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SWOT Analysis of Sage Group Plc

Essay Topic:

The Sage Group is a global supplier of software solutions as well as services in business management to both small and medium sized businesses. This paper will analyze the company with key focus being placed on its internal strengths and weaknesses and how they prepare or hinder it from the opportunities and threats existing in its industry.

Introduction

The Sage Group offers solutions in a number of areas including Payroll, financial forecasting, human resources, taxation, accounting, customer relationship management and other products related with accounting, e-business, business stationery, and development platforms.

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Its primary operating regions are Europe andNorth America. The company’s headquarters are located inNewcastle upon Tyneand it has approximately 14, 350 employees. As of April 5, 2012 the company was ranked position 73 with a market capitalization of 3,905.8 million pounds (Stock Challenge, 2012). Its performance in the FTSE has been consistently around the 60-80 range in the last couple of years but compared to the highest ranked company (Royal Dutch Shell) which had a market capitalization of ?137,243.1 million, it has a long way to go before it enters the top fifty let alone join the top ten companies. Back in 2009 financial year, the group had recorded revenues of ?1,439.3 million which was an 11.1% increase compared to the 2008 financial year (The LSI Group, n.d). The 2011 financial year, the company recorded revenue of ?1,334.1 million which was a 4% increase from the 1,227.6 million pounds that it had recorded in the 2010 financial year (The LSI Group, n.d).

Overview of the 2011 financial year

The 2011 financial year saw the underlying earnings per share and organic revenue increase and in the same year a significant change was seen in the strategic and operational perspective of the group. For instance, a new management structure got embedded and the group disposed of its Sage Healthcare business. A major strength in the group is its ability to expand the range of products and services that it offers to its customers (The LSI Group, n.d). This has been made especially better through the company’s decision to leverage the web further and to re-engage in M&A. resulting from the culture of innovation in the group, an established range of products offered to customers and focus on provision of real business benefits to customers, the group increased its SME customers by 261,000 in the year 2011.

Strengths and Weaknesses in the group

A major strength that the company has is its innovation and technology. New technology developments prepare the group to utilize opportunities of delivering productivity gains to small and medium sized businesses through the use of the group’s solutions. An example is the combination of credit card processing and accounting which would help customers avoid re-keying data hence making them control their payments more effectively and in the end accelerate their own cash receipts. This strength has made it possible for the company to get an increase in demand of its payment services. The cross-selling of payments into the group’s North American accounting base, for example, has in 2011 grown by over 40%. This contributed to the 16% growth of the group’s payment businesses in that year (Hassett, 2011).

The company has prioritized technology and its continual advancement therefore continuing to develop new online business solutions in the small business market such as the ‘Sage One’ which was launched in theUnited Kingdomin 2011. The new innovative products and services offered by the group make it possible for it to utilize opportunities in the industry. A majority of customers using Sage One, for example, are new to Sage.

The other strength is its strong brand which has given it a competitive advantage. The recent decision to rebrand the group’s North American accounting and ERP products will transition them to one Sage brand and individual brands will be eliminated. This move will allow the group and its partners to focus their marketing efforts on one brand only therefore being able to maximize the impact of their marketing spending. Eventually, the step will help the company capitalize on its cross-sell opportunities.

Acquisitions also helped the group in preparing for opportunities in the industry. The process prior to deciding on an appropriate acquisition opportunity is a critical and complex process. The potential acquisition opportunities have to be evaluated. The acquired company would help the group to embrace an additional key growth area which would translate to the growth of the group (Bharat Book Bureau, 2010). No significant acquisitions have been made by the group since 2006 but in October 2011 the group acquired an organization based inSouth Africa(Alchemex) which focuses on the providence of business intelligence tools for small and medium-sized businesses. As a result of the acquisition, Sage Group will have entered into a key growth area.

The ability of the group to offer a wide range of tailor-made software solutions has benefited the group since it enables it to gain a large customer base (Bharat Book Bureau, 2010). Despite the benefits that the strategy has had in helping the group to increase its customer base, it might act as a barrier as the company strives to gain a significant scale. In addition, it may deter the company from appropriately rewarding its long-term shareholders who feel that they should get as much as possible from their company.

Conclusion

The Sage Group is a global company that offers a wide range of software solutions to small and medium-sized businesses all over the world. It has its headquarters inNewcastleand many branches distributed all over the globe. The group was ranked 73 in the FTSE 100 as of April 5, 2012. A number of strengths and weaknesses in the company impact on the opportunities and threats either positively or negatively.

References

Bharat Book Bureau, 2010, The Sage Group plc, SWOT analysis, viewed April 7th 2012, http://www.bharatbook.com/market-research-reports/information-technology-market-research-report/sage-group-plc-the-swot-analysis.html

FTSE All-Share Index Ranking as at close on Thu, 5 April 2012, viewed April 6, 2012, http://www.stockchallenge.co.uk/ftse.php

Hassett, S., 2011, The Risk Premium Factor: A New Model for Understanding the Volatile Forces That Drive Stock Prices, John Wiley & Sons,New York.

The LSI Group, LLE, The Sage Group Plc, A Story of Global Success, viewed April 7, 2012, http://thelsigroup.com/Best.htm

Appendix

Figure 1: FTSE All-Share Index Ranking (unofficial guide) as at close on Thu, 5 April 2012

65CPICapita GroupFTSE 100723.00

4,434.2

66BLNDBritish Land CoFTSE 100472.70

4,201.7

67IHGInterContinental Hotels GroupFTSE 1001,440.00

4,180.3

68CCLCarnivalFTSE 1001,919.00

4,094.4

69UU.United Utilities GroupFTSE 100596.50

4,066.8

70ITRKIntertek GroupFTSE 1002,498.00

4,000.5

71SMINSmiths GroupFTSE 1001,014.00

3,979.7

72SDR+SDRCSchrodersFTSE 1001,476.00 / 1,147.00

3,978.1

73SGESage GroupFTSE 100295.10

3,905.8

74GFSG4SFTSE 100269.60

3,803.2

75AMECAMECFTSE 1001,128.00

3,747.1

76REXRexamFTSE 100419.80

3,681.5

77RSARSA Insurance GroupFTSE 100104.30

3,676.4

78WEIRWeir GroupFTSE 1001,727.00

3,649.8

79SVTSevernTrentFTSE 1001,507.00

3,580.0

80RSLResolution LtdFTSE 100252.00

3,569.0

81POLYPolymetal InternationalFTSE 100932.00

3,566.6

82IAGInternational Consolidated Airlines Group SAFTSE 100180.00

3,339.7

83ITVITVFTSE 10085.50

3,325.2

84BNZLBunzlFTSE 1001,005.00

3,320.5

85TATETate & LyleFTSE 100704.00

3,290.4

86VEDVedanta ResourcesFTSE 1001,235.00

3,282

Source: http://www.stockchallenge.co.uk/ftse.php

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SWOT Analysis of Sage Group Plc. (2019, Apr 19). Retrieved July 19, 2019, from https://phdessay.com/swot-analysis-of-sage-group-plc/.