Q.

5 Porter’s five forces in the industry in 2016

While utilizing the five forces to analyze the wearable technology industry, it was imperative to also look
at each of the industry’s sub-markets – industrial and military, healthcare and medical, infotainment,
and fitness and wellness – and how each of the six forces affect these key areas of business.

Threat of New entrants

The threat of new entrants is current medium as there are small startup companies like pebble to large
multinationals such as Nike who are in the market. Right now as the market reach is still not huge and as
the technology requires regulatory clearances the number of players entering the market are not very
large. As the market size keeps expanding and the acceptability of the technology finds loads of takers
the number of players in the market will increase. As trends rise towards technically advanced
products and the demand for wearable tech products increases, even more companies will be
entering the market.
Rivalry between existing firms (competition)

The competition is medium as the number of players are still not very huge. The need for regulatory
approval for launching a new healthcare product prevents very quick launch of products. However lots
of medical device industries are investing heavily in this space.

Threat of substitutes

The threat of substitutes is high. Wearable medical devices are primarily health monitoring devices
which are connected to the network. Still now substitutes like glucometers, patient monitoring systems
etc. have a much wider acceptance and accreditation though things might change in the future.

Bargaining power of the users

Right now the bargaining power of the user is high. Since the technology is relatively new the market is
still not very huge. Also users have multiple players to choose from as well as existing substitutes that
can use. Buyers will continue to leverage their bargaining power as the industry must overcome
several challenges, like making the price point accessible, specialization, fashion uniqueness,
competition between operating system leaders, to gain mass adoption which would put the
bargaining power in the industry’s hands.
Bargaining power of suppliers

Bargaining powers of suppliers are low as the raw materials and the supplies utilized are generic and
dependency on specific suppliers are not required. Also as this is an evolving market with huge growth
potential more and more suppliers will be entering the market further lowering the supplier power.
 Threat of new
entrants
(Medium)

Supplier Power Rivalry in Buyer Power

(Low) industy(medium) (high)

Threat of
substitutes (High)

Porter’s five force analysis- Wearable Medical Devices-2016

Q.6 Porter’s five forces in the industry in 2022

Threat of New entrants

The threat of new entrants is become high as the number of players in the market will keep increasing.
Though regulatory requirements will remain in place the huge potential of the market and the change in
habits of customers towards wearable medical technology will lead to multiple players entering the
market. Adaptation of the technology and scope of introducing differentiated products with a wide
range of applicability will be major driving force.

Rivalry between existing firms (competition)

Rivalry between the firms will be high. Lot of small, medium and big organizations will enter this
extremely lucrative industry. Already several big medical device companies and sports equipment
manufacturers, and technology giants such as apple are investing in this arena.

Threat of substitutes

The threat of substitutes will remain high. Wearable medical devices are primarily health monitoring
devices which are connected to the network. The non-wearable technologies are also advancing in a
rapid pace and therefore will come with advanced features.

Bargaining power of the users

Bargaining power of the users are expected to remain high as they will have multiple offerings to choose
from. Also there will always be lot of substitute products available in this space.

Bargaining power of suppliers

Bargaining powers of suppliers will remain low.

 Threat of
new entrants
(High)

Supplier Rivalry in Buyer Power

Power (Low) industy(High) (high)

Threat of
substitutes
(High)

Porter’s five force analysis- Wearable Medical Devices-2022

VII. Strategic choices – 2016-21:

 Most Successful Companies, including their strategy to deal with competitive forces that will shape
the future of the industry [best 2 performing companies as at 2016

Wearable devices is getting vouge in society, many companies are trying to tap into this huge market
with large potential. We found that following two companies are leading the pack:
1. Fitbit
One of the most recognised brands for wearable devices. A company founded in May 2007 had a
revenue of 2 billion in year 2016 which shows a growth of 16% YOY growth. The company has
increased its R&D expenditure by more than double from 2015 to 2016.
They have chosen following strategy to counter the forces present in the market:

1. Threat of new entrant:

In the wearable device industry, the initial demand always comes from tech savvy consumer.
New entrant in market always comes in with technological disruption. To counter this Fitbit
has invested greatly in R&D
2. Rivalry among existing firms
Fitbit is trying to create the network effect by merging social media and health services, so
that threat from existing rival could not affect its consumer base.
3. Threat of substitute
The threat of substitute is being countered by providing many features like heart rate
monitoring, motion tracking, sleep tracking in the same product. So as to ensure that a user
need not venture out of the Fitbit network. As per their annual report:

“Broad range of connected health and fitness devices. We believe everyone’s approach to fitness is
different, so we offer our users a range of connected health and fitness devices spanning multiple
styles, form factors, and price points to allow people to find the devices that fit their lifestyles and
goals. In addition to our wrist-based and clippable wearable health and fitness devices, we also
offer a Wi-Fi connected scale that tracks weight, body fat, and BMI. We believe the breadth of our
connected health and fitness devices provides us with a competitive advantage over our
competitors, which often have a more limited line of products”

4. Bargaining power of User

Fitbit is trying to lower the bargaining power of user by forming network effect and providing
unique services to user. For this, they are engaging heavily into social media and mobility.
This, in turn, is feeding them data of user demand which in turn in utilized to improve user
experience of product.

“Large and growing community and powerful network effects. We believe the size of our
community of users makes it more likely that users can connect with friends and family and attracts
many new users to our platform. Each of our users add value to our platform by making progress
towards their goals and syncing their data with our platform, which we leverage to provide better
insights for our users. As our community of users continues to grow, we will develop a deeper
understanding of our users and expect to deliver additional value to them through more detailed
insights and analysis. We believe the growth and scale of our user community allows users to
become not only more engaged with personalized and relevant content, but also less likely to leave
a community in which many of their friends and family are active members.”
 5. Bargaining power of supplier
Most of the component used to manufacture the product are generic but, technology
innovation employed may be classified as a constraint from supplier side hence the company
is investing heavily in R&D to integrate into that segment and lower the supplier bargaining
power in that aspect.

