INTERNAL MEMO

To: [insert your recipient- use “Board of Executive, Fitbit” if you do not have any]

From:

Subject: Fitbit to narrow down its strategy to corporate wellness programs

Date: February 12, 2020

Executive summary

Fitbit is a manufacturer and marketer of consumer wearable fitness devices, including

wristbands and watches. As part of its growth, the company is contemplating an expansion to

include health management. The decision is, however, contingent on the industry and economic

analysis, as well as "the six factors" it identifies. Three possible strategies exist, including

sticking with the current approach, expanding to health management, and narrowing down to

corporate wellness. Based on the analysis, the most probable approach would be to narrow down

to corporate wellness programs, which will see it working with employers and healthcare

organizations as opposed to selling products and services directly to consumers.

Introduction

Fitbit is a marketer manufacturer of consumer wearable fitness devices, including

wristbands and watches. Since 2007, the company has experienced tremendous growth, claiming

the lion's share in the wellness trackers industry. At the start, the company created products for

both high-end customers, as well as price-sensitive customers. By 2015, the company's revenues

exceeded $1.8 billion from the sale of fitness devices alone. At the time, the company was

experimenting with premium services, including personalized progress reports, virtual coaching,

and community engagement. The premium services attracted over 6.7 million customers at the

start, but they contributed less than 1% of the company's revenues.

closest competitor, China's Xiaomi, claimed 10% less market share than Fitbit. The introduction

of the Apple Watch, however, threatened Fitbit’s position. While Apple Watch’s market share

grew, Fitbit’s fell by 25% in 2016. Apple focused on high-end customers, whereas Xiaomi

served the most price-sensitive shoppers. Apple enjoys greater consumer loyalty, as many

people associate it with quality. Apple’s brand awareness is unmatched. Xiaomi, on the

other hand, thrives as a low-cost producer, focusing on the price-sensitive customers.

Besides the saturated market, Fitbit also faced another challenge: high abandonment rates.

Nearly a third of the people who buy fitness wearables quit using them within a halt a year of

buying. Fitbit, however, still maintained its leadership position. A lot of its revenue streams

come from the new devices it kept introducing. Most of its competitors expanded to medical

applications, besides wellness and fitness tracking. To maintain its position, Fitbit must decide

whether or not to enter the disease management niche.

Problem statement

Fitbit must decide whether or not to enter the health management niche of the industry.

Most of its competitors are already exploring opportunities in this area, and Fitbit must move

quickly by reexamining its strategies and potential to expand in this direction. The company

must consider six factors, including the market structure, consumers, technology, financing,

public policy, and accountability in reaching its decision.

Industry & Economic Analysis

SWOT Analysis

Strengths Weaknesses
 Enjoys first-mover advantage  Does not enjoy fitness/health
 Great agility credibility
 Broad product portfolio  Lack of health management devices
  Affiliation of corporate wellness  Fitbit has limited features
programs  Low brand awareness
Opportunities Threats
 Expand corporate wellness  New entrants (start-ups with high
 Introduce health management technologies)
 Improve the supply side  High abandonment rates

Fitbit enjoys enormous competitive advantage over its competitors, as the SWOT

analysis shows. The company enjoys-first move advantage because it was among the very first

firms to enter the market. It also boasts over its partnership with corporate wellness programs. In

2015, for instance, Fitbit partnered with U.S Health Insurance Portability and Accountability

Act. This blanketed customers’ records security, and it helped Fitbit build a connection with the

customer. One of Fitbit aggressive advantage used to be world markets. Fitbit is also agile,

changing with the dynamic business environment.

PEST Analysis

The political environment includes the regulations that the government imposes on the

industry. FDA does not regulate the devices that Fitbit sells unless they claim to have specific

health benefits, such as the ability to diagnose or treat some diseases. As it stands, all of the

Fitbits devices do not fall under the FDA's regulations, which means that the company does not

have many regulations over its head, provided it manufactures safe products. The company

targets both low-end and high-end consumers. Consumer purchasing power is not a big problem.

