Fitbit Firm’s Competitive Advantage, Opportunities and Threats

Subject: Case Studies
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Competitive Advantage and Marketing Strategies

Today’s rapidly developing business world sets a variety of challenges and opportunities for companies that seek to become competitive in the market. A competitive advantage can be defined as an attribute that allows a company to outperform its competitors by providing customers with greater value and achieving higher margins. In other words, it is an advantage that makes the products or services of a business more preferred by customers due to its unique characteristics. The core issues to take into account while determining a company’s competitive advantage refer to identifying the competitors and determining the target markets (Hollensen, 2018). Among the examples of promising competitive advantages, one can list technological advancements, brand image recognition and loyalty, lower costs, highly skilled personnel, and beneficial geographical location. The success of marketing strategies depends on the extent to which a firm can articulate its distinguishable value to clients while seeking and adjusting a competitive advantage to make it flexible to compete effectively.

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According to Porter, there are four generic strategies that can be utilized to create a competitive advantage, such as cost leadership, differentiation leadership, differentiation focus, and cost focus. Depending on the size of the target market and the available resources, companies are assumed to make their products valuable to specific customers (Hollensen, 2018). However, these strategies seem to fail to embrace the complexity of competition and the idea that some of them can be combined. For example, even though Walmart uses a cost leadership strategy, it also spends on advertising, which means that it works on differentiation (Kotler, Keller, and Manceau, 2016). Therefore, a range of alternatives tools to gain competitive advantage can also be used, including Weisbord’s six-box model, a strength, weakness, opportunity, and threat (SWOT) analysis, a value, rarity, imitability, and organization (VRIO) analysis, or Kay’s distinctive capabilities framework.

Fitbit’s Competitive Advantage

Since its foundation as Healthy Metrics Research in 2007, Fitbit grew significantly as one of the leaders in the wearable fitness trackers industry. Considering the performance of the company in terms of Porter’s framework, it is possible to state that Fitbit adopted a differentiation strategy to build its competitive advantage. In particular, it launched seven products for several target markets, including smart scales, clippable activity trackers, and wristband trackers. These products were designed to meet different needs of customers, such as the desire to have fashion products or mere monitoring of personal health data. In comparison, Xiaomi, Apple, and other competitors could not provide such a variety of products. Therefore, the differentiation strategy can be evaluated as a rational and successful decision taken by Fitbit to build its competitive advantage.

According to Porter’s five forces model, a competitive landscape of a business is determined by a range of forces that drive the rivalry in the market (Hollensen, 2018). For Fitbit, the threat of new entrants is moderate since new companies can present their products, paying special attention to innovation and customer value. However, since Fitbit also follows the strategy of constant improvement based on differentiation, this threat cannot be considered significant. The threat of substitutes is another force that is low since there are only a few possible substitutes on the market for fitness trackers. Moreover, the companies operating in this industry offer high-quality products at affordable price, which makes the provision of substitutes quite difficult (Xu and Wang, 2017). Due to the fact that Fitbit meets the needs of different customers, it reduces their desire for substitute products.

The bargaining power of suppliers is low as there are numerous suppliers on the market, while their products have low switching costs and less differentiated. A lack of substitute products shows that suppliers do not have a significant impact within the industry, which is also evident from the fact that companies can easily change their suppliers. In turn, the bargaining power of buyers is moderate because of the limited number of competitors on the market to choose from. A high level of product differentiation in the arena restricts prices and makes buyers more sensitive to them. The efforts of companies to build strong brand loyalty and keep customers interested also impact the bargaining power of buyers. The rivalry among existing firms can be evaluated as strong since there are several large sized companies with such advantages as brand recognition, fashionableness, and innovativeness. For example, Apple, Samsung, Xiaomi, and Nike can be noted among the strongest rivals (Xu and Wang, 2017). They operate to full capacity since market exit barriers are high because of high investment requirements.

