Crafting & Executing Strategy

MGMT702-003

Business Case Analysis

Case 07- Fitbit, Inc.: Has the Company Outgrown Its Strategy?

Submitted by- Alisha de Sousa

Kirandeep Kaur

Qiting Su

Date- January 24, 2019

Submitted to- Professor Byron Tobar

Table of Contents

EXECUTIVE SUMMARY .......................................................................................................... 3

INTRODUCTION & IDENTIFICATION OF SYMPTOMS .................................................. 4

DEFINING THE PROBLEM/OPPORTUNITY ....................................................................... 4

PROBLEM ANALYSIS ............................................................................................................... 6

BRAINSTORMING SOLUTIONS ............................................................................................. 8

EVALUATION OF SOLUTIONS............................................................................................... 9

RECOMMENDED COURSE OF ACTION ............................................................................ 11

IMPLEMENTATION PLAN .................................................................................................... 11

CONCLUSION ........................................................................................................................... 12

REFERENCES ............................................................................................................................ 12

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EXECUTIVE SUMMARY

This case is about Fitbit which was the pioneer of fitness devices. In this case study the main

concerns of Fitbit, and the best course of action is recommended. When Fitbit was introduced, it

was the first fitness tracker in the market. Fitbit was highly accepted by customers. The first

product was named the “Activity Monitor”. It was a wireless and wearable device. Fitbit devices

are used to measure a person’s physical activity to keep the track of their physical health. The

company has an online website where customers can upload their physical data and can compare

the same with other users. Fitbit proved itself as a leader initially but as time passed its

competitors came up with more advanced devices. This was a major reason for the fall of the

Fitbit. Moreover, Fitbit had several problems with their products such as accuracy, design flaw,

antenna, allergies, etc. Fitbit’s manager was so confident about their product that they estimated

sales to be at $2.4 to $2.5 billion. But on the last day of the February 2016, Fitbit’s stock prices

reduced by 20 %. This was happened due to the problems with the product and the increasing

number of competitors which provided customers with other options. Fitbit tried to fix the

problems with its devices. They addressed the design problem, antenna issue and the privacy

issue. But they were unable to fix the problem of allergic reactions. Although Fitbit was the

leader of the fitness tracker device, it did not get a sustainable competitive edge over its rivals.

This led to a decrease in its sales and reputation.

It is recommended that Fitbit fix the problems with its prior devices before launching new

products. Moreover, Fitbit does not have a proper team of developers. This was also a drawback.

Fitbit should expand into other sectors of technology such as cellphones, laptops etc. If Fitbit

wants to be a leader it has to initiate something that its competitors do not do or cannot do.

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INTRODUCTION & IDENTIFICATION OF SYMPTOMS

Fitbit had over estimated the sales revenue for 2016; however, Fitbit did not meet its

expectations and this led to a 20% drop in its share price. Fitbit was in a dominant place in the

Tracker industry. Over the years, many competitors entered in the industry including Xiaomi,

Apple, and Garmin etc. and Fitbit was losing market share. It’s market share went from 37.9% in

2014 to 26.9% in 2015. Also, there were huge costs in launching the two new products that were

negatively affecting the net income in 2016. Finally, many problems arose with Fitbit including a

mal functioning antenna. The design was not made effectively, and the materials was causing

irritation. It’s time to make changes to the company. Fitbit needs to improve its competitive

advantages in order to enhance the value of the company.

DEFINING THE PROBLEM/OPPORTUNITY

What are the central facts of the case? What assumptions are you making about these facts?

Central facts

Fitbit over estimated its sales revenue for 2016, but in the first quarter of 2016, Fitbit announced

that the revenue would not meet the forecasted sales. Therefore, the share price had dropped by

20%.

Assumptions

Based on the financial performance of revenue, sales had increased dramatically by 149% from

2014 to 2015. It was assumed that the revenue for 2016 could be achieved at the range of $2.4 to

$2.5 billion.

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What is the major overriding issue in the case? What major question or issues does this case

address that merits study at this point in the course?

The major overriding issue in this case is that many competitors entered into the Tracker industry,

Fitbit did not take any action to maintain its market share against competitors. Fitbit is still focusing

on a single line of products, the fitness tracker. It did not differentiate its products to gain a

competitive advantage. Therefore, Fitbit did not meet its revenue target for 2016.

The major question that come in place is: Why did Fitbit not take all factors into consideration

before it made the forecast for sales? Factors such as competitors, new product development,

quality of the product, customer satisfaction etc.

What sub-issues or related issues are present in the case that merit consideration now?

There are plenty of sub-issues presented in the case that should be considered now:

 The companies lack of differentiation for the Tracker device.

 Huge costs in launching the two new products, Fitbit Blaze and Fitbit Alpha.

 The irritation problem has not yet been fixed, customers are still complaining about the

replacement for new devices.

 Lack of technology developers to develop more innovative products.

 Fitbit’s market share has dropped 11% from 2014 to 2015.

Who are the stakeholders in the case and what are their stakes? What challenges, threats or

opportunities are posed by these stakeholders?

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James Park, the CEO of Fitbit, is looking for ways to turn around the situation. He is evaluating

the expansion the product line into clinic activities.

Xiaomi, Apple, and Garmin etc. are Fitbit competitors. The stake of competitors is to win the

competition. Xiaomi could be a threat to Fitbit because its Year-over-Year growth rate is 951.8%

compare to 93.2% of Fitbit. Also, Apple has a strong team of developers which Fitbit does not

have.

Customer of Fitbit, the stake of customer is value for money and satisfaction. Fitbit fails to

maintain the quality of the products. The threat to Fitbit is that the customer has more choices and

will looks for substitutes.

