Business analysis for a company in the health and fitness industry. Challenges, trends, and recommendations


Master's Thesis, 2012

46 Pages, Grade: A


Excerpt

Table of Contents

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

CHAPTER ONE
1.0 THE CASE STUDY BRIEF

CHAPTER TWO
2.0 INTRODUCTION
2.1 WATES ESTATES
2.2 ANALYTICAL MODELS

CHAPTER THREE
3.0 STATEMENT OF THE PROBLEM
3.1 Organisational Challenges
3.2 CONCEPT AND FRAME WORKS FOR ANALYSIS

CHAPTER FOUR
4.0 ANALYSIS USING ANALYSIS TOOLS
4.1 PORTER FIVE FORCES TO ANALYSIS OF WATES ESTATES: The collective strength of these forces determines the profit potential of the company.
4.2 SWOT ANALYSIS OF CRISPINS COMPANY
4.3 PESTLE ANALYSIS OF WATES ESTATES
4.4 Human Resources Analysis using 7S frame work (Wates Estates)
4.5 Value Chain Analysis (Crispins):
4.6 Wates Levels of Strategy
4.7 7P Model
4.8 Market Analysis:
4.9 FINDINGS

CHAPTER FIVE
5.0 PROPOSED PLAN OF ACTION
5.1 Forecast
5.2 Broad Strategies for sustainability
5.3 CRITICAL SUCCESS FACTORS
5.4 OVERALL BUSINESS PLAN
5.5 CHANGE MANAGEMENT IMPLEMENTATION PLAN

REFERENCES

ACKNOWLEDGEMENT

My special thanks to god for the privilege he has giving me to complete this project in good health condition. I express my special gratitude to all who have contributed to the success of this project. My special gratitude also goes to my supervisor Mr Funsho Obilade for his great effort in making this work a success.

My special thanks goes to my parent for their great support. Special thanks to all my friends and my brother for their great assistance during the course of this work.

EXECUTIVE SUMMARY

This is an analysis of Harvard Business School case study: Wates Estates, a company which diversified from the traditional estate management to health and fitness industry. This analysis summarised the challenges faced by Wates Estates in the health and fitness industry. The analysis takes a look at the Wates Estate external environment and it position in the industry. It also identifies the challenges and trends in the industry and the company’s preparation to achieve the overall objective and continuous success in the health and fitness industry.

The areas of focus are strategic management, international business, direct marketing, international franchising. The analysis was conducted using several conceptual tools and models were used and justified, models such as porter five forces, swot analysis, generic competitive strategy, product life cycle model, 7S model, 7P model, PEST analysis, value chain analysis, the IT infrastructure was analysed which has a way of determining how innovative the company will be. In carrying out this research relevant questions based on the context of these areas of focus were raised to determine the effectiveness of the functional units which are a representation of the areas of focus. Findings are based on the research questions and research objectives, areas where the company is experiencing challenges are focused on and analysed, areas such as marketing, information technology infrastructure, operational efficiency, human resources effectiveness. Findings are based on the analysis to conclude where the company is now, the industry position, the market position, the international readiness and ability respond to environmental change, change management implementation plan was devised to assist the company in managing change.

CHAPTER ONE

1.0 THE CASE STUDY BRIEF

This is my report as a head of management consultants in Transcends International with established experience in setting up and equipping fitness clubs in the UK and other international city location to Sir Douglas Reed of Wates Estates. My report will be about Wates Estate and its challenges, the findings, outcomes, solution and recommendation.

Firstly, here is the case study brief of Wates Estates- this is Estate Management Company of 90 years in history, its core business is leasing out complex of residential, office and commercial units. It owned several properties including the new free hold site in which 10 years lease was granted to Apex Fitness Limited in the centre of London.

Apex Fitness Limited is a new company with a new concept in total fitness; the company was formally a sole importer and distributor of multi-gym equipment which is used in sports and gymnasiums around the United Kingdom. It is head by a new managing director called Alan Brooks. Alan Brooks was so happy after the signing of the fully repairing and insurance lease with agreed five-yearly rent reviews was concluded because his ‘concept’ of the Brooks Health and Fitness centre has just been birthed. This led to the opening of Brooks Club. The business started facing financial difficulties because ‘Alan Brooks’ the managing director had little financial training and no related experience to the extent that the supporting banks were veryconcerned with the trading progress and wants to close the business. The company went bankrupt and the business is scheduled for premature closure but fortunately for them the free holders of the sites, Wates Estate is still committed to the concept of the club, they’ve leased the rest of the buildings in the complex out based on the fact that the fitness facilities would be available.

