intense competition in the cloud industry. Many companies compete with Salesforce on the platform where they provide support and services that help organizations adopt Change Automation.

Increased competition in the market poses a threat to Salesforce since profits are being shared among other companies such as Microsoft, Google, SAP, etc.

Sanctions Against Russia

Russia is one of the world's biggest markets, having more than 144 million consumers. However, the conflict between Russia and Ukraine has forced companies to suspend their operations in Russia.

Like other companies, Salesforce also decided not to cater to their Russian customers. This decision has cost Salesforce significant revenue that used to be generated from Russia. In addition, the Russia-Ukraine war is a threat for Salesforce since it is lowering its profit margins.

Threats of Data Breach

As technological developments have taken place, data breach threats have also increased. Every now and then, cases are filed against companies in which they are accused of misplacing the data of the users.

Since Salesforce is a SaaS company, it collects personal data from its users before registering them onto SaaS applications. Salesforce stores all the collected data of its users on the cloud. If an outsider gets access to Salesforce's customer data, the personal data of its users will be leaked.

This can cause trouble for Salesforce since lawsuits can be filed against it, causing the company to pay millions of dollars as fines.

Salesforce SWOT Analysis: Final Word

Software companies are essential in today's technological world as they provide software to consumers across the globe. Salesforce is one of the most renowned cloud-based software companies. In addition, it is considered among the top companies that provide SaaS.

In this article, we shed light on the history of Salesforce and discussed its current operations. We then proceeded further to carry out a Salesforce SWOT analysis to see the internal and external factors that affect the operations of Salesforce.

Besides the essay form, we can also use SWOT Matrix or table to analyze the strengths, weaknesses, opportunities, and threats an organization faces.

Today's article discussed that continuously increasing revenue and the diverse portfolio of Salesforce are big strengths for the company.

On the other hand, high employee turnover rate, increasing expenditure, and high reliance on one region are some of the key weaknesses of the company.

Besides that, Salesforce has some great opportunities to avail, while it also has some threats to deal with. Reading this article would have taught you how to conduct a SWOT analysis. Besides this example, have a look at some other examples of SWOT analysis to get a better understanding of this business tool.



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