If the case involves company actions, evaluate what the company did or did not do in handling

the issue affecting it.

Fitbit had faced many issues. One of the issues is the design flaw, the design of the product did not

work effectively, the product could not clip properly and continued to fall and break. However,

the company offered replacement and repairs. Another issue is that the material Fitbit used was

causing irritation, the company offered replacement of the product, but the issue was not

completely getting solved. The customer still complained about the new product causing irritation.

Lastly, Fitbit allowed customers to upload their information via Bluetooth to track energy levels.

This information was made public. Fitbit realized that was not a good way to do it anymore, so the

company changed the website.

PROBLEM ANALYSIS

FISHBONE DIAGRAM

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First problem: The first problem with Fitbit is that it is focused only on fitness devices but

customers nowadays want more than just a single thing. Fitness tracker is just an application

which is being used by many of other brands in their smartwatches. Customers have other

options like Apple smartwatch, Samsung smartwatch which are far more useful than Fitbit

because they have calling, messaging, and calendar apps in addition to tracking fitness.

Causes Effect

Outperforming
Competitors

People do not like

to buy just a
People need more than Fitness tracker.
Fitness Tracker They would tend
to pay more and
Lack of applications like buy a smartwatch
Calling, Messaging than a Fitness
tracker.
Single Product
(Fitness Tracker)

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Second Problem: Fitbit’s products have many problems but rather than fixing and updating their

previous products, it is launching new products every year.

Causes Effect

Problems with
Design
Fitbit falls and breaks
Fitbit had many
problems with its
Allergic Reactions People had allergies with devices that’s why
Fitbit like rashes on wrist its customer base is
Accuracy Fitbit’s calculations weren’t getting lower
Accurate because Fitbit
wasn’t able to
Privacy Issues Privacy issues with the personal data of resolve the
Customers which was being shared on problems.
Fitbit’s website

BRAINSTORMING SOLUTIONS

Identification of different Solutions:

1. Fitbit should diversify their products. They should go beyond just fitness trackers.

Nowadays, Fitbit is making smartwatches which is a good move. But they should do

more, perhaps expand into making mobile phones, etc.

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 2. Fitbit should hire a team of highly qualified software developers. Because their major

competitor Apple has the best team of developers that’s why Apple is outcompeting

Fitbit.

3. Fitbit should have fixed problems with their previous products which is the major reason

behind the criticism of the Fitbit. They tried to fix the design problem but they didn’t put

much efforts to fix the allergic reactions caused by the Fitbit devices.

4. Fitbit should go international because its competitors are performing internationally.

EVALUATION OF SOLUTIONS

1. The first solution is to hire a team of developers which can help Fitbit to develop more

products and can go into different sectors of the technology. That would be beneficial for

them.

Pros: Cons:

 Having a highly qualified team of  Hiring highly qualified developers

developers means more new ideas
and more updated products that
would bring more value to the
company.
 Moreover, they can fix problems
with the previous products.
can cost a lot to Fitbit because the
salaries of specialized individuals
are higher.
 Other than costs hiring will take a
lot of time and it can be complex.

2. Fitbit should have tried to permanently fix problems with their previous devices. But they

may be not efficient to do that because the lack of the resources.

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 Pros:
 It might have saved the
reputation of the Fitbit.
 Fitbit might have created a
long-term relationship with
customers.
3. The next solution is to diversify their products. Fitbit can launch products in sectors other
than smartwatches like cell phones and laptops and so on.
Pros:
 Diversifying products means having
products more than in one category.
It can bring a lot of revenues and a
competitive edge to Fitbit over its
competitors.
 They can also go beyond just
tracking the heart rate, steps, and
physical activity. Fitbit should really
work on its Digital Health Strategy
right now because this is the time to
react.
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Cons:
 When Fitbit tried to fix the
problems, it costed them a lot
nearby
 The customers might try to
exchange the products without
having a problem that would be
dishonesty.
Cons:
 If a company wants to diversify its
products it would require lots of
resources which is very difficult for
Fitbit right now.
 This solution would cost Fitbit a lot
of money and human resources.
 This is a long-term solution which
would require lots of time.
 4. Fitbit should try to expand their business worldwide. It will help them to gain more

popularity and to introduce their products to various nations.

Pros: Cons:

 It will increase Fitbit’s revenue.  It will take too much time and
 It will make Fitbit’s customer money.
base strong.

RECOMMENDED COURSE OF ACTION

- It is recommended that Fitbit can hire a team of developer which can be helpful for

Fitbit. Also, they can fix the problems of allergy and accuracy. Moreover, they can

develop different products which will be useful in diversification. Also, this is cost

effective compare to other alternatives. Hiring a team of developers will not take too

much time.

IMPLEMENTATION PLAN

ACTION & IMPLEMENTATION PLAN

Immediate Actions Fitbit could have called back all their devices
which were had problems and could have
change the materials of the products.
Short Term Actions Hiring a team of developers
(3 months – 1 year)
Long Term Actions Diversification of products
(1 year – 3 years) International expansion of the Brand

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CONCLUSION

Fitbit was one to introduce the fitness tracker concept in the market but they just focus on fitness

tracker but didn’t make appropriate efforts to capture market opportunities and to keep the

market share they gained when they introduced this concept. If Fitbit employs recommended

course of action it can be a leader again.

REFERENCES

Brunson, R. R., & Reed, M. M. (2018). CASE 07Fitbit, Inc.: Has the Company Outgrown Its

Strategy? In A. Thompson, M. A. Peteraf, J. E. Gamble, & A. S. III, Crafting and

Executing Strategy- The Quest for Competitive Advantage. New York: Mc Graw Hill

Education.

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