SWOT Analysis of CRM Software Development Industry in the Philippines

Executive summary

Salesforce.com is launching its products in the global market in order to improve its profitability and market share in the global industry. The company targets the Philippines. Team 4 Consulting Group (T4CG) recommends strategies that will enable the company to explore external opportunities and opportunity support factors in the Philippines as well as mitigating strategies for industry and country threats. The team carried out a SWOT analysis to determine the internal strengths and weaknesses of Salesforce.com in a bid to craft its global strategy. The team further analyzed the CRM software development industry in the Philippines to determine the opportunities and threats in the global market. Using Salesforce.com’s TOWS matrix, the team recommended comprehensive strategies to enable the company thrive in the global market as well as overcome some of the threats in the industry. Based on the results, Salesforce.com will leverage its economies of scale to scale up production in the Philippines and balance the demand and supply of CRM software development services. The company will also invest in new technologies and innovation to develop new products that will cater for the needs of various consumers in the industry. Moreover, Salesforce.com will implement a product diversification strategy to spread risks and increase profitability. The company will also position its brand as of high quality through focus on customer service and not market share expansion. Salesforce.com should also invest in corporate counsel to cushion itself from legal tussles.

Salesforce.com, Inc. is an American CRM cloud-based software company located in San Francisco, California. Established in 1999, the company has 29,000 employees and 150,000 customers worldwide. Its products and services provide CRM technology to assist businesses in improving their customer relationships and daily productivity. CRM technology helps businesses connect and collect information from customers to customize each experience and anticipate their demands. Tailored CRM products contribute to improving company efficiencies to maximize productivity. Forty percent of its customers reported productivity increases using the mobile application. Its ability to forecast and anticipate customers’ needs through productivity helps companies foster better customer relationships. Tailored products also allow companies to improve internal productivity. The next target country of entry for Salesforce.com is the Philippines. An economically growing country, the Philippines presents ample opportunities for Salesforce.com with minimal risks. The country is advanced, its gross domestic product (GDP) is $825 million United States dollars (USD), and its inflation rate is only 3.2 %. Its economic growth is 6% and the Philippines is greatly investing in the technology industry. The country has the required resources for Salesforce.com to operate efficiently. Most importantly, the Philippines has a market size of 400,000 companies with 56,000 renewing their licenses. Export.gov (2017) identified renewable energy and information and communication technology (ICT) among the best prospects for U.S. companies in the Philippines. The renewable energy aligns with, and reinforces, Salesforce.com’s vision of improving the environment. Therefore Philippines is a prospective economic hub which has the potential of competing in the global scale if the policies outlined will be followed. In addition, the country has experienced a surge in the youthful populations more than the old people. The implications are that there are more individuals who can provide a workforce that will increase the economic viability of the country. In few years, the country anticipates to compete with world giants like the USA and China.

Introduction

Salesforce.com Inc is faced with challenges in the global market particularly in the Philippines. Therefore, this paper examines the TOWS strategies that the company should implement in order to mitigate the risks and weaknesses identified in the country. The document further examines how Salesforce.com can leverage its internal strengths to exploit the identified external opportunities in the Philippines. Salesforce.com, Inc. is an American customer relationship management (CRM) cloud-based software company located in San Francisco, California (markets mba-tutorials.com). The firm is targeting Philippines as the country of entry. Salesforce.com anticipates competition from the local Filipino as well as global competitors. Local firms that run CRM business recommend that this organization adopts a viable business plan in order to sustain competition. To gauge the rivalry in the area, multiple companies’ strengths and weaknesses as well as those of Salesforce.com were examined (Jadayil, Khraisat & Shakoor, 2017). The firm offers many different services and it operates to assist other organizations. Since there are other players like Salesforce.com, it must develop an effective business plan to ensure success in the region. The Philippines was the suitable choice for Salesforce.com because the population is highly educated, they speak English, and they have a great infrastructure. The nation is growing and continues to improve its network. These reasons explain why Salesforce.com chose the Philippines as its next entry of expansion. The target buyer comprises of students who occupy most of the institutions where software materials are highly utilized. Besides, the age of the learners is suitable since they have the energy to manipulate the products to suit their needs. Other buyers who make up the target market are entertainment institutions who use the software to create graphics that appeal to customers. About 55% of the Filipino comprise of the youths thus the company stands a better chance of making large volumes of sales. There is a possibility that this number would increase significantly to 60% given the improved health status of the country, courtesy of the rising economy.

