Sonance at a Turning Point
CASE SONANCE AT A TURNING POINT I. Introduction: Problem / General Issue
Sonance is a company at a crossroads, long established as the leader in high-end home theatre speakers, it is at an inflection point where it needs to decide whether it wants to be a high-end speaker producer served through customized dealer channels, or a mass market audio systems maker. The past decade has seen the rise of a new competitive threat, the demise of its dealer channel and the emergence of a highly informed and selective customer base which have all served to hurt the company’s prospects.
In the early 2000s, when price competition prompted Sonance to increase customer variability through retail channels Sonance sacrificed its brand identity. Having no experience in selling its products directly to end customers, Sonance suffered from its own inexperience of appealing to the new market while at the same alienating its established market. While the company made significant investments in R&D, these efforts were never backed by a well-thought analysis of distribution strategy or an understanding of the value of each customer channel.
What follows is an analysis of Sonance’s current situation and the articulation of a strategy, that if implemented, is designed to re-establish Sonance position as the leader in the in-wall, home theatre speaker market.
II. Situation Analysis
In trying to capture the opportunities of the growing consumer electronics market, Sonance’s attempt at expanding into retail ultimately backfired with a decline in revenue from $53mm in 2003 to $47mm in 2004 (almost back to the level of 1999). This situation has brought the company to the edge: with limited funds available, Sonance needs to clearly define its product development and distribution strategy.
By entering the mass retail market channel in 2000, Sonance eviscerated its historical base of dealer customers, losing roughly 50% of its dealers in a 5 year period. While overall revenues
Sonance is a company at a crossroads, long established as the leader in high-end home theatre speakers, it is at an inflection point where it needs to decide whether it wants to be a high-end speaker producer served through customized dealer channels, or a mass market audio systems maker. The past decade has seen the rise of a new competitive threat, the demise of its dealer channel and the emergence of a highly informed and selective customer base which have all served to hurt the company’s prospects.
In the early 2000s, when price competition prompted Sonance to increase customer variability through retail channels Sonance sacrificed its brand identity. Having no experience in selling its products directly to end customers, Sonance suffered from its own inexperience of appealing to the new market while at the same alienating its established market. While the company made significant investments in R&D, these efforts were never backed by a well-thought analysis of distribution strategy or an understanding of the value of each customer channel.
What follows is an analysis of Sonance’s current situation and the articulation of a strategy, that if implemented, is designed to re-establish Sonance position as the leader in the in-wall, home theatre speaker market.
II. Situation Analysis
In trying to capture the opportunities of the growing consumer electronics market, Sonance’s attempt at expanding into retail ultimately backfired with a decline in revenue from $53mm in 2003 to $47mm in 2004 (almost back to the level of 1999). This situation has brought the company to the edge: with limited funds available, Sonance needs to clearly define its product development and distribution strategy.
By entering the mass retail market channel in 2000, Sonance eviscerated its historical base of dealer customers, losing roughly 50% of its dealers in a 5 year period. While overall revenues