Sleep Number (SNBR) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sleep Number (United States)

Based on various researches at Oak Spring University , Sleep Number is operating in a macro-environment that has been destablized by – increasing commodity prices, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Sleep Number

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sleep Number can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sleep Number, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sleep Number 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Sleep Number can be done for the following purposes –
1. Strategic planning of Sleep Number
2. Improving business portfolio management of Sleep Number
3. Assessing feasibility of the new initiative in United States
4. Making a Furniture & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sleep Number

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Strengths of Sleep Number | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sleep Number are -

Organizational Resilience of Sleep Number

– The covid-19 pandemic has put organizational resilience at the centre of everthing Sleep Number does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Cross disciplinary teams

– Horizontal connected teams at the Sleep Number 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.

Analytics focus

– Sleep Number is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Furniture & Fixtures industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Highly skilled collaborators

– Sleep Number has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Furniture & Fixtures industry. Secondly the value chain collaborators of Sleep Number have helped the firm to develop new products and bring them quickly to the marketplace.

Superior customer experience

– The customer experience strategy of Sleep Number in Furniture & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

– Suppliers of Sleep Number in the Consumer Cyclical sector have low bargaining power. Sleep Number has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sleep Number to manage not only supply disruptions but also source products at highly competitive prices.

Ability to recruit top talent

– Sleep Number is one of the leading players in the Furniture & Fixtures industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Strong track record of project management in the Furniture & Fixtures industry

– Sleep Number is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- Sleep Number 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 Sleep Number is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sleep Number emphasize – knowledge, initiative, and innovation.

Sustainable margins compare to other players in Furniture & Fixtures industry

– Sleep Number has clearly differentiated products in the market place. This has enabled Sleep Number to fetch slight price premium compare to the competitors in the Furniture & Fixtures industry. The sustainable margins have also helped Sleep Number to invest into research and development (R&D) and innovation.

Training and development

– Sleep Number has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Ability to lead change in Furniture & Fixtures

– Sleep Number is one of the leading players in the Furniture & Fixtures industry in United States. Over the years it has not only transformed the business landscape in the Furniture & Fixtures industry in United States but also across the existing markets. The ability to lead change has enabled Sleep Number in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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Weaknesses of Sleep Number | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sleep Number are -

Interest costs

– Compare to the competition, Sleep Number 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.

Products dominated business model

– Even though Sleep Number has some of the most successful models in the Furniture & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sleep Number should strive to include more intangible value offerings along with its core products and services.

Skills based hiring in Furniture & Fixtures industry

– The stress on hiring functional specialists at Sleep Number 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.

Slow to strategic competitive environment developments

– As Sleep Number is one of the leading players in the Furniture & Fixtures industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Furniture & Fixtures industry in last five years.

Capital Spending Reduction

– Even during the low interest decade, Sleep Number has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Furniture & Fixtures industry using digital technology.

Ability to respond to the competition

– As the decision making is very deliberative at Sleep Number, in the dynamic environment of Furniture & Fixtures industry it has struggled to respond to the nimble upstart competition. Sleep Number has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High cash cycle compare to competitors

Sleep Number has a high cash cycle compare to other players in the Furniture & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow decision making process

– As mentioned earlier in the report, Sleep Number has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Furniture & Fixtures industry over the last five years. Sleep Number even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

High dependence on Sleep Number ‘s star products

– The top 2 products and services of Sleep Number still accounts for major business revenue. This dependence on star products in Furniture & Fixtures industry has resulted into insufficient focus on developing new products, even though Sleep Number has relatively successful track record of launching new products.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sleep Number supply chain. Even after few cautionary changes, Sleep Number is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sleep Number vulnerable to further global disruptions in South East Asia.

Compensation and incentives

– The revenue per employee of Sleep Number is just above the Furniture & Fixtures industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

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Sleep Number Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sleep Number are -

Creating value in data economy

– The success of analytics program of Sleep Number has opened avenues for new revenue streams for the organization in Furniture & Fixtures industry. This can help Sleep Number to build a more holistic ecosystem for Sleep Number products in the Furniture & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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 Sleep Number 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.

Buying journey improvements

– Sleep Number can improve the customer journey of consumers in the Furniture & Fixtures industry by using analytics and artificial intelligence. It 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.

Better consumer reach

– The expansion of the 5G network will help Sleep Number to increase its market reach. Sleep Number 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.

Loyalty marketing

– Sleep Number 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Furniture & Fixtures industry, but it has also influenced the consumer preferences. Sleep Number can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Sleep Number 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 Sleep Number to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sleep Number to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sleep Number to hire the very best people irrespective of their geographical location.

Learning at scale

– Online learning technologies has now opened space for Sleep Number to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Developing new processes and practices

– Sleep Number can develop new processes and procedures in Furniture & Fixtures industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Use of Bitcoin and other crypto currencies for transactions in Furniture & Fixtures industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sleep Number in the Furniture & Fixtures industry. Now Sleep Number can target international markets with far fewer capital restrictions requirements than the existing system.

Leveraging digital technologies

– Sleep Number can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Building a culture of innovation

– managers at Sleep Number 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 Furniture & Fixtures industry.

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Threats Sleep Number External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sleep Number are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Sleep Number may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Furniture & Fixtures sector.

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 Sleep Number.

Environmental challenges

– Sleep Number needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sleep Number can take advantage of this fund but it will also bring new competitors in the Furniture & Fixtures industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Sleep Number in Furniture & Fixtures industry. The Furniture & Fixtures 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.

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 Sleep Number in the Furniture & Fixtures sector and impact the bottomline of the organization.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Furniture & Fixtures industry are lowering. It can presents Sleep Number with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Furniture & Fixtures sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Sleep Number 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 Sleep Number prominent markets.

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.

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.

Shortening product life cycle

– it is one of the major threat that Sleep Number is facing in Furniture & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Easy access to finance

– Easy access to finance in Furniture & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sleep Number can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Consumer confidence and its impact on Sleep Number demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Furniture & Fixtures industry and other sectors.

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. Sleep Number needs to understand the core reasons impacting the Furniture & Fixtures industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Sleep Number Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sleep Number 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 Sleep Number 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 Sleep Number 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 Sleep Number 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 Sleep Number needs to make to build a sustainable competitive advantage.

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