External opportunities identified in the Philippines

Salesforce.com Inc will seek to exploit external opportunities in Philippines in order to expand its market share and achieve its business objectives. These prospects include the high number of businesses in the Philippines with 56,000 of them planning to renew their licenses (saylordotorg.github.io) and the central role of the CRM software development sector to the economy of the Philippines where it accounts for 50% of the country’s GDP. Others are the growing number of mobile subscribers in the Philippines (markets mba-tutorials.com), government policy and its investment in telecommunication infrastructure in the country and lastly the little competition in the CRM software development industry (Jadayil, Khraisat & Shakoor, 2017). Further opportunities include the burgeoning number of academic institutions and the growth of the entertainment industries. The two sectors are largely accessed by populations from a vast cross-section of the Philippine land (Mindtools.com). In this sense, the economy has empowered people with the ability to earn decent incomes where they can afford higher education. Most of the institutions offering the learning services provide information through the use of software which is a product of the company in question (Mindtools.com.). Entertainment cuts across all ages and in the digital era, much of the content is stored and retrieved from software (Ezproxy.umuc.edu.).  Unlike in the past where music was created manually, today there are applications which are designed to produce tunes without the physical use of any instruments. Salesforce.com can take advantage of the changing times and extensively make a lot of profit from the opportunity (Mindtools.com.).

Threats in the Philippines

Salesforce.com Inc will seek to navigate the following threats where vendors with on-premise development and free subscription may easily join the industry and offer more competition. The companies may develop their own CRM software and therefore reduce the demand for the services of Salesforce.com Inc (markets mba-tutorials.com). The corporation will be taxed more than local entities and also incur costs associated with the currency exchange rates and inflation. The third risk is that Salesforce.com Inc may be threatened by lack of enforcement of intellectual property, patent and copyright laws in the Philippines (markets mba-tutorials.com). Massive invasion of piracy has curtailed the production of genuine software. In this perspective, individuals with wrong intentions duplicate the software and sell it at cheaper prices, limiting the sales for the company. Given that the vice is widespread, Philippines is a market that faces the same challenge. Apparently, Salesforce.com Inc may incur a lot of expenses to curb the menace (Ezproxy.umuc.edu.).  Competition is a threat to any business which intends to establish a niche in a certain market segment. For instance, there are other prospecting companies that view the Philippines as a rich destination to offer their software items (Mindtools.com.). The issues of pricing and quality will come into play thus if Salesforce.com Inc does not sufficiently address customer needs, the other players will outdo the company’s influence. Lastly, the foreign policy of the Philippines may not support the company’s business objectives (VolunteerHub.).

Exploiting strategies for opportunities and opportunity support factors

The large number of businesses in the Philippines means that the demand for the Salesforce.com’s CRM software will be high. Salesforce.com should use its financial economies of scale to expand its production of capacity in order to meet the high value. In the Philippines, the company will need to position itself as a reliable supplier with a high capacity to provide place and time utility for its products (markets mba-tutorials.com). A robust production strategy will ensure that the services are available to customers whenever they need them. Expanding production will require adequate investment in human resources, new technologies and distribution channels so as to meet the needs of all the businesses that will renew their licenses. Basically, the company will need to hire more workers, buy more machines and equipment and modify its employee shifts so that the number of working hours is increased to ensure more production (Jadayil, Khraisat & Shakoor, 2017).

