CASE NAME: FITBIT, INC: HAS THE COMPANY OUTGROWN ITS STRATEGY

Case Study No:7

Course Title Strategic Management

SUBMITTED BY
Jeba Sharmin
ID. 2003059
SUBMITTED TO
Dr. Md Zahangir Kabir
Professor
Dept.of Management
DEPARTMENT OF ACCOUNTNG
HAJEE MOHAMMED DANESH SCIENCE AND TECHNOLOGY UNIVERSITY, DINAJPUR
Case 07- Fitbit Inc.: Has the Company Outgrown its Strategy?

Fitbit is a relatively new company (founded in 2007) that has already

established a strong brand name and has positioned itself as a
frontrunner in the fitness tracking industry. Although basic
pedometers have been around for many years, Fitbit saw an
opportunity to revolutionize this idea by creating a product that is
social, interactive, and stylish. They capitalized on consumer health
and wellness trends to appeal to a range of consumers- from fitness
enthusiasts to workout novices. From the case, we find the questions
and try solve them given below:
1.What is competition like in the activity tracking industry? How
strong is the competitive strength of buyers and suppliers? New
entrants and substitute products? Rivalry among competing sellers?
Prepare a Five Forces Model of Competition to support your
conclusions.

Threat of New Entrants: MODERATE

• Fitbit still has 25.9% of the market share in 2015 making it the
leader in the industry; however, their market share is decreasing as
time goes on because the overall market for fitness trackers is
declining— consumers want more than a fitness tracker (i.e. a smart
watch like the Apple Watch is the new “big thing”)
• They have a first mover advantage— Fitbit was the first in the
market to create a product like their “Fitness Tracker” giving them a
reputable brand name
• There is a huge industry potential for fitness in general. Health
and wellness is more important toillennials who are arguably the most
important demographic to cater to. Fitbit uses their track technology
alongside a mobile app to create a community of users
Bargaining Power of Buyers: HIGH
• There is a high buyer power; fitness trackers are not a necessity
therefore a product must really appeal to a buyer in order for him/her
to purchase.
• There is a high demand for multiple features at a cheap price;
Fitbit has a larger range of products than the Apple Watch and
generally offers lower price points than competitors. Fitbit cannot just
produce a step counter and expect consumers to purchase it at a high
price point therefore they offer more applications.
• Overall, buyers want lower prices in the fitness industry because it
is not a necessity. Power of Suppliers: LOW
• Fitbit outsources their manufacturing to China and can easily
switch suppliers for moderate costs therefore suppliers do not really
have competitive power.
• There are lots of substitute manufacturers/suppliers available to
produce Fitbit’s products.
Threat of Substitute Products or Services: HIGH
• There are many substitutes on the market for Fitbit’s products
(i.e. Garmin, Jawbone, Apple, Samsung, etc.)
• It is easy to switch to competitors because most are readily
available in the same store. (i.e. Target carries Fitbit, Apple, Jawbone,
and Garmin products making them all easily accessible to consumers)
• Fitbit must continue to innovate and evolve their products if they
want to stay dominate in the industry.
2. How would you best describe Fitbit’s competitive strategy?
Fitbit has a strong brand name that is known globally as a once
innovative product called the “Fitness Tracker”. In 2007, Fitbit
capitalized an opportunity to create a stylish, interactive and health-
aware product. Their mission states that Fitbit’s goal is to “empower
and inspire you to live a healthier, more active life. We design products
and experiences that fit seamlessly into your life so that you can
achieve your health and fitness goals, whatever they may be.” I would
describe Fitbit’s current strategy is to produce a premium product that
consumers are willing to pay for based off of the Fitbit brand name.
3. Perform a SWOT analysis for Fitbit. What are the company’s
primary strengths and weaknesses? What external opportunities and
threats exist?

Internal
Strengths (S) Weaknesses (W)

Opportuni SO WO
• Attractive • Resources that
ties
customer base are readily
Favorable (i.e. Fitbit’s copied or for
trends mission is to which there are
inspire and good
External

encourage substitutes
consumers to (Many people
live a healthier have made the
lifestyle comment that
through the Fitbit needs to
tracking of be more than a
their physical one-product
activity) company;
• Strong brand- “Activity
name image tracking is just
(study in a feature used
by Fitbit, and
 this feature
was being used
in many other
this feature
was being used
in many other
•
2015 found devices by a
that “merely variety of
wearing the companies)
Fitbit seemed • Weaker
to heighten the dealer
amount of network than
physical key rivals
activity in (Fitbit does
which women not have a
engaged) team of app
developers
generating
income as the
Apple App
store does
therefore they
are unable to
bring in
 sufficient
revenues like Apple
does)

Threats ST WT
• Expanding the • Increased intensity
Unfavor
company’s
able amongcompetition
product line to
meet a of industry rivals
trends
broader range (i.e. Fitbit has lost
of customer
market share to
needs (Fitbit
has released Xiaomi and Apple
10 products to since 2015)
their line since • Likely entry of new
the company’s
creation in competitors since
2009) creation of Fitbit
• Taking in 2009 (i.e. Apple
advantage of
Watch, Xiaomi,
emerging
technological Jawbone, Garmin)
developments • A shift in buyer
 to innovate needs and tastes
(I.e. the away from the
company
industry’s product
should
become “a (consumers want
platform rather more than just an
than a
activity level
tracker;
consequently, the
desire for a “smart

product”) watch” is more

• Serving
popular in the
addition
customer market)
groups or
market
segments
(Fitbit should
consider
entering the
healthcare or
 corporate
health market
with their
products)

4. Analyze the company’s financial performance. Do trends suggest

that its strategy is working?

In 2016, Fitbit revenue totaled $1.86 billion and adjusted EBITDA of

$389.9 million. From 2014 to 2015, Fitbit’s revenue more than doubled
and they expect its full-year 2016 revenue to be $2.5 billion “which
would be driven by the introduction of new products and expansion in
new geographic territories.” While their revenues have been up, their
stocks have decreased significantly (especially in 2016 of 20%). This
drastic decrease is probably due to the threat of the smartwatch and
the decreasing interest in just a fitness tracker. Based on this decrease
in stock value and overall value of the company, I would say that Fitbit’s
current strategy is not working because they are not diversified enough
to compete in the changing market.

5. What recommendations would you make to Fitbit management

to address the most important strategic issues facing the company?

Many critics say that Fitbit “needed to be more than a one-product

company”. One possibility for Fitbit is to expand into other markets
such as the medical side of the health industry. Fitbit’s current products
focus on the fun side of health and wellness while providing a stylish
product for its users. Their product design could be expanded to
include health data trackers such as glucose indicators or other
monitoring devices. Fitbit could also focus on expanding their
international footprint. The market for fitness level trackers is on the
decline in the United States; however, the world market could
experience a possible expansion.

Conclusions: Fitbit’s best chance for long-term differentiation and

growth is focusing their efforts on health and wellness through patient
data tracking. Fitbit built a trusted brand platform based on easy and
fun fitness tracking, which gives them a natural segue into providing
deeper, more meaningful health insights. Furthermore, their open API
enables them to continue expanding their partnerships with software
and hardware providers. Fitbit’s fashionable and discreet look will help
them convert those who currently use monitoring devices that are
bulky or not aesthetically pleasing. Fitbit Inc. faces moderate threats from
new entrants and suppliers, high threats from substitutes and buyers, and
intense rivalry . To maintain its market position, Fitbit must continue to
innovate, differentiate its products, and respond effectively to competitive
pressures.