Page 12 - CIMA SCS Workbook February 2019 - Day 1 Tasks

CIMA FEBRUARY 2019 – STRATEGIC CASE STUDY

3 KEY THEMES

There are a number of important themes that emerge from the Vita pre-seen:

Growth in sales of smartwatches
The growth in popularity of smartwatches is mentioned many times throughout the pre-seen, and
global sales of such products overtook those of fitness and activity trackers for the first time in
2018. Vita does not make smartwatches, and there is a high risk that its performance could go
into decline as a result.

Reliance on suppliers
Despite the point made above about the growing popularity of smartwatches, Vita is still enjoying
growth, albeit at a slowing rate. It has just 2 manufacturers who put the components of its
products together, and we are told that both of these are nearing full capacity. Vita may need to
consider broadening its supplier base if it is to achieve its own growth ambitions.

Intense competition

The industry is described as intensely competitive, which is not surprising given the historic
growth potential and good profit margins; it has attracted many tech companies. Vita will need to
continually invest in new product if it is to stay at the forefront of a highly dynamic industry.

Investment in R&D
Vita became a quoted company in 2017; the main reason behind the flotation was to raise funds
for research and development. In 2018 it increased its R&D expenditure by $354m compared to
the previous year, and would hope to see some return on that investment in the near future. It is
also likely to have to maintain that level of investment for the foreseeable future.

Lack of dividends
Vita has not paid any dividends thus far, and has no plans to do so in the future. It claims to have
good relationships with its shareholders, who seem happy for there to be no cash return on their
investment yet; however, this could change.

Data security
A lot of data on fitness tracker users is collected via Vita’s app and website. This can be shared
with other users in a ‘fitness community’ should the user decide that this is what they want to do.
However, Vita will need to ensure that data integrity is maintained; otherwise it could suffer a
severe loss of reputation. Its database is maintained by a robust and experienced third party
supplier, but instances of unauthorised hacking are an everyday occurrence these days.

Accuracy of data
Users have historically used the data from fitness trackers to give them the motivation to be more
active. As the sophistication of the products grows, so people are becoming more dependent on
them to monitor specific health concerns, such as heart rate and blood pressure. Inaccurate data

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