The CRM software service sector is a strong pillar of the economy of the Philippines. Therefore, CRM software development is important to many industries in the country and its people. The economy is therefore receptive to new products in the industry especially those that guarantee higher quality and less costs. Salesforce.com should seek to reduce the costs incurred in the CRM software development industry as a percentage of the GDP (markets mba-tutorials.com). To achieve this, the company should carry out research and come up with innovative ways of production that will increase the quality of its services as well as reduce the costs of production. Such an innovation strategy will align the company’s goals with those of the Philippines economy because the CRM software development will be able to contribute more to the GDP and with fewer costs. Moreover, the improved quality will stimulate economic growth by enhancing more value creation in other sectors of the economy (markets mba-tutorials.com). An innovation strategy will also speed up the company’s penetration in the new market and increase its market share. The approach will also generate more revenue because of reduced costs thereby enabling it to implement corporate social responsibility initiatives (Jadayil, Khraisat & Shakoor, 2017). In a nutshell, an elaborate innovation strategy that is consistent with modern technologies and production methods will position the company as a major contributor of economic growth in the Philippines.

Salesforce.com should capitalize on the increasing number of mobile subscribers in the Philippines by diversifying its products in order to cater for the various needs of customers. Every mobile subscriber has their individual expectations and needs and may not necessarily require CRM software. Therefore, a product diversification strategy aimed at meeting various market demands would be ideal in market expansion (markets mba-tutorials.com). Moreover, the company will cushion itself from risks and losses that may result from failure of the CRM software segment to impress in the market. Salesforce.com should utilize its research and development department to carry out a comprehensive survey that will identify consumer needs to guide the design and implementation of the product diversification (Jadayil, Khraisat & Shakoor, 2017).

The government of the Philippines has consistently invested in telecommunication infrastructure in order to boost investor confidence and create an enabling environment for businesses to thrive (driveyoursucess.com). These investments will stimulate economic growth through job creation, setting up of businesses and making the CRM software development sector more vibrant (hult.edu). The perfectly elastic demand curve in the CRM software development sector will translate to higher prices for the CRM software development services with the increase in demand. Salesforce.com should take advantage of investments in the telecommunication infrastructure by using local resources in production so as to minimize costs and maximize profits. With investments in telecommunication infrastructure, Salesforce.com should use technologies available in the Philippines and not import them from the US. The company will be able to reduce its burden of taxes that would be incurred from importation of raw materials and currency exchange rates (hult.edu). In a nutshell, the government is supporting investments in the CRM software development sector and Salesforce.com should take advantage to reduce the operational costs per output.

The CRM software development market in the Philippines is less competitive with only a few firms. The small number of firms in the industry means that customers have little power because they do not have many substitutes (driveyoursucess.com). Nevertheless, with the increasing growth of the industry, more and more firms are likely to enter the market. Salesforce.com should capitalize on the little competition at the moment through a robust brand positioning strategy. The firm should anticipate future advances in technology and customer demands and position itself as capable of coping with those changes (driveyoursucess.com). Using its research and development capabilities, Salesforce.com should effectively analyze the industry and ensure every aspect of its production and service delivery resonates with the market. The company should focus on delivery of quality services so that customers recognize its value and integrity. Moreover, it should seek to achieve excellent customer service by hiring qualified and talented personnel from the Philippines who have a deeper understanding of the industry and the competition. Initially, Salesforce.com should not focus on expanding its market share but rather creating quiet opportunities for its customers (hult.edu). Once customers understand the credibility and value offered by the company, they will remain loyal and will not shift to other firms when more of them join the industry. Concisely, focusing on customer service rather than market share will enable the company to remain objective, strengthen its brand and attract more customers even with the entry of more firms in the industry.