The analysis of Fitbit’s competitive advantage based on the SWOT analysis is the alternative that can be used to better understand its internal and external environment. Fitbit’s key strengths refer to great investments in research and development, a health platform support, and trustful relationships with customers. Fitbit understands that the connection with customers is extremely important and provides an integrated wellness platform to educate them on wellness and fitness. Another area of strength is product differentiation, from the simplest solutions to cooperation with fashion brands (Xu and Wang, 2017). The compatibility with fitness applications is also a significant strong point as it makes customer experience more pleasurable and convenient. Among the weaknesses, one can enumerate a limited target market and the need to work on its products’ functionality.

The opportunities for Fitbit include focusing on further innovations and brand loyalty to extend the customer base, which is required by the growing demand for smart devices that help customers to improve their health. The extension to such areas as nutrition assistance and calorie monitoring composes another opportunity to increase Fitbit’s competitiveness. Strategic partnerships with various medical, fashion, and entertainment companies can be useful as well. As for threats, one should note the overall tendency for growing competition in the fitness and electronics industry, which sets additional pressure to develop a software side of products, thus adapting to external environment trends.

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Fitbit’s Marketing Situation

The analysis of the given Fitbit case study allows formulating its business mission as understanding and meeting specific customer needs, which shows its orientation to customers instead of products. The company also strives to encourage customers to become healthier by offering them assistance with their fitness goals. The current vision statement integrates innovation and valuing customer needs. Fitbit’s vision is to help people maintain health, more active lifestyles, exercising, and fitness. The company has developed elegant and easy-to-use products that fit seamlessly into people’s lives to help them achieve their health goals. As the market leader in the health and wearable technologies, Fitbit sees it as its core mission to strengthen its leadership position by developing new products. It differentiates itself from its competitors with premium designs and added features that allowed users to customize their Fitbit devices according to their unique preferences. This allowed building a loyal customer base, while the only problem is that most people used their Fitbit gadgets for an average of six months and lost interest in them after that.

Speaking about Fitbit’s current market position, one should state that it is highly competitive since its competitive advantage is multifaceted and strong. Along with Apple, Xiaomi, and Samsung, Fitbit remains one of the market leaders, also having a clear understanding of the need to adjust constantly depending on market changes. Its differentiation strategy is a viable and relevant way to stay highly competitive, as it is demonstrated by the demand for Fitbit products. In this regard, the identified market position seems to serve as a powerful driving force that stimulates the company to take new initiatives for supporting its competitiveness. Although the global market of fitness wearables tends to become saturated, there are still numerous opportunities for the leaders to develop, such as extending target markets, penetrating new geographical areas, and advancing technology.

The ability to utilize the available resources and sustain a competitive advantage can be assessed based on Barney’s VRIO framework. It is used to analyze the internal resources and capabilities of a firm to see if it can be a source of strong competitiveness (Hollensen, 2018). Focusing on the internal environment of the given company, it becomes evident that the financial, human, and distribution resources are highly valuable. Skilled personnel and investment opportunities are especially important for the company to address the market threats. At the same time, research and development, as well as structural resources, seem to be less valuable since these points lead to greater costs compared to the profit. As for the rarity of Fitbit’s resources, its technologic basis is not rare as the competitors use similar advancements. However, the firm’s wellness platform and brand image are rare as there unique cooperation with other companies, specific customer offers, and assistance commitment.

A company that has a valuable and rare resource can achieve at least a temporary competitive advantage, while the cost of imitability serves as a decisive factor. The extent to which Fitbit’s products can be imitated is moderate since its technology is not costly to repeat, but the platform ensures customer experience sustainability, which is difficult to reproduce. Resources alone do not give a company any advantage if it is unable to extract and retain value from their application (Kotler, Keller, and Manceau, 2016). Only a company that is able to harness valuable, rare, and inimitable resources can achieve sustainable competitive advantage. The organization of resources in Fitbit is appropriate, as it is evident from its well-developed distribution network.

