Fitbit, Inc., in 2017: Can It Revive Its Strategy and Reverse Mounting Losses? 4

ID: 422196 • Letter: F

Question

Fitbit, Inc., in 2017: Can It Revive Its Strategy and Reverse Mounting Losses? 4 a connect MARLENE M REED Bor University revolutionized the personal ntness actisity in in the number of devices sold. The company sold only of its Tracker wearable 23% devices in the nrst quarter of 2017 compared to the company was a hit in the 4,842 during the first quarter of 2016. Correspond nearly ubig ingly, Fitbit's revenue declined from $505 mion dus ith titness enthusiasts and health comcious ing the first quarter of 2016 to $299 million during the wearing the devices and checking them first quarter of 2017, The accelerating collapse of Fit e company's sales of activity bit's competitive advantage and financial performance Fitbit revolutionized t 2009 with the introduction ivity monitor. By 2016 the marketplace with Fitbit devices becoming the day. The increased from 5.000 units in 2009 to created a crisis for founders James Park and Enic Fried connsectod health monitors had 214 million yearend 2015. The company execused a successfiul IPO new strategic course to save (initial public ofTering) in 2015 that boossed liqundity by $4.1 billion and recorded revenues of $1.86 hilion by the conclusion of its first year as a public coaupany and fitness devices by man, who were now faced with peompsty establishing a Background on Fitbit Fitbit's chiet managers expected 2016 revenues in the Fitbit was founded in October 2007 by James Park range or 524 billion to $2 5 bilhon However, on the last (CE0) and Eric Friedman(CTO). The two men started day of February 2016 the price of Fitbt stock plunged the company after noticing the polential for using sen nearly 20 percent after the company announced that ses in small wearable devices to track individuals the sales and earnings in the first quarter would fail phsical activities Betore they had a prototype. Park short of analysts forecasts The company's revenues and Friedman took a circuit board in a wooden box increased by nearly 17 percent from 2016 to 2017 and around to venture capitalists to raise money In 2008. ts number of devices sold increased from 214 milion Park and Friedman addressed the TechCrunch50 in 2015 to 22.3 million in 2016. However, the com Conference drumming up pecorders for their product pany's oost of revenue increased from 51.5 percent Neither man had any manufacturing experience, so in 2015 to 61 percent in 2016 The dramatic cust of thcy traveled to Asia and revenue incrcases coupied with ragidly increasing oper company to produce the device for them ating expenses resulted in a nt loss of S102 millionF in 2016 5or Fitbit Fitbit put its product named Tracker on the market at the end of 2009, and the company shipped Ficbit's financial troubles accelerated in 2017 with appruximately 5,000 units at that time. They had pany reporting revenue for the first quarter of additional orders for 2 .000 units on the books 2017 of $299 million and a net loss of $60,1 million. While the company's financial travail in 2016 was related primarily to increasing costs, the weak first quarter 2017 performance was driven by a decline esere

Explanation / Answer

Answer:-

Threat of New Entrants: MODERATE

Bargaining Power of Buyers: HIGH

Power of Suppliers: LOW

Threat of Substitute Products or Services: HIGH

Answer 3:- FitBit has a strong brand name that is known globally as a once innovative product called the “Fitness Tracker”. In 2007, Fitbit capitalized an opportunity to create a stylish, interactive and health-aware product. Their mission states that Fitbit’s goal is to “empower and inspire you to live a healthier, more active life. We design products and experiences that fit seamlessly into your life so that you can achieve your health and fitness goals, whatever they may be.” I would describe Fitbit’s current strategy is to produce a premium product that consumers are willing to pay for based off of the Fitbit brand name.

Answer 4:-

External

Internal

Strengths (S)

Weaknesses (W)

Opportunities

Favorable trends

Threats

Unfavorable trends

Answer 5:- In 2016, Fitbit revenue totaled $1.86 billion and adjusted EBITDA of $389.9 million. From 2014 to 2015, Fitbit’s revenue more than doubled and they expect its full-year 2016 revenue to be $2.5 billion “which would be driven by the introduction of new products and expansion in new geographic territories.” While their revenues have been up, their stocks have decreased significantly (especially in 2016 of 20%). This drastic decrease is probably due to the threat of the smartwatch and the decreasing interest in just a fitness tracker. Based on this decrease in stock value and overall value of the company, I would say that Fitbit’s current strategy is not working because they are not diversified enough to compete in the changing market.

Answer 6:- Many critics say that Fitbit “needed to be more than a one-product company”. One possibility for Fitbit is to expand into other markets such as the medical side of the health industry. Fitbit’s current products focus on the fun side of health and wellness while providing a stylish product for its users. Their product design could be expanded to include health data trackers such as glucose indicators or other monitoring devices. Fitbit could also focus on expanding their international footprint. The market for fitness level trackers is on the decline in the United States; however, the world market could experience a possible expansion.