Capitalization of Costs at Salesforce.com SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Capitalization of Costs at Salesforce.com
An investor wishes to make an investment in a software/information technology company. The investor is intrigued by the growth prospects of firms in the cloud computing industry and is deciding on whether to make an investment in the common shares of Salesforce.com. While the industry appears to be very attractive, concerns have been raised in the financial media over the company's accounting policy decisions, particularly the decision to capitalize software development costs (internally developed intangible assets) and sales commissions. Concerns have also been raised over the company's focus on metrics outside generally accepted accounting principles. Students are asked to evaluate the company's accounting policy choices and are provided with relevant information regarding the company's business model, existing and proposed accounting standards (both under U.S. GAAP and IFRS), and the accounting policies of competitors. After evaluating the accounting policies, students may then conclude whether any adjustments should be made to the financial statements and determine how this impacts valuation.
Authors :: Darren Henderson, Chris Sturby, Jessica Kelly
Swot Analysis of "Capitalization of Costs at Salesforce.com" written by Darren Henderson, Chris Sturby, Jessica Kelly includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Accounting Salesforce.com facing as an external strategic factors. Some of the topics covered in Capitalization of Costs at Salesforce.com case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Capitalization of Costs at Salesforce.com casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing transportation and logistics costs, geopolitical disruptions,
digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Capitalization of Costs at Salesforce.com
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Capitalization of Costs at Salesforce.com case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Accounting Salesforce.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Accounting Salesforce.com operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Capitalization of Costs at Salesforce.com can be done for the following purposes –
1. Strategic planning using facts provided in Capitalization of Costs at Salesforce.com case study
2. Improving business portfolio management of Accounting Salesforce.com
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Accounting Salesforce.com
Strengths Capitalization of Costs at Salesforce.com | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Accounting Salesforce.com in Capitalization of Costs at Salesforce.com Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Accounting Salesforce.com is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Accounting Salesforce.com in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Accounting Salesforce.com is one of the leading recruiters in the industry. Managers in the Capitalization of Costs at Salesforce.com are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Capitalization of Costs at Salesforce.com Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Accounting Salesforce.com
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Accounting Salesforce.com does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– Capitalization of Costs at Salesforce.com firm has clearly differentiated products in the market place. This has enabled Accounting Salesforce.com to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Accounting Salesforce.com to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Accounting Salesforce.com in the sector have low bargaining power. Capitalization of Costs at Salesforce.com has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Accounting Salesforce.com to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Accounting Salesforce.com has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Capitalization of Costs at Salesforce.com - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Accounting Salesforce.com is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Accounting Salesforce.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Capitalization of Costs at Salesforce.com Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Accounting Salesforce.com is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Accounting Salesforce.com has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Accounting Salesforce.com are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Accounting Salesforce.com is present in almost all the verticals within the industry. This has provided firm in Capitalization of Costs at Salesforce.com case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Capitalization of Costs at Salesforce.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Capitalization of Costs at Salesforce.com are -
No frontier risks strategy
– After analyzing the HBR case study Capitalization of Costs at Salesforce.com, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– It come across in the case study Capitalization of Costs at Salesforce.com that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Capitalization of Costs at Salesforce.com can leverage the sales team experience to cultivate customer relationships as Accounting Salesforce.com is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Accounting Salesforce.com has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Capitalization of Costs at Salesforce.com, in the dynamic environment Accounting Salesforce.com has struggled to respond to the nimble upstart competition. Accounting Salesforce.com has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Accounting Salesforce.com has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Accounting Salesforce.com is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Capitalization of Costs at Salesforce.com can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Accounting Salesforce.com products
– To increase the profitability and margins on the products, Accounting Salesforce.com needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Capitalization of Costs at Salesforce.com has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Accounting Salesforce.com 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Darren Henderson, Chris Sturby, Jessica Kelly suggests that, Accounting Salesforce.com is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to strategic competitive environment developments
– As Capitalization of Costs at Salesforce.com HBR case study mentions - Accounting Salesforce.com takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Accounting Salesforce.com needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Capitalization of Costs at Salesforce.com | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Capitalization of Costs at Salesforce.com are -
Buying journey improvements
– Accounting Salesforce.com can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Capitalization of Costs at Salesforce.com suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Accounting Salesforce.com in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Accounting Salesforce.com can use these opportunities to build new business models that can help the communities that Accounting Salesforce.com operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Accounting Salesforce.com can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Capitalization of Costs at Salesforce.com, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Accounting Salesforce.com to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Accounting Salesforce.com can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Accounting Salesforce.com can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Accounting Salesforce.com has opened avenues for new revenue streams for the organization in the industry. This can help Accounting Salesforce.com to build a more holistic ecosystem as suggested in the Capitalization of Costs at Salesforce.com case study. Accounting Salesforce.com can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Accounting Salesforce.com can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Accounting Salesforce.com can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Loyalty marketing
– Accounting Salesforce.com has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Accounting Salesforce.com can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Accounting Salesforce.com can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Accounting Salesforce.com to increase its market reach. Accounting Salesforce.com will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Capitalization of Costs at Salesforce.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Capitalization of Costs at Salesforce.com are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Accounting Salesforce.com needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Accounting Salesforce.com.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Accounting Salesforce.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Accounting Salesforce.com in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Accounting Salesforce.com business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Accounting Salesforce.com in the Finance & Accounting sector and impact the bottomline of the organization.
Regulatory challenges
– Accounting Salesforce.com needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Accounting Salesforce.com will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Accounting Salesforce.com high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Accounting Salesforce.com has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Accounting Salesforce.com needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Accounting Salesforce.com can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Capitalization of Costs at Salesforce.com .
Weighted SWOT Analysis of Capitalization of Costs at Salesforce.com Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Capitalization of Costs at Salesforce.com needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Capitalization of Costs at Salesforce.com is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Capitalization of Costs at Salesforce.com is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Capitalization of Costs at Salesforce.com is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Accounting Salesforce.com needs to make to build a sustainable competitive advantage.