A political, economic, social, technological, environment, and legal (PESTEL) analysis is another instrument that allows for evaluating a company’s external environment. It focuses on top-level results, providing the so-called helicopter view, also known as a top-down view of the company’s external environment and place in the market. PESTEL’s significance is associated with paying attention to a range of factors that identify a business situation, which is beneficial to recognize and timely respond to available threats and opportunities (Kotler, Keller, and Manceau, 2016). Since Fitbit’s performance lies in the area of health promotion, governments have a positive attitude, being interested in improving their citizens’ health outcomes. Accordingly, the political and legal factors are stable, which is positive for Fitbit’s further development. The company’s products are affordable and preferred by customers, who want to become healthier, and it makes the economic factor a beneficial point. In terms of the technological factor, Fitbit tries to follow the latest trends, but it needs more flexibility to adopt innovations faster, thus being ahead of its competitors.

Mobile and fast, Fitbit’s devices change the world and consumption patterns at an incredible speed. The trend towards intelligent interaction through smart devices becomes obvious, and the driver of these changes is a so-called digital customer’s expectations. Along with the growing demands for quality, functionality, and product design, there is a demand for emotional experiences. To create competitive products with a high level of value, Fitbit actively follows consumer trends and identifies consumer insight. As for environmental sustainability, even though the company seems to be concerned with the existing air pollution problems, its transportation system can be called the main challenge to be addressed.

Proposed Marketing Strategy for Fitbit

A properly-designed marketing strategy is the foundation of any company’s performance since it provides a direction of development. Without clear objectives and messages to customers, it is almost impossible to ensure value and generate profits in a long-term perspective (Rubin, 2018). In this regard, a marketing strategy for Fitbit is necessary to overcome its current challenges and use opportunities. Specifically, the marketing objectives for the chosen company can be formulated as follows: to increase the market share, identify new and emerging customer needs and provide relevant values, build stronger partnerships, and cover new target markets. Fitbit’s strategic focus should be devoted to inspiring people to live healthier lives, connecting them with digital technologies.

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To explore potential development areas, it is possible to adopt Ansoff’s growth strategy matrix that is a model describing possible strategies for the company’s growth in the market. In this context, there are two directions for Fitbit, such as a market development strategy and diversification strategy. The market development strategy implies an extensive growth strategy and invites companies to develop new markets for existing goods or services (Kotler, Keller, and Manceau, 2016). By attracting a new audience to the product, Fitbit would increase their income and profits in the long term. A diversified growth strategy should involve the development of new products for new markets; in this case, younger and older populations and healthcare connection. This strategy is the riskiest of the proposed growth strategies in Ansoff’s matrix. Nevertheless, the reason for Fitbit to select a diversification strategy is to distribute the company’s risks between different areas of business.

In the struggle to dominate the market, Fitbit can be recommended to develop a competitive positioning that includes continuous innovation as well as increasing marketing costs, including advertising and global expansion. One can expect that the increase in sales and revenues will continue, yet the rate of profit growth is likely to slow down due to the market saturation (Rubin, 2018). To ensure that Fitbit remains one of the market leaders in activity tracking, it is critical to build on its strengths and create an integrated system that fits seamlessly into customers’ lives. In contemplating its future, Fitbit faces three major challenges: intense competition from smartwatches, increasing its relevance and integration into the healthcare market, and retention of consumers interested in wearing the tracker for more than six months. The company’s ability to develop partnerships that increased brand awareness, visibility, and accessibility has helped it expand into new market segments.

A growing number of corporate partnerships have demonstrated the company’s willingness to move beyond retail and the widespread interest of its integrated system in new consumer segments. In 2018, Fitbit acquired Twine Health, a verified health coaching platform that empowered people to achieve better health outcomes at lower costs (Mainwaring, 2019). This strategic acquisition helped fit Fitbit’s integration into the healthcare industry and set the stage for further expansion by integrating its products into health plans, the healthcare system of insured employers. Accordingly, it should be recommended for the company to continue this initiative and deepen into the healthcare sector. For example, a called for a greater use of wearable technology in healthcare can be made, where doctors connect patients to public services provided by councils or charitable organizations. This technology has the potential to improve health care, but it is vital that these benefits are available to everyone, not just people with the means to take full advantage (Mainwaring, 2019). Fitbit should think creatively about how to provide people with the support they need to live a good life.

