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, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion,
challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Sonos 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.
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.
Diverse revenue streams
– Sonos is present in almost all the verticals within the Audio & Video Equipment industry. This has provided Sonos 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.
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.
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.
Weaknesses of Sonos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sonos are -
Interest costs
– Compare to the competition, Sonos 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.
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.
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.
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.
Lack of clear differentiation of Sonos products
– To increase the profitability and margins on the products, Sonos needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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.
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.
Need for greater diversity
– Sonos 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.
Sonos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sonos are -
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.
Better consumer reach
– The expansion of the 5G network will help Sonos to increase its market reach. Sonos 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.
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.
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.
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.
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.
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.
Manufacturing automation
– Sonos can use the latest technology developments to improve its manufacturing and designing process in Audio & Video Equipment sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Audio & Video Equipment industry, but it has also influenced the consumer preferences. Sonos can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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.
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.
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. Sonos needs to understand the core reasons impacting the Audio & Video Equipment industry. This will help it in building a better workplace.
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.
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.
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.
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. Sonos 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.
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.
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.
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.
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.
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.