Fitbit is one of the most popular brands in the field of personal fitness activity. In this case study, a detailed report of the company will be provided from the point of its initiation to the factors that led to the overall success. The brand was revolutionized with the latest technology that the company used to build a variety of products that promoted healthy living and a fit life among the people. The company developed a product which was known as the activity monitor that formed the basis of all the products that the company launched in near future. The management promoted the brand as the one that helps the individuals to achieve their fitness goals for life, by seamlessly incorporating them into their lifestyles. Over the years there have been many new developments in this field and new companies have cropped up to give fair competition to the already growing Fitbit (Fereidooni, Classen and Spink).
Few of the immensely popular company in this field are Apple, Jawbone and Xiaomi. All these companies have been developing products that are better than Fitbit in look and design and that has affected the overall business of the company. As more products and companies are entering the market the dominance of Fitbit has reduced comparatively. In this case study, the problem areas of the company, the main aspects that dominate the overall growth of the company are discussed. The financial information and analysis of the same have been provided and necessary recommendations have been provided by which the company can improve its present position and ensure more growth in the times to come. A proper analysts statement has been if studies the main reasons that had led to the downfall of the company and provides a better viewpoint on the road ahead for the management of the company (Visinescu, Jones and Sidorova).
Fitbit was a growing brand and was bringing several changes in its technology to make its overall products more appealing to the masses. However, what can be seen is that even though the company has a prominent presence in the market, there were certain aspects that had led to the downfall of the company like-
One of the major advantages that Fitbit had was being the early mover and that initially helped the company in making their stand in this field, but with progress in technology, there are many new players that give tough competition to the company. Apple is the largest brand when it comes to technology and it has made a strong entry in this field of active fitness reporting. Other companies can Xiaomi is also trying to make its mark (Kohtamäki).
The product that the company was marketing and selling to its customers has its own share of problems that included flaws with the design that made the product unusable if a part broke down. People faced allergic reactions because of the product being close to their skin.
One of the most interesting features of the band was that it was connected to the Bluetooth and people could easily transfer their data on the net and can share with other Fitbit users. This was a great privacy issue as people were unknowingly giving out a lot of information and sharing some personal information with the customers was not a great idea. It was also stated that user information was tracked by the company and was sold to third parties. This was a great privacy concern and affected the overall reputation of the company (Grundy, Held and Bero)
The company was trying to design new products with better technological usage, but that required increased amount of expenditure and that was hurting the overall financial margins of the stakeholders. The company would have ended up incurring a huge amount of manufacturing cost and the cost of overall research and development would have increased.
This is the biggest issue in case of Fitbit that it is focused on one product that is the fitness bands. This is affecting its customer base who are switching to other companies as they are getting more variety. Thus the company needs to invest in more products.
The overall financial position of the company was very weak given its low amount of net profit and increased investments for better products. With increased competition, the overall sales have also decreased, thus that was also a bad aspect in terms of finances. The Overall stock position had degraded and the value of shares has also decreased. Thus, financially the company was facing huge issues and needed to take steps to improve that position.
Thus, it can be seen from the above analysis that the entire organization was affected due to the above issues. However financially and operationally the company was highly affected as it did not have enough finances to fuel new products and the present operations were not working effectively. The presence of competition in the market had affected the overall sales and thus the investors were also sceptical to invest their funds in the company (Mayntz).
Based on the present analyst’s statement the market for the company’s product had decreased considerably and there was nothing that Fitbit could do to reverse the same. The company also didn’t have group support that could help them to recover their losses, unlike Apple. The management was facing many issues with the prospects of the company and almost all the publications stated that the major drawback for Fitbit was being a single product company. This had limited their overall growth and sales (Eisemann, Parker and Alstyne). It was thus important that management should look for alternatives where they can launch in new products economically. This would help them to make their position in the market and maintain their net profit values.
