Salesforce.com is a U.S. corporation with headquarters situated in San Francisco, California. It also has three auxiliary stations located in Dublin, Tokyo, and Singapore. It is the world’s number one provider of Internet-based Customer Relationship Management (CRM) services and applications. Marc Benioff, who at one time served as an executive member of Oracle Corporation, founded the company in 1999 (Olson, Ryan, and Stebbins 4). His primary objective was to create cheap and easy to use CRM software capable of outcompeting similar products. Since then, Salesforce.com has become a leader in business computing where organizations and managers can access subscriptions for major software that perform activities related to sales, marketing, customer support, collaboration, and data analysis. It also offers Salesforce1 Platform, an innovative service that enables individual users to develop applications that can be accessed anywhere in the world.
On April 2, 2014, Salesforce.com released a press statement where it announced its new strategy for delivering social, mobile, and connected cloud solutions to six leading global market segments: financial services, healthcare, retail products, communication, public sector, and manufacturing (Salesforce.com). Specifically, it promised to bring together industrial experts and partners that can develop revolutionary solutions to the challenges facing various businesses. Other essential policies practiced by the organization are the strengthening of existing solutions, covering of high-demand categories, continuous search for new clients, and permitting the development of third-party applications.
Salesforce is a publicly traded company on the New York Stock Exchange (NYSE). According to a financial report released by the company on February 24, 2016, the net revenue for the fiscal year that ended on January 31, 2016 (FY16) was $6.67 billion, a 24 percentage rise from the figure recorded in FY15 (Cumming and Cho). Keith Block, its vice chairman attributed the growth to an increase in the number of enterprises that seek its advice. Consequently, its management forecasts that total revenue collections for the current FY17 will hit $8.12 billion. However, its earnings per share registered a small decline of $0.07.
Acquisition of SteelBrick
Even though Salesforce has over the years had a tendency of acquiring other enterprises, the $360 million purchase of SteelBrick is the most important (Kim). The pact was made official in December 2015 after a short period of speculation. However, before the buyout Salesforce had already made tremendous investments in the acquired firm. Apparently, it did so knowing that the activities of SteelBrick aligned with its CRM software services and sales. In spite of their differences, both of them are vendors in the growing cloud computing industry. Hence, the synergies of their amalgamation will make it more profitable and competitive.
The Relationship of Services
Salesforce performs three critical roles: sales, marketing, and, service. On the other hand, SteelBrick has only one function that entails the use of quote-to-cash (QTC) technology to simplify complicated quotes and billings for customers. The use of QTC is particularly useful to salespeople who need to interpret difficult quotations for clients. Therefore, its addition to Salesforce’s portfolio will boost the sales department that is the most important to the company (Kim). Interestingly, the acquisition coincided with a period when the revenue from sales was on a decline (Team). Hence, the synergy attained from the transaction was expected to create an immediate impact.
Because Salesforce’s business activities are web-based, any company offering CRM and cloud computing services from any part of the world is a potential competitor. Nonetheless, since inventing the web-based CRM in 1999, it has held on to be the market leader by right. For instance, as of 2012, it boasted of approximately 14 percent of the entire American CRM market. Oracle Sales Cloud, its closest rival commanded a share of 11.1 percent during the same year (Blattberg). Besides Oracle, its other biggest competitors are Microsoft CRM, and Sugar CRM. Locally, other smaller CRM vendors such as IBM and Workbooks are also a major source of direct competition to the company.
Four factors that have helped the company retain its market leadership are innovativeness, accessibility, comprehensiveness, and flexibility. Firstly, Salesforce has experienced experts who are always looking for new ways that can adequately gratify individual customer needs. Secondly, being web-based makes it accessible at all times as long there is a steady connection to the Internet. Thirdly, its tasks are among the most comprehensive in the market. Notably, besides sales, it integrates both marketing and service-management. Lastly, the services of the company are very adaptable. For example, its users can access it via devices that are supported by distinct operating systems such as iOS, Windows, and Android. The company also empowers its customers to choose from numerous price packages. As a result, every user can subscribe to an arrangement that is affordable. Moreover, its unique Salesforce1 forum enables people to post custom-made applications that can be accessed by other subscribers.
Future Strategic Acquisitions
The high number of companies offering CRM services in the U.S. makes acquisitions or mergers the best alternatives to achieve growth. In the case of Salesforce, the best option available in the market is to purchase Oracle Sales CRM. Based on 2012 market statistics, the synergy of these two companies will command a market share of about 25.1 percent (Blattberg). In contrast, Microsoft CRM, the closest challenger is likely to enjoy only 6 percent of the entire industry. As a result, economies of scale will enable the new company to make price decisions that will discourage new entrants, as well as disadvantage small firms already in the market. Eventually, the market share of the newly formed enterprise will rise because vendors that will be unable to compete with the adjusted prices will wind up.
Blattberg, Eric. “The Top 10 Customer Relationship Management Services.” Venturebeat. VB, 11 February 2014. Web. 26 March. 2016. Retrieved from: http://venturebeat.com/2016/03/26/watch-oculus-founder-palmer-luckey-deliver-the-first-rift-preorder-himself/
Cumming, John and Chi Hea Cho. “Salesforce Announces Fiscal Year 2016 Fourth Quarter and Full Year Results.” Salesforce. San Francisco: Salesforce.com, Inc., 24 February 2016. Web. 26 March. 2016. Retrieved from: http://s1.q4cdn.com/454432842/files/doc_financials/2016/Q4/CRM-Q416-Earnings-Press-Release-w-financials-(1).pdf
Kim, Eugine. “Salesforce Just Bought 6-Year Old Start-up for $360 Million.” Business Insider. Business Insider Inc., 23 December 2015. Web. 26 March. 2016. Retrieved from: http://www.businessinsider.com/salesforce-just-bought-a-6-year-old-startup-for-360-million-2015-12
Olson, Alexander, Claire Ryan, and Thaddeus Stebbins. “Strategic Report: Salesforce.com. Inc.” Vector Strategy Group, 14 April 2014. Web. 26 March. 2016. Retrieved from: http://economics-files.pomona.edu/jlikens/SeniorSeminars/vector2010/pdf/crm.pdf
Salesforce.com. “Salesforce.com Announces New Industries Strategy.” Boston: Salesforce.com, 2 April 2014.Web. 26 March. 2016. Retrieved from: http://www.salesforce.com/company/news-press/press-releases/2014/04/140402.jsp
Team, Travis. “Here’s The Reason Behind Salesforce.com’s Acquisition of SteelBrick.” Forbes. 30 December 2015. Web. 26 March. 2016. Retrieved from: http://www.forbes.com/sites/greatspeculations/2015/12/30/heres-the-reason-behind-salesforce-coms-acquisition-of-steelbrick/#886ed152c50
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