Competitive Advantages of Salesforce.com in the Philippines

Salesforce.com is a multinational corporation that offers customer relationship management (CRM) cloud-based software to approximately 150,000 customers from many parts of the world (Salesforce.com, 2018). The company operates in the ever-changing telecommunications and technology industry. Saleforce.com needs to expand its customer base and improve its product in a way that can enable it remain competitive. One of the countries that Salesforce.com should consider during its expansion is the Philippines. In the last several years, the Philippines has been experiencing increased fast and reliable internet penetration. More businesses in the Philippines now have access to faster and more reliable internet than was the case five years ago. Moreover, the Philippines has a large population of 104 million people (BBC News, 2018). Therefore, expanding in the Philippines would be a good business venture as the company is likely to find a large market. At the same time, Salesforce.com is likely to face less competition in the Philippines because it has many competitive advantages compared to its competitors. Competitor analyses show that Salesforce will face competition from Avanza, which is a local corporation, and Bitrix24, which has its headquarters in the United States. Avanza has an advantage of knowing its country well and having many connections in the Philippines (Quema, 2016). Moreover, its staff can communicate in both Filipino and English languages, which would make it easy for them to connect well with the locals. Similarly, Bitrix24 has an advantage as it charges lower prices for its products compared to Salesforce. In spite of these advantages, Salesforce.com is likely to win the competition because of its size (Salesforce, 2018). As a large company, Salesforce has many resources that will enable it to market its products to all its target customers. Moreover, it offers customized CRM products that are suitable for large businesses. Therefore, it is expected that Saleforce.com will have many customers in the Philippines, which will enable it to mitigate country-specific risks that could affect its business. In particular, large economies of scale will cushion it against high taxes that the country levies foreign companies.

Lastly, based on the findings of competitor analyses, it is recommendable for Salesforce.com to pursue a differentiation strategy. The company should focus on the uniqueness of its products when marketing itself to other organizations in the Philippines. Since the company cannot compete effectively by pursuing a cost leadership strategy, it is advisable for it to focus on what makes its CRM products unique. Moreover, it should pursue generic differentiation by targeting large organizations. Its competitors do not have the capability to provide customized CRM products to large organizations (Bitrix24, 2018). Therefore, Salesforce.com should focus on this market segment to remain competitive in the Philippines market.

Salesforce.com should identify the right competitive strategy in order to beat the competition in various countries. This paper seeks to identify the right competitive strategy that Salesforce.com should adopt in the Philippines. In doing so, this paper will compare the strengths and weaknesses of Salesforce.com with those of two selected organizations. Salesforce.com, Inc. was established in 1999. Its headquarters are located in San Francisco, California (Salesforce.com, 2018). The company offers customer relationship management (CRM) cloud-based software. At the beginning of 2018, it had more than 150,000 clients drawn from different parts of the world. Businesses require CRM to improve their efficiencies in dealing with their customers. CRM technology enables entities to anticipate customer needs, track down the way customer issues are being dealt with, collect more information about clients, and customize each client’s experience (Salesforce.com, 2018). All these functions aim at improving customer relationships as well as maximizing an entity’s productivity to its clients. The telecommunications and technology industry, in which Salesforce.com falls within, has been changing rapidly in the last few decades. New companies in this industry have come up within the last two decades and ended up being among the top industry leaders. As such, organizations within this industry need to keep innovating and differentiating their products for them to remain ahead of their competitors (Salesforce.com, 2018).

Salesforce has a variety of software clouds to offer to the Philippines market. For example, it offers service cloud which includes automated routing, computer telephony integration, self-service customer portals, social network integration, mobile CRM, call center case management with chat, customer communities, chatter, and escalations (Salesforce.com, n.d.). The company’s sales cloud includes marketing management functions and sales force automation. Some of the functions in the sales cloud include content management system, partner relationship management, opportunity/contact/lead/account management, email and calendaring, mobility, basic approvals and workflow, and chattering. Moreover, the organization offers its sales cloud in different editions depending on the size of the customer. Its contact manager supports a maximum of five users and its charges are $5 per user per month. On the other hand, its unlimited edition supports a large number of users at all time and costs $250 per user per month (Salesforce.com, n.d.). Having different editions with different prices and capabilities will enable the company to offer its services to both medium and small sized organizations in the Philippines.

