Hollander Sleep Products: A Cost-Centered Business Strategy

Introduction

Hollander Sleep Products is a well-known American organization that takes a leadership position in the market of sleep goods. It was established in 1953 as a family business by Bernard Hollander. The firm soon began supplying various blankets, pillows, mattresses, featherbeds, and many other products, making its clients’ life cozier. High quality, affordable prices, and polite staff allowed it to win favor with thousands of customers in North America. In 2017, Hollander acquired its main competitor Pacific Coast Feather. Although to date, Hollander Sleep Products is considered a leading organization among America’s pillow and blanket manufacturers; it would be wrong to claim that it has always avoided failures and financial problems.

The Development of a Business Strategy for the Organization

Firm’s Challenges Related to Cost

Hollander Sleep Products has several quite serious challenges related to its operating costs. In May 2019, it filed for bankruptcy, explaining the incredibly high “material, labor and shipping costs and the costs of integrating a competitor” (Hollander drops debt swap, 2019, para. 3). Most of the company’s money was spent on purchasing materials and serving two firms. As shown in the cost analysis, Hollander purchased many natural materials, such as feathers, which were too expensive, and customers refused to buy them, preferring synthetic pillows (In-Court restructuring, n.d.). The organization also had $233 million in debt and limited access to a new loan (Hollander drops debt swap, 2019). Therefore, the owner decided to sell the company to Bedding Acquisition LLC, which promised to pay all firm’s debts and provide it with $1.2 million. It allowed the company to overcome difficult times and become one of the market leaders again; however, it cannot guarantee that this situation will not repeat. Thus, it is necessary to develop a cost-centered strategy for Hollander Sleep Products to protect the organization from repeated bankruptcy.

A Business Strategy

Hollander Sleep Products was operating according to broad cost leadership strategy rules. Its competition with other firms was based on price, and it promoted the products within a broad target market (Kennedy et al., 2020). This strategy cannot work anymore since the organization’s revenue did not increase due to low prices and purchasing of valuable materials. Therefore, the company should attentively study the audience’s requirements and adopt a best-cost strategy which means that it will offer unique goods at relatively low prices (Kennedy et al., 2020). The organization can pay more attention to the type of goods that just appears on the market. Due to producing such goods, the firm will avoid purchasing the material that is not popular among buyers and increase the number of customers. Thus, a best-cost strategy is a way for Hollander Sleep Products to attract new clients and increase their revenues.

Devising a Tactic

Since the best-cost strategy involves offering customers something unique but not expensive, it is not easy to implement. Therefore, the organization should adhere to specific tactics developed in the strategy scope (Kennedy et al., 2020). For instance, the company can start producing anatomic pillows, the most comfortable ones for any client. This type of goods is relatively new; therefore, the firm will not have many competitors and will be able to establish a pretty profitable price. In addition, Hollander Sleep Products can offer sets of pillows for a family, in which a pillow for a man and a pillow for a woman would have different sizes. Within the scope of the strategy, Hollander Sleep Products should also carry out client surveys to understand what its audience needs. Therefore, the tactic of introducing modern products will support the best-cost strategy.

Conclusion

Hollander Sleep Products is a large producer of high-quality goods for comfortable sleep, which has several financial problems due to the high operating costs. The company should adopt the best-cost strategy, offering the clients products different from competitors’ goods but not more expensive. To support this strategy, the organization should adhere to producing goods that are pretty new within the market but popular among clients.

References

Hollander drops debt swap in favor of $102 million sale. (2019). Kirkland & Ellis.

In-Court restructuring: Sale of bedding products manufacturer. (n.d.). Carl Marks Advisors.

Kennedy, R., Jamison, E., Simpson, J., Kumar, P., Kemp, A., Awate, K., & Manning, K. (2020). Strategic management. Virginia Tech Publishing.