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 can cost a lot to Fitbit because the
and more updated products that salaries of specialized individuals
would bring more value to the are higher.
company. Other than costs hiring will take a
Moreover, they can fix problems lot of time and it can be complex.
with the previous products.
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: Cons:
It might have saved the When Fitbit tried to fix the
reputation of the Fitbit. problems, it costed them a lot
Fitbit might have created a nearby
long-term relationship with The customers might try to
customers. exchange the products without
having a problem that would be
dishonesty.
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: Cons:
Diversifying products means having If a company wants to diversify its
products more than in one category. products it would require lots of
It can bring a lot of revenues and a resources which is very difficult for
competitive edge to Fitbit over its Fitbit right now.
competitors. This solution would cost Fitbit a lot
They can also go beyond just of money and human resources.
tracking the heart rate, steps, and This is a long-term solution which
physical activity. Fitbit should really would require lots of time.
work on its Digital Health Strategy
right now because this is the time to
react.
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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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