Salesforce.com’s offices in the Asia-Pacific region are located in Singapore (Salesforce.com, n.d.). Given that the company has been keen to expand its presence in the region, this research paper compared Vietnam with the Philippines in order to determine where the company should focus its efforts. The researcher concluded that the Philippines offers better prospects than Vietnam due to a few reasons. First, the Philippines has a higher population than Vietnam. The Philippines has 104 million citizens compared to Vietnam’s 92 million (BBC News, 2018). Second, the Philippines is a democratic country that has enjoyed political stability for many years. Moreover, it is a member of  international organizations, such as the United Nations, which influence the country’s political and economic policies. On the other hand, the Vietnamese government has protectionist policies that favor local organizations while putting international competitors at a disadvantage. Therefore, the Philippines was a better opportunity for Salesforce.com compared to Vietnam.

I. Competitors’ Strengths and Weaknesses

The researchers selected Bitrix24, a global competitor, and Avanza Inc., a local competitor, in order to conduct a competitor analysis and strategy for Saleforce.com.

A. Bitrix24 Strengths and Weaknesses

            Bitrix24 is a United States- based entity that offers CRM services to businesses in different parts of the world. It is easy to set up and its prices are low. It is also suitable for small enterprises that have zero to fifty users. Bitrix24 has a CRM tool that is mobile-friendly and simple to use. Moreover, small entities that have fewer than twelve users are likely to save money since Bitrix24 is free for twelve users. On the other hand, Bitrix24 has features that are general for all users (Bitrix24, 2018). Compared to Saleforce.com which can customize its product depending on specific customer needs, Bitrix24 has a small room for customizing its product.

            An assessment of the strengths and weaknesses of Bitrix24 based on the issues identified in country analysis suggests that the company would not compete effectively in the Philippines market. To begin with, Bitrix24 is a US-based company, and as such, most of its employees would experience difficulties offering support services to local small enterprises. This is because even though the Philippines has two common languages, many locals are comfortable with Filipino as opposed to English. Therefore, a foreign company might have more challenges connecting with locals compared to a local company. Moreover, the Philippines subjects foreign corporations to a higher tax compared to local companies. Higher taxes impose a heavier burden on foreign companies operating in the Philippines.

            On the other hand, the country analysis research revealed that the strengthening of the US dollar weakened the Philippines peso. The weakening of the peso would place local companies at a disadvantage compared to a foreign company. Therefore, Bitrix24 seems to have an advantage over local competitors as far as currency value changes are concerned. It is also important to note that should tide change and the American dollar weakens, Britrix24 would be at a disadvantaged position due to adverse currency conversion effects.

B. Avanza Inc. Strengths and Weaknesses

            Avanza is a Filipino company that offers CRM products to businesses in the Philippines. It has been assisting its clients to grow and retain their customers for the last 20 years (Quema, 2016). Avanza has customers in cement, fast-food, oil, insurance, banking, medical, and retail industries. In the last decade, Avanza has been investing in innovative technologies to convert client knowledge into profitable customer management activities. It has relationships with more than 2,000 vendors. According to Quema (2016), Avanza has been running the grassroots program since 2012.

            As a local corporation, Avanza has several strengths compared to foreign entities. To begin with, its employees are from the Philippines and they are fluent in both English and Filipino languages. As such, they can offer support services to anyone who needs CRM products in the Philippines. Moreover, they can connect well with the local entities through their grassroots programs (Quema, 2016). At the same time, Avanza pays a lower tax compared with other foreign entities. That could be an advantage at a time when the growth rate in the country is not as good as it might have been expected.

