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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices,
geopolitical disruptions, challanges to central banks by blockchain based private currencies, 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 -
Ability to lead change in Audio & Video Equipment
– Sonos is one of the leading players in the Audio & Video Equipment industry in United States. Over the years it has not only transformed the business landscape in the Audio & Video Equipment industry in United States but also across the existing markets. The ability to lead change has enabled Sonos 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
– 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.
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.
High brand equity
– Sonos has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sonos to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Strong track record of project management in the Audio & Video Equipment industry
– Sonos is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Sustainable margins compare to other players in Audio & Video Equipment industry
– Sonos has clearly differentiated products in the market place. This has enabled Sonos to fetch slight price premium compare to the competitors in the Audio & Video Equipment industry. The sustainable margins have also helped Sonos to invest into research and development (R&D) and innovation.
Analytics focus
– Sonos 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 Audio & Video Equipment 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.
Digital Transformation in Audio & Video Equipment industry
- digital transformation varies from industry to industry. For Sonos digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sonos 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.
Innovation driven organization
– Sonos is one of the most innovative firm in Audio & Video Equipment sector.
Weaknesses of Sonos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonos are -
Ability to respond to the competition
– As the decision making is very deliberative at Sonos, in the dynamic environment of Audio & Video Equipment industry it has struggled to respond to the nimble upstart competition. Sonos has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Sonos has some of the most successful models in the Audio & Video Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sonos should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Sonos has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Audio & Video Equipment industry over the last five years. Sonos 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 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.
Compensation and incentives
– The revenue per employee of Sonos is just above the Audio & Video Equipment 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.
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.
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.
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.
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.
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.
Sonos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonos are -
Developing new processes and practices
– Sonos can develop new processes and procedures in Audio & Video Equipment 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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sonos 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 Sonos to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sonos can use these opportunities to build new business models that can help the communities that Sonos operates in. Secondly it can use opportunities from government spending in Audio & Video Equipment sector.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sonos is facing challenges because of the dominance of functional experts in the organization. Sonos can utilize new technology in the field of Audio & Video Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Sonos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sonos are -
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.
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 Sonos business can come under increasing regulations regarding data privacy, data security, etc.
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.
Consumer confidence and its impact on Sonos 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 Audio & Video Equipment industry and other sectors.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Sonos is facing in Audio & Video Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sonos 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 Sonos prominent markets.
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.
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.