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 – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing energy prices, increasing transportation and logistics costs, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, 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 -

Diverse revenue streams

– Sleep Number is present in almost all the verticals within the Furniture & Fixtures industry. This has provided Sleep Number 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.

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.

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.

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.

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.

Operational resilience

– The operational resilience strategy of Sleep Number comprises – understanding the underlying the factors in the Furniture & Fixtures 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.

High switching costs

– The high switching costs that Sleep Number 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.

Digital Transformation in Furniture & Fixtures industry

- digital transformation varies from industry to industry. For Sleep Number digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sleep Number has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

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.

Successful track record of launching new products

– Sleep Number has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sleep Number has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

High brand equity

– Sleep Number has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sleep Number to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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.

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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.

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.

Low market penetration in new markets

– Outside its home market of United States, Sleep Number needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Aligning sales with marketing

– From the outside it seems that Sleep Number needs to have more collaboration between its sales team and marketing team. Sales professionals in the Furniture & Fixtures industry have deep experience in developing customer relationships. Marketing department at Sleep Number can leverage the sales team experience to cultivate customer relationships as Sleep Number is planning to shift buying processes online.

No frontier risks strategy

– From the 10K / annual statement of Sleep Number, it seems that company is thinking out the frontier risks that can impact Furniture & Fixtures industry. 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.

Increasing silos among functional specialists

– The organizational structure of Sleep Number is dominated by functional specialists. It is not different from other players in the Furniture & Fixtures industry, but Sleep Number needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sleep Number to focus more on services in the Furniture & Fixtures industry rather than just following the product oriented approach.

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 bargaining power of channel partners in Furniture & Fixtures industry

– because of the regulatory requirements in United States, Sleep Number 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 Furniture & Fixtures industry.

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.

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.

Need for greater diversity

– Sleep Number has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

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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 -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Sleep Number can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sleep Number in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Furniture & Fixtures industry, and it will provide faster access to the consumers.

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Sleep Number is facing challenges because of the dominance of functional experts in the organization. Sleep Number can utilize new technology in the field of Furniture & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Sleep Number can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

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.

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.

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. Sleep Number can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Using analytics as competitive advantage

– Sleep Number has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Furniture & Fixtures sector. This continuous investment in analytics has enabled Sleep Number to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sleep Number to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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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 -

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.

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.

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.

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.

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. Sleep Number 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.

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 Sleep Number business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– Sleep Number 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 acceleration in Forth Industrial Revolution

– Sleep Number has witnessed rapid integration of technology during Covid-19 in the Furniture & Fixtures industry. As one of the leading players in the industry, Sleep Number needs to keep up with the evolution of technology in the Furniture & Fixtures 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.

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.

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.

Regulatory challenges

– Sleep Number 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 Furniture & Fixtures industry regulations.

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.

Stagnating economy with rate increase

– Sleep Number can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Furniture & Fixtures industry.

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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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