            On the other, the Philippines experiences about five natural catastrophes each year. Even though no entity can prevent the negative effects of natural catastrophes, some organizations tend to suffer more loss than others. For instance, a local company such as Avanza would be at a greater disadvantage than a multinational corporation such as Salesforce.com. Therefore, the size of Avanza is a weakness as it is more likely to suffer significant losses if a natural catastrophe were to occur in the Philippines.

II. Comparing Salesforce.com Strengths and Weaknesses to Competitors

            Salesforce.com gives its customers a wide variety of products. Moreover, it has strong partnerships with many large technology companies such as Google. Customers who opt to use the products that Salesforce.com provides can request for their products to be configured in a way that suits their business needs (Salesforce.com, 2018). At the point, it is important to note that Bitrix24 and Avanza do not have a room for configuring their products in accordance with each client’s unique requirements and specifications. In addition, Salesforce.com targets both medium and large-sized businesses while Avanza and Bitrix24 tend to go for small and medium-sized entities. Salesforce.com’s many product varieties ensures it has a suitable product for every business whether large or small. The strengths of Salesforce.com could be a competitive advantage in spite of the high tax that the company has to pay as a foreign entity. Offering many customized products cushions an entity against adverse economic forces (Salesforce.com, 2018).

            At the same time, Salesforce.com has several weaknesses. First, the Philippines is a developing country which means many of the small entities could be struggling financially. This puts Salesforce.com at a disadvantage since some of the small businesses might find its products to be too costly. As such, small entities might choose cheap products from the competitors of Salesforce.com (Salesforce.com, 2018).

III. Areas where Salesforce.com Has Competitive Advantages Relative to Competitors

            Salesforce has a competitive advantage because of its large size. Salesforce.com is a global entity that has over 150,000 customers (Salesforce.com, 2018). As such, operational challenges in one small developing countries in the world such as the Philippines is not likely to affect the company’s profitability in a great way. This is not the case for its two competitors. Any substantial operational challenges in the Philippines could affect the profitability of Avanza and Bitrix24 in a great way. The recent Business monitor international report for country risks indicates that Philippine’s short-term political risk index is 63.1%. This means that the probability of short-term political instability is higher than one half. Moreover, the country is prone to natural catastrophes that make some parts of the country inaccessible. If any of these risks occur, the loss suffered by Bitrix24 and Avanza could amount to a significant percentage of their profits due to their relatively smaller sizes compared to Salesforce.com.

            At the same time, Salesforce customizes its products to suit each of its client’s needs. Moreover, it offers products with many more features compared to its two competitors (Salesforce.com, 2018). As a result, Salesforce is in a better position to take advantage of the Philippines’ increased internet penetration. As fast and reliable internet continues to penetrate all parts of the country, it is likely that many entities will be able to use internet-based products such as CRM products.

            Salesforce.com should choose an appropriate competitive advantage strategy to enable it to remain competitive in the market. To start with, Salesforce.com can choose cost leadership strategy. This strategy would require it to focus on cutting its costs in order to compete effectively against its competitors. The fact that Salesforce does not have offices in the Philippines indicates that the company is keen to lower its costs. The company incurs administrative and office expenses in Singapore where it has its regional offices (Salesforce.com, 2018). In addition, the size of Salesforce Corporation gives it an advantage in terms of economies of scale. As a result, percentage of shared costs attributable to a particular country tend to go down. For example, the cost of research and development attributable to the Philippines is relatively smaller than if the company was operating in a few countries as is the case with its competitors.

            Another option that Salesforce.com should consider is the differentiation strategy. In the past, Salesforce.com has been successful in customizing its CRM products based on its customers’ needs, for which it charges them extra fees. At this point, it is worth noting that its global competitor, Bitrix24, does not offer highly customized CRM products to its clients. Similarly, Avanza’s ability to customize CRM products cannot be compared to that of Salesforce.com. In the future, Salesforce may have to continue to differentiate its products in a way that solves various client problems in the best way possible to give them the best experience.

