Case Study Analysis: Fitbit, Inc., in 2017

This case study analysis of Fitbit, Inc., in 2017 discusses its business model, marketing mix, competitive advantage, and recommended solutions to stay competitive in the global market. It also includes a PESTEL analysis and Porter's Five Forces model analysis.

Running Head: MANAGEMENT 1
Case Study Analysis: Fitbit, Inc., in 2017
Student Name-
University Name-
06 February 2019

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Introduction
Fitbit, Inc., was started in 2007, and it’s the largest provider of fitness devices. The
company comes in the health and fitness category, and design its products, which track the
day to day fitness and health.
Discussion 1- PESTEL
Political factors- For Fitbit, there is a stable political environment, as the product is suitable
for health and fitness; a healthy lifestyle can be attained by using Fitbit products.
Economic- this product is economical as people are interested in spending money on fitness.
This product is valuable for sports and health conscious people.
Social- People are getting conscious about their health and want to use products that are good
for their health.
Technological- there are no technological problems, and Fitbit makes use of innovative
technology (Marshall, 2015).
Environmental- Fitbit explore the new sustainable business environment for profitability and
productivity.
Legal- Fitbit follows safety regulations for consumer protection.
Fitbit Business model
The fundamental value proposition behind the Fitbit is that it provides the latest
technologies, which inspire customers to live better, be active and meet their physical goals.
The devices have easy usability and are a disruption for health market, which means two
things are happening all over the world, one is increasing rate of obesity and people are
interested in collecting information to analyse their health (Selke, 2016).

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Fitbit Generic strategies and how it’s working
Fitbit applies differentiation strategy in three categories; strategic target, which means
everyone is health conscious and fitness enthusiasts. In 2015 and 2016, for six months the
primary metrics of Fitbit was to evaluate the performance, business, create a financial
forecast and take strategic decisions (Brunson & Reed, 2017).
30th June 2015 2nd July 2016
Revenue earned $ 737166 $ 1091884
Net income of Fitbit $ 65678 $ 17376
Adjusted EBITDA $ 179628 $ 93433
Products Sold Out $8234 $ 10515
Fitbit marketing mix as per the case study
Product and Price
 Long battery life of devices
 Convenient brand
 User-friendly devices
Promotion
 Applied only social media advertising
 Depend on word of mouth referral
Place
 Offer staff with Fitbit
 Partner with fitness/gyms/nutritional stores

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Discussion 2-Five forces Model Analysis
Porter's Five Forces model analysis
The threat of New Entrants: MODERATE
Fitbit has 25.9% of the total market share in 2015, and lead the market. It also has first
mover advantage for creating the product like “Fitness Tracker,” which made it a reputable
brand (Brunson & Reed, 2017). There is enormous industry potential for health and fitness.
Bargaining Power of Buyers: HIGH
There is high bargaining power of buyers, as fitness devices are not a necessity, that’s
why the product can only appeal buyers, but can’t make them purchase it. There is high
demand for various features at low cost.
Bargaining Power of Suppliers- LOW
Bargaining power of suppliers in the dominant position can reduce Fitbit margin. The
overall effect of high supplier power reduces the total profitability of Technical and scientific
products.
Threats of Substitute Products or Services- HIGH
Google Drive and Dropbox are the substitutes for storing the hardware devices. The
substitute product or service threat is high if it provides the fundamental value proposition,
which is different from current industry offerings (Sasaki, Hickey, Mavilia, Tedesco, John,
Keadle & Freedson, 2015).
Rivalry among the Existing Competitors- HIGH
Fitbit Incorporation tries to operate within the highly competitive technical and
scientific instrument industry (Cadmus-Bertram, Marcus, Patterson, Parker & Morey, 2015).

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The competition fails to get the tool over the complete long term organization profitability
(Brunson & Reed, 2017).
Industry force with the most significant impact
Due to the high rival competitors, high buyers bargaining power, and the high threat
from substitutes, the device industry of fitness tracker create challenges in achieving success
and in maintaining the competitive benefits. For changing the industry dynamics, Fitbit
should emphasize on spreading the complete market potential or either they should provide
the unique features (Brunson & Reed, 2017).
Discussion 3: Competitive advantage
Step 1: Use the case information to create a list of the main resources and key capabilities
the company has.
Primary resources and critical capabilities of Fitbit
Software and hardware Technology- Fitbit had designed both software and hardware
technologies for their devices. Software like Bluetooth low energy, other is PurePulse
regularly track the heart rate, and algorithms of Fitbit came up with innovative technologies
in the market.
Platform Openness (Open API) - the commitment of Fitbit towards open API (Application
Program Interface) has tremendous breadth as compared to its competitors. There are many
integrations with apps, such as Weight Watchers, MyFitnessPal, and MapMyRun.
The Fitbit brand- this name has become quite synonymous with the market of fitness tracking
and has made its valuable resource, which assists Fitbit in neutralizing the new entrant’s
threats.