Unlike all players in the wearable electronics market, Fitbit pioneered the B2B segment by negotiating with insurance companies that work with large corporations (Mainwaring, 2019). The use of Fitbit trackers in such corporations leads to a decrease in the cost of insurance, while the companies are also interested in buying devices and having employees wear them on a daily basis. By receiving additional information about their activity, insurers can predict their risks and adjust payments in one direction or another. Fitbit’s approach fits well with various wellness programs in the corporate environment, in which companies try to make their employees healthier, as it is ultimately cheaper for them (Hong and Yoon, 2019). No other player in this market is active to such an extent in this area as Fitbit has a separate division responsible for this area.

Every year, fitness trackers are getting more and more features, such as sending notifications about messages and calls or contactless payments using near field communication (NFC) technology. Protection against moisture and dust should become an important standard, and the quality of measurements is improving. The highest positive dynamics in the category can be demonstrated by highly specialized smart watches for children and the elderly with the ability to track location, send messages and call emergency help. By 2025, the entire fitness wearables industry is likely to grow with a multi-billion dollar turnover (Hong and Yoon, 2019). This potential is because of the growing popularity of these devices among people of age, who are comfortable using them in order to independently track and control the course of chronic diseases or to call medical workers if the need appears.

The implementation of the proposed strategies can be conducted according to a marketing mix. The first element of the marketing mix is pricing, and it should be affordable for customers, depending on their category. As for the product element, it should pay attention to the ease of use and quality-cist balance, which are critical for customers to buy fitness trackers and stay engaged in using them for more than six months. The proposed place should be organized in a way to not only sell products but also collect the necessary information about changing customer preferences and their concerns. In addition, it seems to be useful to ensure the possibility of providing feedback to customers to resolve their issues timely. As for the promotion, the proposed marketing strategy should integrate a range of various channels to distribute Fitbit’s products with the main goal of keeping customers interested so that they can feel the value of their trackers. Among others, digital marketing, community influencers, and reward programs can be used. The process of the new strategy implementation should be preceded by training the company’s personnel as their key asset that works directly with customers.

Conclusion

To conclude, Fitbit is a middle-size company that operates on the market of fitness wearables and offers customers seven products. This paper provides a critical analysis of the case study that discusses Fitbit, which is supported by pertinent data from academic literature and official websites. The analysis focuses on Fitbit’s competitive advantage, opportunities, threats, and comparison with the key market rivals. Both internal and external factors are taken into account by applying the SWOT analysis, Porter’s generic strategies, Porter’s 5 forces model, VRIO framework, PESTEL analysis, and Ansoff’s matrix. It is recommended for Fitbit to adopt a marketing strategy of constant technological improvement, partnerships in the healthcare area, increasing market share, and targeting new customer categories. These recommendations are consistent with the company’s mission to make people healthier through technology-driven products.

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Reference List

Hollensen, S. (2018) Marketing management. 4th edn. New York, NY: Pearson.

Hong, S. K. and Yoon, S. C. (2019) ‘A longitudinal study on customers’ usable features and needs of activity trackers as IoT based devices’, Journal of Internet Computing and Services, 20(1), pp. 17-24.

Kotler, P., Keller, K. L. and Manceau, D. (2016) Marketing management. 15th edn. New York, NY: Pearson.

Mainwaring, S. (2019) ‘Purpose at work: how Fitbit’s giveback is strengthening its business’, Forbes, Web.

Rubin, P. (2018) ‘How Fitbit started the wearables craze that got us all moving’, Wired, Web.

Xu, X. and Wang, X. (2017) Fitbit: the business about wrist. Ivey Publishing.