Tempur Sealy International (A)
HBS Strategy Case No. 718-422
Posted: 14 Sep 2017
Date Written: September 6, 2017
This case series explores the long-term relationship between Tempur Sealy (TPX, a mattress manufacturer) and Mattress Firm (MFRM, a bedding retailer and TPX’s largest customer). For almost 20 years, the firms had enjoyed a mutually beneficial and commercially prosperous relationship. Yet in August 2016, Steinhoff (a large, vertically integrated furniture retailer based in Europe and South Africa) made an offer to acquire MFRM. Whether this acquisition will affect the symbiotic relationship that had existed between the two firms is the key question in the case. While some industry observers argued it would increase MFRM’s bargaining power vis-à-vis TPX, others argued it would not alter the balance of power, and that the incentives to collaborate would remain intact.
This case provides a deep dive into the dynamic interaction between a buyer and seller to illustrate two of Porter’s “Five Forces” (two of the five “drivers” of business attractiveness in Van den Steen’s framework). In particular, it defines the concepts of buyer (customer) and supplier power, illustrates how power gets expressed in a commercial relationship, and explores how and why the balance of power can change over time. It challenges students to address a fundamental managerial decision in most commercial relationships: when is it appropriate to collaborate in a symbiotic relationship to create value, and when is it appropriate to compete in an attempt to capture value? It also shows how three leadership attributes affect strategic decisions (i.e., how 3 P’s--person, pay, and pressure--affect strategic decisions).
Keywords: Porter's 5 Forces, bargaining power, buyer power, supplier power, customer power, value creation, value capture, business strategy, consumer durables, retail distribution, industry dynamics, cooperation vs competition
JEL Classification: L11, L14, L22, L25, L68
Suggested Citation: Suggested Citation