Swot Analysis Of Case Study Two: Fitbit By Brian M Ginardi PDF

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Running head: FITBIT

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Case Study Two: Fitbit Brian M Ginardi Baker College

FITBIT

2 Case Study Two: Fitbit

Introduction Fitbit began in 2007 when James Park (CEO) and Eric Friedman (CTO) believed there was a market for a device that could track a person’s physical activity. The initial device was designed to measure personal data such as number of steps walked, heart rate, quality of sleep, and steps climbed (Brunson & Reed, para. 4, 2018). Fitbit is a well-known brand name and the favorite when you think of the fitness tracking industry. Fitbit devices becoming nearly ubiquitous with fitness enthusiasts and health-conscious individuals wearing the devices and checking them throughout the day. The company had seen a considerable increase in sales between 2009 and 2015 but then sales started declining. The company’s demise caused Park and Friedman to set a new strategic plan and save their company (Brunson & Reed, para. 3, 2018). Fitbit’s present strategy The three financial ratios I chose to analyze are operating profit margin, net profit on margin, and gross profit margin. As you look at the table below you see all the CAGR (Compound Annual Growth Rate) are in the red which is a bad sign for the company because the operating profit margin shows profitability of current operations without regard to interest charges and income taxes. The net profit margin shows after tax profits per dollar of sales and the gross profit margin shows revenues available to cover operating expenses and yield a profit. All three of these ratios are operating in a negative ratio which shows the company’s present strategy is ineffective. The ideal picture of the table should show each of theses trends heading in an upward direction and the higher the ratio the better the results.

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Year 2014 2015 2016 First Quarter 2017

Operating Profit Margin 21.19% 18.74% -5.18% -30.57%

Net Profit Margin 17.68% 9.46% -4.74% -20.10%

Gross Profit Margin 47.80% 48.50% 38.99% 39.57%

CAGR

-2.78%

-113.69%

-6.07%

Competitive Power of a Resource 1. Does the resource or capability have competitive value? The Fitbit has several competitive values starting with brand recognition, its name has become synonymous with the connected fitness market. Another value includes the number of health and fitness devices, next is Fitbits purpose-built hardware and software technologies, designed only for health goals. Fitbit is available in sports, fitness, and retail stores. The current number of Fitbit users as of Q1 2015 was 19 million, this information helps the company determine features for future products based on detailed insights and analysis (McNew, 2015). 2. Do many or most rivals have much the same resource or capability? There are several competitors including; Garmin, Under Armour, Apple, Jawbone, and Xiaomi that are Fitbits main rivals. Many of the competitors do not have the same resource as Fitbit such as hardware & software technology, Platform Openness, and Brand Name. The products maybe similar but Fitbit is still the leader. 3. Is the resource or capability hard to copy? The resource or capability that is used by Fitbit is not hard to copy because all their key resources are either imitable or substitutable, meaning that their position as a leader in the market is at risk (Deshpande, 2017).

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4. Can the value of a resource or capability be trumped by substitute resources and capabilities of rivals? Yes! It is possible that a resource or capability can be replaced by something better, it would all depend on how well the company’s IT department was and if they can solve issues that are being mentioned by consumers. SWOT Analysis

STRENGTHS (+)

WEAKNESSES(-)

Business Model Brand Name

Design Flaws Allergic Reactions

Ease of Use Battery Life

Privacy Issues Sharing of Information

OPPURTUNITIES(+)

THREATS (-)

More choices Consumer-friendly Niche markets Become a Platmore

# of competiors Technology issues Enviroment Regulations

Value Chain Activities The value chain activities being considered by Fitbit are focusing on niche markets and how does this add value to Fitbit? A focused low-cost strategy seeks to achieve a competitive advantage by serving buyers in the target market niche at a lower cost and lower price than rival competitors. This strategy has considerable attraction when a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment (Thompson, 2018).

FITBIT Recommendations The recommendation for Fitbit would be for the company to pursue a niche market such as health and fitness markets. By focusing on the health and fitness industry and providing more unique and reliable features and software for their products would help them as. They could also design products that could be used by doctors for their patients to track their health and possibly send it to the doctor(s). This way the doctor could see any changes in the patient(s) sooner. The last recommendation is for the company to put a little more effort and money into marketing their product to reach more people which could in turn increase their sales. They already have a target market they just need to market to them. Conclusion My conclusion is that Fitbit needs to stay on top of research and development of new product and fix the issues of privacy, design, and IT problems. One possibility for the company was to become a platform, rather than just a product. That would entail moving into niche markets with devices that are designed for very specific and unique purposes. Some of the possibilities would be moving further into health care and corporate health care.

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Deshpande P. (2017, 21 March) Fitbit - Strategic Analysis. LinkedIn Retrieved from: https://www.linkedin.com/pulse/fitbit-strategic-analysis-parag-deshpande McNew S. (2015, 5 September) FitBit's 7 Competitive Advantages Over Other Brands. The Motley Fool. Retrieved from: https://www.fool.com/investing/general/2015/09/05/7competitive-advantages-fitbit-says-it-has-over-o.aspx Thompson A. (2018) Strategy Core Concepts and Analytical Approach. Burr Ridge, IL. McGraw Hill Education....