Sonos (SONO) SWOT Analysis / TOWS Matrix / MBA Resources
Audio & Video Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sonos (United States)
Based on various researches at Oak Spring University , Sonos is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sonos can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sonos, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sonos 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 Sonos can be done for the following purposes –
1. Strategic planning of Sonos
2. Improving business portfolio management of Sonos
3. Assessing feasibility of the new initiative in United States
4. Making a Audio & Video Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sonos
Strengths of Sonos | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sonos are -
Superior customer experience
– The customer experience strategy of Sonos in Audio & Video Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Sonos has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Audio & Video Equipment industry. Secondly the value chain collaborators of Sonos have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Sonos has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sonos staying ahead in the Audio & Video Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Sonos 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.
Organizational Resilience of Sonos
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sonos does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Sonos is one of the most innovative firm in Audio & Video Equipment sector.
Operational resilience
– The operational resilience strategy of Sonos comprises – understanding the underlying the factors in the Audio & Video Equipment 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.
Learning organization
- Sonos 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 Sonos is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sonos emphasize – knowledge, initiative, and innovation.
Training and development
– Sonos 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.
Low bargaining power of suppliers
– Suppliers of Sonos in the Consumer Cyclical sector have low bargaining power. Sonos has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sonos to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Sonos has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sonos 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.
Ability to recruit top talent
– Sonos is one of the leading players in the Audio & Video Equipment 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.
Weaknesses of Sonos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonos are -
High dependence on Sonos ‘s star products
– The top 2 products and services of Sonos still accounts for major business revenue. This dependence on star products in Audio & Video Equipment industry has resulted into insufficient focus on developing new products, even though Sonos has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Audio & Video Equipment industry, Sonos 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.
Employees’ less understanding of Sonos strategy
– From the outside it seems that the employees of Sonos don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Sonos 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 Audio & Video Equipment industry using digital technology.
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 Sonos supply chain. Even after few cautionary changes, Sonos is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sonos vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sonos is slow explore the new channels of communication. These new channels of communication can help Sonos to provide better information regarding Audio & Video Equipment products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Sonos is one of the leading players in the Audio & Video Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Audio & Video Equipment industry in last five years.
High operating costs
– Compare to the competitors, Sonos has high operating costs in the Audio & Video Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sonos lucrative customers.
Skills based hiring in Audio & Video Equipment industry
– The stress on hiring functional specialists at Sonos 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.
High cash cycle compare to competitors
Sonos has a high cash cycle compare to other players in the Audio & Video Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Sonos is dominated by functional specialists. It is not different from other players in the Audio & Video Equipment industry, but Sonos needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sonos to focus more on services in the Audio & Video Equipment industry rather than just following the product oriented approach.
Sonos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonos are -
Loyalty marketing
– Sonos 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.
Leveraging digital technologies
– Sonos 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sonos in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Audio & Video Equipment industry, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Audio & Video Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sonos 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. Sonos 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.
Building a culture of innovation
– managers at Sonos 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 Audio & Video Equipment industry.
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 Sonos 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sonos 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 Sonos to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sonos 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.
Use of Bitcoin and other crypto currencies for transactions in Audio & Video Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sonos in the Audio & Video Equipment industry. Now Sonos can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Sonos 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.
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. Sonos can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Sonos has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Audio & Video Equipment sector. This continuous investment in analytics has enabled Sonos to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sonos to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Sonos has opened avenues for new revenue streams for the organization in Audio & Video Equipment industry. This can help Sonos to build a more holistic ecosystem for Sonos products in the Audio & Video Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Sonos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonos are -
Technology acceleration in Forth Industrial Revolution
– Sonos has witnessed rapid integration of technology during Covid-19 in the Audio & Video Equipment industry. As one of the leading players in the industry, Sonos needs to keep up with the evolution of technology in the Audio & Video Equipment 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sonos in Audio & Video Equipment industry. The Audio & Video Equipment 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.
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 Sonos.
Easy access to finance
– Easy access to finance in Audio & Video Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sonos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Sonos 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 Audio & Video Equipment industry regulations.
Increasing wage structure of Sonos
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Sonos.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Audio & Video Equipment industry are lowering. It can presents Sonos with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Audio & Video Equipment sector.
Environmental challenges
– Sonos 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. Sonos can take advantage of this fund but it will also bring new competitors in the Audio & Video Equipment industry.
High dependence on third party suppliers
– Sonos 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sonos may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Audio & Video Equipment sector.
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 Sonos in the Audio & Video Equipment sector and impact the bottomline 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.
Stagnating economy with rate increase
– Sonos 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 Audio & Video Equipment industry.
Weighted SWOT Analysis of Sonos Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sonos 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 Sonos 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 Sonos 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 Sonos 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 Sonos needs to make to build a sustainable competitive advantage.
