FitBit Case Analysis: Report of Current Performance and Recommendation for Future Prospects

  Introduction 

Assessing the performance of a company is essential in the determination of significant errors and opportunities that present themselves. Consequently, a company can use effectively determined assessments to chart courses of action for improving output. In the case of FitBit, the assessment is conducted as a result of consideration by the C.E.O- James Park. Below is a presentation of evaluation of competitive forces, competitive advantage and SWOT analysis, and financial and operating performance. As a result, recommendations are made on strategies to improve the company’s future prospects. 

An Evaluation of the Five Competitive Forces in the Activity Tracking Industry 

FORCE	LEVEL	REASON
COMPETITIVE RIVALRY	High	Competitors existing in the activity tracking industry include Garmin, Under Armour, Apply, Jawbone, Xiaomi, and Apple
SUPPLIER POWER	Moderate	Raw materials from varied numerous suppliers  New products would cost the company significantly higher manufacturing costs
BUYER POWER	High	The new entrants in the market who offer wider alternatives for similar products  Products offered are more luxury than necessity
THREAT OF SUBSTITUTION	Moderate	FitBit Inc. has the advantage of consistently developing the tracker technology  Apple watch
THREAT OF NEW ENTRY	Moderate	New entrants such as Apple put pressure on FitBit through new strategies

Competitive Rivalry 

Competitive Rivalry is high. When there is high rivalry among the existing players in an industry, it is possible that prices will reduce, thus eventually leading to lower productivity for FitBit, Inc. Considering the activity tracking industry, it is notable that FitBit, Inc. is operating in a rather highly competitive environment. Notably, competitors existing in the activity tracking industry include Garmin, Under Armour, Apply, Jawbone, Xiaomi, and Apple. For instance, Xiaomi came second to FitBit in global market share in the year 2015, while Apple entered the market in 2015 with shares of up to 14.9 %. 

Supplier Power 

Supplier power is moderate. Companies in the activity tracking industry get their raw materials from varied numerous suppliers. However, when the suppliers have a dominant position in the industry, they significantly affect the profit margins. This effect is evident in FitBit, Inc. during the production of FitBit Blaze and FitBit Alpha. Notably, the new products would cost the company significantly higher manufacturing costs. 

Buyer Power 

Buyer power is high. Buyers of activity tracking devices (like many other customers) want to get the best of products at the minimum possible cost. Thus, when the customer base for FitBit is smaller, it gets more powerful, thus putting higher pressure on FitBit, Inc. In this case, the company is driven to offer discounts and offers due to the higher bargaining power of clients, affecting profits. In the case of FitBit, customer power is likely to be influenced by the new entrants in the market who offer wider alternatives for similar products. There is also the lure of highly priced unique products such as the Apple watch in 2015. Moreover, the products offered are more luxury than necessity. 

Threat of Substitution 

Threat of substitution is moderate. FitBit Inc. has the advantage of consistently developing the tracker technology including the FitBit Tracker, FitBit Ultra, FitBit Aria, FitBit One, FitBit Zip, and FitBit Flex among others. However, when new products or services meet similar needs of customers, the profitability of the company suffers. This is especially so if the substitute product offers a unique value than the one presented by FitBit. For instance, there is the Apple watch among others. There is also the consideration of faults with FitBit products that significantly affects value proposition. 

Threat of New Entry 

The threat of new entry is moderate in the activity tracking industry. New entrants such as Apple put pressure on FitBit through new strategies implying FitBit has to establish new means of maintaining their competitive edge. However, FitBit still has the higher market share at 26.9% in 2015. 

FitBit’s Competitive Advantage and SWOT Analysis 

Competitive Advantage 

FitBit has developed a strong competitive advantage over competitors by use of essential strategies. In particular, the company offers a competitive variety of products developed over a period of time. The varied products with different features (digital clock, colored, touchscreen, and vibrating alarm among others), therefore, sets them apart from the other companies that focus on smaller options. 

Strengths 

FitBit’s strengths is based on its research and development abilities. In particular, the technology offered by FitBit entails essential tests and approaches that ensure consistent innovation. As a result, the company is always developing new, unique, and a variety of products that fulfills the ever growing needs of the customers. 

Weaknesses 

The plunge in FitBit stock is a significant challenge. There are other weaknesses such as design flaws, allergic reactions, and too much information as presented in the case. 

Opportunities 

In spite of the weaknesses, FitBit is presented with opportunities to advance due to a number of factors. One opportunity is the conclusion of Tan Le that wearing activity devices is important for health ("Case Study: FitBit, Inc. Has the Company Outgrown its Strategy?," n.d). The change in perspective leads to greater uses for activity tracking devices, thus more opportunity for research and innovation by FitBit. 

Threats 

Nonetheless, FitBit is challenged by the increasing competition in the activity tracking industry. 

Evaluation of FitBit’s Financial and Operating Performance 

The above assessment on revenue appears very encouraging. In spite of growth in overall revenue, however, FitBit’s current performance is worrying. There is a lot more to be done to live up to expected standards. In 2015, FitBit fails to keep up with the year on year growth. Notably, their market share significantly reduces to 26.9% down from 37.9% in 2014 ("Case Study: FitBit, Inc. Has the Company Outgrown its Strategy?," n.d). Particularly, the full revenue for the year 2015 is at $1.86 billion, which is an increase up from $0.7 billion the previous year. Nonetheless, full revenue for 2016 is $2,170 million, thus only about 90% of the year target of $2.4 billion. Consequently, overall, the company growth as at now is very minimal. Sales are at 21.4 million units as recorded in the year 2015. In 2016, this figure increases to 23.3. As a result, Fitbit still holds on to first position in market share. To maintain competitiveness, there is need for this figure to increase. Moreover, stock market price is interestingly on a downward trend since 2015 further raising concern. 

Recommendations Related to Modifying the Business Model/ Increasing Value to Customers 

The research and development department needs to work with other departments in the company to ensure value. Notably, the customer department should be re-invented with customer values (Reading 10). In the case of FitBit, this entails the consideration that for customers to be retained their thoughts should be considered in the development of new technologies. As a result, customer retention will enable higher realization of profits. 

References 

Case Study: FitBit, Inc. Has the Company Outgrown its Strategy? (n.d.). 

Reading 10