Mitigating Strategies for Country and Industry Threats

With advances in technology and changes in industry demands, the CRM software development industry in the Philippines may witness the entry of new firms capable of offering on premise development. Currently, Salesforce.com solely offers off premise development and the entry of firms with on premise development services will offer more competition and reduce its market share. Nevertheless, Salesforce.com has a high capacity for research, innovation and product diversification (hult.edu). Essentially, the company should mitigate this threat by diversifying its product line and launching the on premise development segment. Launching the on premise development segment may require financial investments but will be more profitable in the long run because it will guarantee Salesforce.com its share of the market. However, the company should carry out adequate industry analysis to determine the viability of the on premise software development with respect to the customer needs and demand (driveyoursucess.com). The research will guide the product diversification strategy. Alternatively, Salesforce.com may specialize in off premise development as it is and focus on strengthening its brand so as to achieve optimum production and market share (driveyoursuccess.com). With a consolidated and loyal customer base in the off premise software development segment, Salesforce.com will not be threatened by the entry of new firms since their product lines will be different. Succinctly, Salesforce.com has the capacity to launch on premise development and reduce the market influence of new firms that may enter the market with that product line or may opt to specialize in off premise development and strive to attain its optimum market potential (hult.edu).

Companies may also opt to develop their own CRM software instead of sourcing the services of Salesforce.com. The organization should mitigate this threat by active research and innovation of its products so that they offer more value at cheaper cost than what companies can develop themselves. Value addition may also be enhanced by offering after sale services such as free maintenance of software so that the option of companies developing their own CRM software remains unattractive (Kijewska, 2016). Salesforce.com has the capacity to leverage its high sales turnover to plough back profits and offer cheaper services to more customers so to build a loyal customer base. Since the price elasticity of demand curve is perfectly elastic, a decrease in price of the products will lead to an increase in its demand, a strategy that will enable the company to consolidate its customer base.

Going global means the company will have to incur costs associated with currency exchange rates, inflation and taxes (driveyoursucess.com). Salesforce.com should cut down on taxes by using resources available in Philippines and not importing them. The vibrant CRM software service industry coupled with government investments in telecommunication infrastructure indicate the availability of resources necessary for Salesforce.com to achieve its business objectives without having to import any equipment (hult.edu). Moreover, the company should cut down on taxes and inflation costs by partnering with Filipino companies and using their distribution channels in order to share costs and spread the risks. Partnerships with local companies will weaken the company’s foreign tag and will enable it to minimize costs in the supply chain (driveyoursucess.com). Since the currency exchange rate fluctuates more often, the company should ensure that most of its transactions remain in the Philippines currency. Suppliers should be paid in their own currency so that the company does not incur losses from currency exchange rates (hult.edu). Salesforce.com should actively carry out financial market research to anticipate fluctuations in the currency exchange rates. With such information, the company may adopt the forward contracting approach where prices for future sales or transactions are agreed in advance to cushion the company from unfavorable exchange rates (driveyoursucess.com).

The lack of enforcement of copyright or intellectual property laws is another threat that may interfere with Salesforce.com’s business objectives. The ill defined regulations and potential corruption in Philippines poses the threats of violation of the company’s rights to intellectual property. To navigate this landscape, Salesforce.com should invest in knowledgeable and experienced corporate counsel who will ensure the company’s property rights are safeguarded (hult.edu). The corporate counsel will be able to advice the company accordingly on how to overcome any legal hurdles related to its intellectual property rights. Additionally, Salesforce.com should understand the legal framework and laws of Philippines and strictly abide by them so as to avoid legal tussles with the authorities that may make it vulnerable to abuse (driveyoursucess.com). If the company respects and abides by the laws of the land, the state will be more willing to protect its rights of intellectual property.