From the data provided the above-given ratios have been calculated. Previously the company was performing very well but in one year there has been the significant amount of changes. The overall return on equity has fallen from 1.75 to 0.17, which showcases that the shareholders will not be able to receive their dues and the overall return earned by them have dropped significantly. The debt to equity ratio is a very important parameter that shows the total amount of debt that the company is having with respect to its total equity (Gartland). It can be seen, that in one year there has been the great decrement in the same. A higher financial leverage shows how volatile the earnings are, so in case of Fitbit, the financial leverage is more than 1. It means with the change in EBDITA, the earnings will change at a faster rate. The operating leverage of the company has also reduced over the year and this signifies the volatility of the net contribution that the company earns over its income.
In case of Fitbit, the key performance indicators will include the EBDITA, that has significantly reduced over the year. The cash and cash equivalent have increased in 2015 significantly and this shows that the overall liquidity position of the company is not stable as they are having most of their assets in cash. There was a twenty percent drop in the stock price of the company and this is a big indicator of the present financial stability of the company. The investors will not invest in the company as they will not receive their dues. It has also been stated that in 2016, the company has earned a much lower revenue in comparison to the previous year. All this showcases that the company’s financial position is not stable.
Based on the overall research it can be said that Apple has the highest share even though the bands are more costly than other bands. Other companies like Xiaomi is also trying to make their place in the industry. All this is giving tough competition to the Fitbit. When it comes to market dominance Fitbit had an upper hand, but as time has elapsed and more companies have jumped into this business, Fitbit has lost its position.
Fitbit as a brand should try to maintain its net profit margin so that stakeholders can get their dues. The company is dealing with only one product so it must try to bring in new products in the market. The management of the company is thinking to launch in more products that would be lightweight and help in medical diagnosis, but the company should see to it that they need to arrange in for the required amount of funds. It is also important that effective market study is done. The company must initially improve its present state and then invest in other products, in that way it will be able to arrange in for the required funds (Elimam).
From the viewpoint of the analyst, the company is in a very bad position financially as the net profit margin of the company is reducing and the company has no further funds to fuel its operations. From 2014-2016, comparatively the company has lost on its market share and its overall dominance have also reduced. The major weakness in the overall structure of the company is that it is centric on only one product. The need of the hour is that the company must invest in new products and that will help them to fight the tough competition. The major threat it is facing is that soon in future there will be no market for such bands, and the company has no other group products to support its operations. There are many top-rated companies that are functioning in this field, and the company is losing its place (Belton). The strength of the company is that it had a very good start and was the first to use this activity tracker technology. The company has a loyal audience so in cases where the company will launch its new products, initially there will be no problem. On the basis of the current situation, the company must invest its money in research and development and focus on developing new products.
References
Belton, P. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd, 2017.
Eisemann, T, G Parker and M.W Alstyne. “STRATEGIES FOR TWO SIDED MARKETS.” 2017.
Elimam, H. “The Role of Small Businesses (Small Scale Economic Projects) in Alleviating the Acuity of Unemployment.” International Business Research 10.3 (2017).
Fereidooni, H, et al. “Breaking Fitness Records Without Moving: Reverse Engineering and Spoofing Fitbit.” International Symposium on Research in Attacks, Intrusions, and Defenses (2017): 48-69.
Gartland, D.J. “The importance of audit planning.” Journal Of Accountancy (2017).
Grundy, Q, F Held and L Bero. “A Social Network Analysis of the Financial Links Backing Health and Fitness Apps.” American Journal of Public Health (2017).
Kohtamäki, M. Real-time Strategy and Business Intelligence: Digitizing Practices and Systems. Finland: Palgrave Macmillan, 2017.
Mayntz, R. Networked Governance. Springer, 2017.
Visinescu, L, M.C Jones and A Sidorova. “Improving Decision Quality: The Role of Business Intelligence.” Journal of Computer Information Systems 57.1 (2017): 58-66.
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