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MGMT 4003 Peloton Interactive Case Study
Author
Affiliation
Course
Instructor
Due date
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MGMT 4003 Peloton Interactive Case Study
Key Problems, Decisions or Issues and Why They Are Important
Although the Peloton revenue increased dramatically during the COVID-19 pandemic and its
segmental demographic seemed strong, it encountered challenges as it could not serve the demand.
Hence, it encountered long-run delays in the delivery, annoying consumers. The issue is critical as it
affects future sales by gaining consumer loyalty, brand reputation, and referrals. The situation paves in
another key issue of industrial competition, resulting in the brand’s substitution. The company responded
by making several strategic decisions to lower the delays and attain its objective of becoming the leader in
service delivery speed, quality, cost, and scale in the connected fitness sector (Ivey Business School
Foundation, 2022). Hence, direct consumer engagement and vertical integration became critical
competitive advantages.
Another issue is the high fitness equipment demand as individuals working out grew. The
pandemic discouraged individuals from visiting gyms resulting in the bankruptcy of some facilities such
as Gold’s Gym International Inc. As a result, Peloton’s fitness equipment, such as the 2014 bike driven to
foster entertainment, fitness, and exercise, was in higher demand. However, the pandemic resulted in a
supply chain disruption, resulting in delivery delays. As a result, in February 2021, the management cited
that they would invest $100 M to accelerate the bikes and Treads delivery worldwide to meet the delivery
commitments (Ivey Business School Foundation, 2022). Although the move would lower the product
delivery delays, it inspired an increase in logistical costs. In the following months, the managed cited they
would incur over ten times their ordinary expenses per tread and bike as they would also consider
shipping by air over the ship. These issues may affect the investment decision in Ohio.
Priority Issues Facing the Company
•
Stiff Competition
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Although the gym sector has paved the way for Peloton Interactive Inc. to prosper, other fitness
market players are also eyeing the opportunity resulting in stringent market rivalry. The work from home
directives, the pandemic, and the interest in leading a healthy and fit lifestyle inspired the growth of
home-based workouts and interactive devices that created a gym experience at home. The market
developments inspired new competition from firms providing home-based and interactive options as well
as the renewal of significant brands. New rivals include Tonal and Echelon Fitness Multimedia LLC,
while other sectorial exiting rivals are Mirror Fitness and Tempo Interactive Inc. Bowflex and Nordic
Track are among the significant brand renewals (Ivey Business School Foundation, 2022).
•
High Costs Resulting in Losses
The pandemic disrupted the supply chain resulting in delays in product delivery. To curb the
challenge, the management injected over $100 M to assist in accelerating the transit of Treads and Bikes.
The move increased the delivery costs to over ten times. Although the company’s sales grew to $758 M
by the conclusion of the 2020 fiscal year, a 232% increase from the similar period previously, it still
encounters operational loss and net loss (Ivey Business School Foundation, 2022). Hence, the high costs
are still eating up the company’s earnings.
Analyze these Key Strategic Issues
Value Chain
General Administration
Peloton’s general administration is the primary division that uses the legal division when
relating with the employees, government, and other stakeholders. It is primarily entrusted with
the controlling, directing, organization, and planning duties. The general administration also
relates with the investors to oversee investment projects and decisions, such as the inception of
the new factory in Ohio (Ivey Business School Foundation, 2022). The Peloton administrators
oversee documentation, order placement, and monitoring, inventory check and maintenance,
receive purchases, and sustain the manufacturing systems.
Human Resource Management
The Human resource management at Peloton is in charge of hiring and laying off workers. The
department also plans job analysis, training, and HR needs. For instance, the department
planned HR as individuals worked from home during the pandemic, and there was a high
demand for fitness products.
Product R&D. Technology and Systems Development
Peloton’s expansion to the US deal was concluded in 2021. It inspired the boosting of research
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Sales &
Marketing
Peloton’s
operations
involve
international
channels. It has
its production
lines along with
partnerships
with third
producers.
Hence, it owns
its production
facilities but
does not own
those of the
partners.
Peloton
responded to the
high consumer
demand by
increasing the
direct-toconsumer and
vertical
integration
capacities. The
products are
shipped directly
to consumers
upon demand.
Although
expensive, they
are efficient.
The direct-toconsumer
management
faces cost and
efficiency
challenges from
a brand like
Echelon Fitness
Multimedia,
which charges
lower rates than
Peloton and uses
retailers such as
Costco, Target,
Amazon, Best
Online platforms
are utilized for
sales and
marketing. The
company has
consistently
increased its
sales and
marketing
investment from
$151 M in 2018
to $324 M in
2019 and $477
M in 2020 (Ivey
Business School
Foundation,
2022). Online
platforms have
proved
beneficial in
encouraging
online sales for
individual
consumers, a
factor
responsible for
key sales during
2020. However,
Echelon,
Tempo, and
Mirror offer
cheaper
Service
Distribution
Peloton’s supply
chain includes all
the parties,
suppliers,
organizations,
technologies,
activities, and
resources
involved in
producing and
selling a product.
The company’s
supply chain
includes the
Taiwan
Facilities, thirdparty
manufacturers,
the US
manufacturing
capacities, and
transport
systems,
including ship
and air. The
company targets
to lower the
supply chain
challenge by
investing more in
production and
efficiency (Ivey
Operations
Supply Chain
Management
and development capacities which fostered increased penetration of the commercial markets.
Further, the venture has consistently increased its investment in R&D, including $23M in
2018, $55 M in 2019, and the highest, $89 M in 2020. The research improvement has enabled
the organization to stay informed of the changes in the market. For instance, the company has
significantly invested in major global segments to sign that they can access real-time
information. As its CEO revealed its plan to expand to the US, it outlined that it would keep
investing in the Asian sector (Ivey Business School Foundation, 2022). Real information also
helped target deliveries as more demand came from individuals seeking to exercise at home.
Moreover, R&D and advanced technology inspired the 2014 new fitness category that offered
entertainment, fitness tracking, and exercise in one novel bike. Hence, the functions have been
piv...