The foreign policy of the Philippines is one that is less dependent on the United States but inclined towards stronger partnerships with China (Jennings, 2018). As a result, American companies investing in the Philippines do not receive the cordial support accorded to the Chinese. However, the Philippine administration is now cozying up to the Trump administration, an indication that relations between the two nations may become better (hult.edu). The relations may be strengthened owing to the personalities of the two leaders and Salesforce.com should anticipate instabilities and changes in foreign policy. Importantly, the company should assess and understand the country’s economic and political landscape and its implications on regulations, interest rates, tax laws, trading laws and policy changes among others (hult.edu). A deep understanding of these implications and an accurate forecast of the same will inform the future decisions and strategies of the company.

The aspect of mergers and acquisitions serves as a comprehensive mitigation effort for any firm. For instance, the concept encompasses several hazards that may affect individual companies and blend them to provide a viable solution (Ezproxy.umuc.edu., 2018).  In the event that two companies are competing for a particular market niche, they can come together as a single entity where they will agree to divide the profits and liabilities according to the share contributions. The essential bit is that risks will be shared whether physical or financial. Mergers combine experience from managers of the respective organizations where they engage their expertise in solving challenges that would not be sorted by individual entities (Ezproxy.umuc.edu.).

There are short term and long term solutions to the risks that face an organization. Short term answers address the problem almost as soon as it happens whereas the other type gives a way over long spans of time. Mitigation efforts executed on a short period are easy to implement while those adopted on long term require several bureaucracies (Mindtools.com). Mitigation strategies done on short term include the change of staffs where the human resource managers can either sack or swap individuals in different departments. The change will not only avail the opportunity for another member to join the organization but it will be a wakeup call for the remaining workers to work hard and avoid the danger of losing their jobs (Ezproxy.umuc.edu.). Sometimes, risk occurs in an organization owing to the insiders and not only the external environment. Nonetheless, corrective measures that are too harsh will terrify other workers and limit their productivity. Another short term solution is to get into credit by borrowing a loan to finance company activities (Mindtools.com.). Nonetheless, it is advisable that loans be taken for purposes of creating more cash flows and not paying debts since the companies would be rendered insolvent. Long term programs include the construction of infrastructure such as roads, railway and buildings that house factories. Basically, the efforts would be realized at later stages where the economy benefits the future populations. Conclusively, if Philippines invests in the strategies based on long periods, the economy of the country will improve thus creating ample space for individuals and companies such as Salesforce.com Inc to thrive (VolunteerHub., 2018). The biggest setback in regard to the major infrastructural strategies employed by a country is the financial implications which may drain the funds needed to be used recurrently.

Conclusion

Salesforce.com should exploit external opportunities in the Philippines by implementing strategies such as expanding its production strategy to meet the high demand in the industry. Moreover, the company should invest in innovative ways of production to reduce the costs of production in the entire industry and position itself as a key pillar to the country’s economy. The company should also develop new products to cater for the needs of different mobile subscribers. Salesforce.com ought to take advantage of government’s investments in telecommunication infrastructure to use cheap and locally available technologies, equipment and human resources for production. With the small number of firms and little competition in the industry, Salesforce.com should focus on customer service and strengthening its brand in order to gradually consolidate its customer base which will be maintained even with the entry of new firms. The efforts will see it serve the population diligently despite the threats that exist.

References

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Jennings, R. (2018, February 2). Turnaround Seen for US-Philippine Ties; China Wary. Retrieved October 26, 2018, from https://www.voanews.com/a/turnaround-us-philippines/4235941.html

Kijewska, A. (2016). Causal analysis of determinants influencing the Economic Value Added (EVA) – a case of Polish entity. Journal of Economics and Management, 26, 52-70. doi:10.22367/jem.2016.26.03

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VolunteerHub. (2018). The TOWS Matrix: Putting a SWOT Analysis into Action. [online] Available at: http://www.volunteerhub.com/blog/the-tows-matrix-putting-a-swot-analysis-into-action/ [Accessed 27 Oct. 2018].

Mindtools.com. (2018). The TOWS MatrixDeveloping Strategic Options from an External-Internal Analysis. [online] Available at: https://www.mindtools.com/pages/article/newSTR_89.htm [Accessed 27 Oct. 2018].

