After rapid growth, Peloton plans to launch an app-only tier for users without equipment. Some investors fear it will cannibalize bike sales; others see it as a gateway product. Which strategic lens best supports this expansion?

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BlackTom AI · Accepted Answer

This question asks which strategic lens best supports Peloton's plan to launch an app-only tier for users without equipment, a move that could cannibalize bike sales or function as a gateway product.
Option 1: Cost leadership. This lens focuses on becoming the lowest-cost producer in the industry. The app-only tier is not primarily about cutting costs or achieving price leadership; it’s about product strategy and market positioning, so this choice misaligns with the objective described.
Option 2: Retrenchment. Retrenchment involves shrinking the scope of a business, divesting, or cutting back activities to survive. Introducing a new app tier expands offerings rather than pulling back, so this option doesn't fit the described strategic move.
Option 3: Product development. Product development centers on creating new products or services to serve existing or new customers, leveraging the firm’s capabilities. An app-only tier for users without equipment represents a new product/offering from Peloton built on its platform and ecosystem, designed to broaden adoption (potentially acting as a gateway to paid hardware models). This aligns with growing the product portfolio and leveraging existing brand strength.
Option 4: Diversification. Diversification typically means introducing new products into new markets where the company has little existing presence. While the app tier targets a new user segment (non-equipment users), Peloton’s core competency remains connected to its fitness platform and community; the move can be viewed as extending the core product line rather than entering an entirely unrelated business. Depending on interpretation, some may see it as adjacent diversification, but the clearest lens is product development within the existing business scope.
Option 5: Market penetration. Market penetration emphasizes increasing market share with existing products in current markets. The app-only tier constitutes a new product variation rather than simply selling more of the same hardware/software bundle to the same customers, so this option is less fitting as the primary strategic lens.
In summary, the app-only expansion is best understood through the product development lens because it introduces a new product format that leverages Peloton’s platform to reach users who don’t own equipment, expanding the product offering without the aim of cutting costs, shrinking the business, entering an unrelated line, or strictly chasing more of the current hardware-based market. The other options describe strategies that don’t map as closely to a new app-based service within Peloton’s existing ecosystem.

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After rapid growth, Peloton plans to launch an app-only tier for users without equipment. Some investors fear it will cannibalize bike sales; others see it as a gateway product. Which strategic lens best supports this expansion?

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