V. Recommendations

            An analysis of competitive strategies that Salesforce.com can pursue suggests that it has two options. First, it can pursue differentiation strategy. Second, it can also pursue cost leadership strategy. However, it may not be advisable for Salesforce to choose cost leadership strategy since it would still be unable to pass on the lower costs to customers in form of lower prices as its competitors charge too low prices for it to match. For instance, Bitrix24 does not charge anything for CRM products for a small number of customers up to twelve. Even though cost leadership may not necessarily lead to proportionate price leadership, the company can continue to cut its costs while charging the same prices to improve its profitability.

            In addition, it is recommendable for Salesforce.com to pursue differentiation strategy for it to compete effectively against all its competitors. A good differentiation strategy should encourage the perception that the firm in question offers a unique product to its customers. According to Helms (2009, p.897), a differentiation strategy should aim to convince customers that a firm offers unique desirable features, irrespective of whether this perception is based on real features or on what customers think. Moreover, differentiation strategy works in cases where clients are price-insensitive. While marketing its product in the Philippines, Salesforce.com should let the customers know why they are being charged high prices. The emphasis should be on the uniqueness of product features, which justify a high cost (Lacobucci, 2015).

            The right differentiation strategy for Salesforce.com should have certain features. First, it should include brand image (Kapferer, 2012). Salesforce should aim at having a strong trusted brand in the Philippines. The firm should make its customers believe that they are getting their CRM product from one of the most popular brands in the world. Next, Salesforce.com ought to market its products as technological tools that can enable clients to solve their customer management challenges while giving them an opportunity to anticipate and meet customer needs. Depending on the way Salesforce.com will market its differentiated product, it is likely that customers will not worry about price differences between its products and those of its competitors (Helms, 2009).

            Moreover, it is also advisable for Salesforce.com to adopt the generic strategy in the Philippines. Avanza and Bitrix24 are well suited for a large percentage of small entities that do not require complex CRM products. Therefore, it might be more involving competing with them in areas where they seem to have price advantages. Salesforce.com should focus on marketing its product for medium and large organizations. Firms can differentiate themselves by targeting a specific market segment (Helms, 2009). In this case, Salesforce would have more competitive advantages if it advertised itself as the provider of CRM solutions for medium and large organizations. Many large organizations are likely to be interested in the benefits that Salesforce.com offers through its CRM products as opposed to the price it charges.

            Lastly, Salesforce.com should adopt a combined strategy when implementing its differentiated strategy. Since it already has significant presence in the Philippines, it can start to advertise its products in a way that attracts the attention of its targeted segment. There would be no justification to implement its strategy over time. In any case, technology is always changing and if it takes long before implementing its strategy it might have to deal with other powerful competitors in the future.

Conclusion

            A competitive analysis indicates that Salesforce,com has several competitive advantages in the Philippines. To begin with, Salesforce offers a variety of customized products that are suitable for all businesses entities. Its ability to sell its product to many businesses will improve its profitability, and thus, cushion it from the effects of high taxes that the Philippines levies foreign corporations. Its foreign competitors that do not have the capacity to attract many large customers may be at a disadvantage due to high taxation. Moreover, Salesforce.com stands a better chance to gain from the increased penetration of reliable internet in the Philippines compared to its competitors. As a large company, it has the necessary resources to market its product and reach all potential customers. In addition, given that the Philippines experiences several catastrophic incidents that affect businesses in the country, there is a likelihood that some local entities such as Avanza suffer significant losses when such incidents occur. Moreover, in case of any political instability or incidents that affect the business environment in the country, Salesforce.com would suffer less significant losses compared to its competitors. Finally, Salesforce.com should pursue a differentiation strategy by focusing on the uniqueness of its features. It should continue to innovate in order to customize its CRM products in accordance with client needs. Investing in research and development to facilitate innovation will enable the company to remain competitive in an ever-changing technology industry.

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