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Step 2: Provide brief comments to explain why you answered each VRIN question the
way you did with the yes or no.
VRIN Analysis
Specific Resources (use case
information) Valuable? Rare? Inimitable?
Non-
substitutable?
The Fitbit brand Yes Yes Yes No
Software and Hardware Technology Yes No No No
Platform Openness (Open APA) Yes Yes Yes No
As per VRIN analysis, Fitbit brand is valuable, rate, inimitable, but non-substitutable,
because it’s the first device to track fitness and health and there is no substitute of it. Software
and hardware technology of this product is only valuable, but not rate, inimitable and non-
substitutable, because many other companies are coming up with similar product. In case of
platform openness it’s valuable, rare, inimitable and non-substitutable, because it can only
run on single platform.
Current competitive advantage is sustainable or not
The critical resources of Fitbit are rare and valuable, depicting that the competitive
benefits for the company (Quelch, 2016). Nevertheless, this benefit is not sustainable. All
resources are either substitutable, which implies that they are positioned as a market leader
and are at risk.
Discussion 4: Solution
Problem

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The research conducted on fitness trackers shows the present participation in the
competitive industry (Brunson & Reed, 2017). Many competitors that hold benefits of
technological development and launch of new items, such as smartwatches took an effort to
attain high market share (Brunson & Reed, 2017). Besides this, it exacerbates the situation of
Fitbit through the issues with products, like design flaw, antenna and allergic reactions, etc.
This is a primary reason, why in present time, Fitbit financial performance is not good (Selke,
2016). It is analysed that gross margin profits had reduced by 9% between the year 2015-
2016 and the cost of target stock was also cut from $33 to around $18 (Brunson & Reed,
2017).
Recommended Solution
It is recommended that Fitbit should initiate market research to examine where the
requirement of the patient is and what information should be tracked out of it (Brunson &
Reed, 2017). Fitbit should also invest in research and development to understand how to
improve the present products and spread their product line (Brunson & Reed, 2017). Fitbit
should also look toward connecting with insurance companies, medical product companies,
and doctors (Brunson & Reed, 2017). This might engrain the lifestyle of customers and will
help doctors in collecting and monitoring information of patients (Brunson & Reed, 2017).
Currently, Fitbit has applied a differentiation strategy, depending on the premium features
and designs to raise the willingness of customers to pay (Diaz, Krupka, Chang & Peacock,
2015). To maintain the benefits by strategy, Fitbit will require to hone their resources for
making sure that it creates customer value and provide differentiating features.
Question
Question: Why strategies Fitbit should focus to stay as competitive brand in global market?

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References
About Fitbit. (2019). Retrieved from www.fitbit.com/about
Brunson, R. R., & Reed, M. M. (2017). Fitbit, Inc., in 2017 Can It Revive its strategy and
reverse mounting losses? Baylor University.
Cadmus-Bertram, L. A., Marcus, B. H., Patterson, R. E., Parker, B. A., & Morey, B. L.
(2015). “Randomized Trial of a Fitbit-Based Physical Activity Intervention for
Women.” American Journal of Preventive Medicine, 49(3), 414–418
Diaz, K. M., Krupka, D. J., Chang, M. J., & Peacock, J. (2015). “Fitbit: An Accurate and
Reliable Device for Wireless Physical Activity Tracking.” International Journal of
Cardiology, 185, 138–140
Marshall, G. (2015). “The Story of Fitbit: How a Wooden Box Became a $4 Billion
Company.” Retrieved from www.wareable.com/fitbit/youre-fitbit-and-you-know-it-
how-awooden-box-became-a-dollar-4-billioncompany
Quelch, J. A. (2016). Consumers, Corporations, and Public Health: A Case-Based Approach
to Sustainable Business. Oxford University Press.
Sasaki, J. E., Hickey, A., Mavilia, M., Tedesco, J., John, D., Keadle, S. K., & Freedson, P. S.
(2015). “Validation of the Fitbit Wireless Activity. Tracker for Prediction of Energy
Expenditure.” Journal of Physical Activity and Health, 12, 149–154
Selke, S. (2016). Lifelogging: Digital self-tracking and Lifelogging – between disruptive
technology and cultural transformation. Springer.