Ezproxy.umuc.edu. (2018). Shibboleth Authentication Request. [online] Available at: http://ezproxy.umuc.edu/login?url=http://go.galegroup.com.ezproxy.umuc.edu/ps/i.do?id=GALE%7CCX3273100290&v=2.1&u=umd_umuc&it=r&p=GVRL&sw=w&asid=86bd270f6e12bb7d0ee947a39effe1ac [Accessed 27 Oct. 2018].

Appendix

SALESFORCE.COM INC SWOT/TOWS Matrix

Internal  Factors

External Factors

Strengths(S)

S1A leading provider of enterprise cloud computing solution with focus on customer relation management (CRM) and has a large market share

S2Offers the Employee Stock Purchase Plan and strong advocate of equality

S3Customer success platform provides sales automation, customer service, marketing automation, community engagement, analytics, application development, etc. and can integrate with other platforms

S4Product subscriptions are available from simple out-of-the box setup to highly-configurable; meets the needs of businesses of all sizes

S5Supports all major internet browsers and works on leading mobile devices

Weaknesses(W)

W1On-premise deployment option not available

W2Cost of subscription is competitive, but higher than local Filipino competitors

W3 Depends on third-party vendors for hosting, implementation, and training

W4 Public cloud support is limited and no data center in the Philippines

W5 Direct sales and marketing are limited in the Philippines

Opportunities(O)

O1CRM software development is fastest growing segment and the market is estimated to be $120 billion USD worldwide

O2The Philippines has over 400,000 businesses and 56,000 renewing their licenses

O3 A large service industry in the Philippines that contributes to 50 percent of the GDP

O4Government investment in the telecommunication infrastructure and increase mobile subscription users

O5Few local and global competitors for cloud-based CRM software

SO Strategies

SO1 Should leverage its large production capacity and economies of scale for expansion in emerging (markets mba-tutorials.com)

SO2 Salesforce.com Inc should carry out research to identify gaps in CRM and provide remedies that would enable more businesses to renew their licenses

S03 Should invest in service innovation to meet new customer expectations and needs in the industry to stand out as the industry leader in quality, community engagement and customer service

SO4 Should expand its production capacity to balance the supply and demand in the rapidly growing market

SO4 Salesforce.com Inc should set the bar high through quality improvement, stakeholder management and corporate social responsibility in order to discourage entrance of new firms in the industry.

WO Strategies

WO1 Should leverage its industry dominance to lead in innovation and provide customers with more options including on-premise development

WO2 Should implement elaborate marketing strategies to double its market share, double its revenues and plough back profits in the reduction of its mobile subscription costs.

WO3 Should seek government support with the aim of developing its own capabilities for hosting, implementation and training in order to reduce over-reliance of third party vendors.

WO4 Salesforce.com Inc should partner with industry stakeholders especially the government of Philippines to establish a data center and strengthen the cloud based computing sector.

WO5 The company should partner with other leading brands in Philippines with the aim of using their distribution channels so as to speed up market penetration, spread risks and share costs.

Threats(T)

T1 CRM vendors with on premise solution and new entrants with free subscription

T2 Company develops their own CRM

T3 Currency exchange rate, tax, and inflation

T4 Lack of enforcement of intellectual property and copyright laws that protects patents

T5Stability of the government and its foreign policy

ST Strategies

ST1 Can leverage its large market share and financial economies of scale to introduce op premise solutions. The increased revenue and profit margins will enable it to reduce mobile subscriptions

ST2 Should invest in new technologies of production that will minimize costs and enhance quality which will make it more worthwhile for businesses to use the company’s CRM software instead of developing their own(saylordotorg.github.io)

ST3 Should leverage its capacity for innovation and quality production to create an artificial need for its services so that customers are willing to purchase them regardless of inflation and price increase. May also purchase raw materials in the local market and partner with local companies in order