2. Apple
Apple is always known to be present or to be source of industry wide disruptor. With recent
aquistion of Beddit They are targeting wholistic enviorment for user and choose a way of strategic
allaince with complementry service proivders.
An example of Apple strategy for wearable devices :
“watchOS is the Company’s operating system for Apple Watch. In September 2017, the Company
released watchOS 4, which adds a proactive Siri watch face that displays the information users need most
throughout the day, personalized activity coaching and a new music experience. watchOS 4 also includes an
enhanced Workout app and introduces GymKit™, a technology platform that offers users connected
workouts with cardio equipment.”

They have chosen following strategy to counter the forces present in the market:

1. Threat of new entrant:

Apple is trying to build entry barrier to its target segment by strategic positioning of its
product to user. They also metigate the threat by the way of acquistion of new technologies
entering in the market. For eg accquiring “Gliimpse”, “ Emotient”, in 2016, “Beddit”,
“SensoMotric Instruments” in 2017.

2. Rivalry among existing firms

Apple is trying to tap into its existing phone consumers and provide them comprehensive one
stop solution for Health tracking and monitoring services theirby eleminating the the threat
from existing firms.

3. Threat of substitute
The threat of substitute is being countered by providing many features like heart rate
monitoring, motion tracking, sleep tracking in the same product and integrating the same
with iPhone making the susbtitue redundant.
4. Bargaining power of User
Apple is trying to lower the bargaining power of user by forming network effect and providing
integrated services to user. For this, they are engaging heavily into social media and using
exsisting counmer base of apple products. This, in turn, is feeding them data of user demand
which in turn in utilized to improve user experience of product.
“Apple Watch is a personal electronic device that combines the watchOS user interface and
technologies created specifically for a smaller device, including the Digital Crown™, a unique
navigation tool that allows users to seamlessly scroll, zoom and navigate, and Force Touch, a
technology that senses the difference between a tap and a press and allows users to access controls
within apps. Apple Watch enables users to communicate in new ways from their wrist, track their
health and fitness through activity and workout apps, and includes Siri and Apple Pay. In September
2017, the Company introduced Apple Watch Series 3, featuring health and fitness enhancements
and built-in cellular capability on qualifying devices.”
 5. Bargaining power of supplier
Most of the component used to manufacture the product are generic but, technology
innovation employed may be classified as a constraint from supplier side hence the company
is investing heavily in In house R&D as well as accquiring firms with promising idea for the
product.

 Least Successful companies, including their strategy to deal with competitive Forces that will shape
the future of the industry [worst 2 performing companies as at 2016]
1. Fasttrack
Fasttrack is a titan brand conventionally a watch manufacturer. With advent of wearable devices
their core consumer base is shirnking with users shifting to wearable devices. They introduced
fasttreck flex in March 2017 to move into the wearable devices space.
2. Intex
Intex is a computer accessory manufacture know for its afforable products. They entered into the
market with Fitrist in April 2017 trageting the low end consumer of this product.
Analysis of both their strategies are as follows:
1. Threat of new entrant:
Both the companies are targeting low end consumer, They provide similar features in product
at a much cheaper rate to enjoy the ecoomies of scale. They eliminate threat of new entrent
by providing product at chepaest possible rate thereby eleiminating the inncentive for anybody
to enter in the market.

2. Rivalry among existing firms

Intex and Fastrack both face heavy rivalry in the industry. They both are in intence price war
among themselves and with players like Mi. To eliminate the this risk by trying to occupy
diffrenticiated poistioing in market. Fastrack is more inclined towards youth and intex towards
buiness users.

3. Threat of substitute
They face a high threat of subsititue and try to price themselve below the susbtitue cost so as
to lower the threat of subsitute.
4. Bargaining power of User
The bargaining power of user is very high as the user is very price senistive. Being a low cost
player aids both the compnaies in attracting customers who want similar features as a high
end product but have lower willingness to pay.

5. Bargaining power of supplier

Most of the component used to manufacture the product are generic hence the supplier power
is low for them.
VIII. Analysis form Investors perspective (from fund manager's perspective as at 30 June 2016)
- buy, hold, sell stocks in various types of companies of the industry duly considering future
industry evolution during 2016-21.

Fibit :
Recommendation : Buy
Reason :
- Innovative
- Techonlogy leader
- Revenue has grown 16% YOY and CAGR of 74%.
- Heavy Investment of R&D.

Apple :
Recommendation : Buy
Reason :
- Market Disruptor
- Huge captive consumer base, great chances of cross selling.
- Revnue has grown 6.2% YOY and CAGR of 5%

Titan:
Recommendation : Hold
Reason :
- Business under threat from subsitute
- Changing Consumer Demand
- Only 4 % of CAGR but 16% of YOY growth
- Falling PBDIT margin

Intex:
Recommendation : Sell
Reason :
- Falling Revenue in FY 17 by 30%
- Falling Market Share from 6% to 2%
- Failing new products.
IX. References [detailed references will be needed]:
https://investor.fitbit.com
https://www.investopedia.com/news/apple-has-acquired-company-monitors-sleep-aapl/
http://investor.apple.com
https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple
http://www.intex.in/smartwearables/smartband/fitrist/
http://www.moneycontrol.com/financials/titancompany/ratiosVI/TI01#TI01
https://economictimes.indiatimes.com/news/company/corporate-trends/reliance-jios-
ripple-effect-intex-says-sales-plunged-30-in-2016-17/articleshow/61553855.cms