By working with corporate wellness programs, and by offering differently-priced products, the

company has managed to stay ahead of economic turbulences. Many people are increasingly

adopting wellness programs, as they see it as the best way of staying healthy. Physicians and

researchers alike maintain that leading a healthy lifestyle, including eating well, exercising, and

sleeping well, is vital for a healthy body. Social factors, therefore, are in favor of the company's
growth. Technology is fast-changing. Newer companies are coming up with state-of-the-art

technologies, and they are giving existing companies, such as Fitbit, a run for their money. Fitbit

must innovate to stay ahead of the technological competition if it is to survive the test of time.

Porter’s five forces analysis (Characteristics of the wearable device market)

Force Rate
The threat of new entrants Weak to Moderate
Threat of substitution Weak
Power of suppliers High
Rivalry Moderate to High
Power of consumers Moderate

The wearable industry has initial costs, which include the costs of setting up the plant and

marketing. With big brands like Apple in the industry, it is tough for new entrants to establish

themselves in the industry. Also, access to distribution networks scares off many newcomers.

Fitbit enjoys cost advantages, and it can use this to wade off any new entrants. The industry has

many suppliers, meaning they are less likely to influence prices. The power of suppliers is,

therefore, low. Buyers have fewer firms to choose from, as only a few companies are operating

in the industry (Murphy, 2018). As such, buyers do not pose a considerable threat to Fitbit. Also,

the industry has limited substitute products, and this makes substitution less a threat to the

company. The industry has very few firms, and rivalry is thus limited to a few firms. With big

companies, like Xiaomi and Apple, however, the competition is intense.

Alternative strategies

Stick to the current wellness niche

Fitbit has established itself as a global leader in this niche, and it would be wise to

continue operating in this niche as opposed to entering a new niche. Based on the identified

weaknesses, the company does not enjoy adequate brand awareness in its current strategy. It
would also be logical to focus on its brand awareness before entering the health management

niche. The wellness strategy will not lend the company to a lot of scrutiny from both the FDA

and physicians, thereby allowing it to grow.

Expand to health management

Many patients fancy a health management approach, besides the wellness approach. With

technologies, such as Telehealth, coming up, it is only a matter of time before all wearables

adopt a health management model. Fitbit, as an industry leader, should move swiftly to take

advantage of the opportunities that health management offers. Moving to this space will allow

the company to leverage many of the factors that are in its favor, including consumer

preferences, financing, technology, and accountability.

Move from consumer products to working with corporate wellness programs

The consumer product niche is fast becoming saturated. Fitbit should consider changing

its models from dealing directly with consumers to only focusing on corporate wellness. The

enterprise should work with employers and healthcare organizations to address both

wellness/fitness and health management. The rationale for this strategy is that the company

already enjoys massive support from various employers, and many of its customers are from

corporate wellness programs. Also, working with employers will reduce abandonment rates,

thereby allowing the company to focus on innovation rather than regular marketing.

Tracking metrics

To track the impact on these recommendations, the company will examine its key

performance indicators (KPIs). One of the most common KPIs is market share. A good strategy

should increase the company’s current market share. Other KPIs include revenues and

profitability, brand awareness, cannibalization, and customer satisfaction.

Based on the industry & economic analysis, Fitbit should go with the last strategy:

focusing more on corporate wellness. This strategy will reduce abandonment rates since

employers will also aid in making sure their employees adhere to fitness programs they

subscribe. The company will continue to manufacture and market its products for corporates

rather than for the mass consumers. The strategy will also create a new niche for the industry

leader, allowing it to compete on a whole new level. Many companies in the industry target

consumers who, as research has shown, do not adhere to the fitness program they subscribe to.

Working with corporations, including healthcare organizations, will enable the company to get

endorsements for health management, a strategy that it may adopt later. In line with this strategy,

Fitbit should move ahead to market its products and services directly to employers and

healthcare organizations. There is room for as many players in this niche, given that there are as

many employers and healthcare organizations that companies like Fitbit can partner with.
 References

Herzlinger, R. E., Sniverly, C., and Mehta, S. (2017, January 17). Fitbit. Harvard Business

School

Murphy, E. (2018, November 20). Fitbit Inc Porter Five Forces Analysis. Retrieved February 12,

2020, from https://www.essay48.com/term-paper/5758-Fitbit-Inc-Porter-Five-Forces