Wates Estates pumped a substantial amount into the business to rescue the situation. Alan Brooks was retained as the managing director and Clare Hepburn was brought as the director of the club. The business was renamed Crispins to reflect what it’s set to do. The club is growing and managed by Clare. It’s been locally recognised and making tremendous progress compared to before, these was because she had operated in a similar club in Miami in other words, she had relevant experience. At the introduction of a prospective club members, she majored on the fact that rather than focusing on the corporate financial accounts to assess performance and settle for just survival, companies should invest on the well being of their staff on which corporate financial health depends, in other words when employees are happy and healthy there will be higher output and return. Clare created the most favourable first impression. The business made progress as new members joined.

Wates Estates is happy and comforted with the progress that has been achieved with Crispins and has now seen the opportunity for diversification beyond their area of specialisation which is estate management in which they have 90 year history into health and fitness. All Crispins fixed cost will be covered by Wates Estates and these cost will be recovered in form of management fee that will be paid to Wates Estates. Wates has also injected substantial amount into Crispins with the hope that it will be self-funding and able to finance similar clubs in London. The long term ambition is to achieve a scalable business and reach out internationally across the globe and with the membership database created to build business model to market health and sports where there is substantial growth and opportunities.

Wates Estates also have other free hold properties around London and its surroundings with substantial funds backing up the fixed assets. One of the properties is Acotts Manor which is presently empty and the plan explained by Sir Douglas Reed at the appointment of Adrian Scotts as business development manager is to turn it into model life style centre for getting into good mental and physical shape and also extending the planned facilities and capacity by building more residential facilities within the park surroundings. The business is set to open within 18 months. Wates Estates ambition is for significant diversification, therefore my scope of this report are as follows:

- International Franchising
- International Business
- Change Management
- Target Marketing
- Strategic Management
- Globalisation
- Financial Management.

CHAPTER TWO

2.0 INTRODUCTION

2.1 WATES ESTATES

Wates Estates, an estate management company who own the new free hold site and had 90 years history in Estate management granted 10 years lease to Apex Fitness Limited which is being managed by Alan Brooks, they also have other free hold site such as Acotts Manor, Apex Fitness Limited company was a sole importer and distributor of multi gym equipment for use in sports and clubs and gymnasiums around the UK, after the signing of the lease with five yearly rent review, the concept of health and fitness club with five year time horizon was birthed. However the business started to experience financial difficulties because Alan Brooks had little financial training and no related experience in other words there is no core competencies. The supporting bank wants to close the business but Wates Estates rescue the situation because they are committed to the concept of the club.

Alan Brooks was retained as the managing director while Clare Hepburn who had related experience in Florida was brought in as the director of the club, she rename the club ‘Crispins’ the club is experiencing growth and started to gain local recognition under the direction of Clare. As a result of these, Wates Estates saw a potential diversification in the area of health and fitness. Competitors of Wates Estates in the area of real estates are Allied Property Group located in Greenwich, London, Caselli Commercial Property in Stratford London, Choyce Peterson Inc located in Stamford in the UK while competitors in the area of health and fitness are The Health Club, Manchester, The Laboratory Muswell Hill London, Thirtysevendegrees Tower Bridge London, SP Health 3 At Jubilee Place, Chelsea, London.

Wates is investing in the future with the hope that in the next three to five years, Crispins and Acotts Manor would have attained a sound financial standing in such a way that it will cover its variable cost and be paying management fee to its mother company which will be a good return on their investment.

As a head of the team of management consultant from Transcend International, my report will focus on the major challenges of Wates Estates, both macro and micro challenges with the use of analytical model such as Porter Five Forces, SWOT analysis, 7S model, PESTLE analysis and Generic competitive analysis and also propose solution and recommendation. I will also propose action needed to build business volumes at Crispins within the next 3-5 years, how to set up franchise system within 3-5 years, how to secure sustainable long term business that is 5-7 years at Acotts Residential Health Farm, how to attract and sustain customer demand, win potential customer and sustain the business cash flow, how to build competitive advantage. Below are the various models I will use to analyse Wates Estates’ internal and external environment to come up with solution to the challenges.

2.2 ANALYTICAL MODELS

2.2.1 PORTER FIVE FORCES

Porter Five Forces frame work helps identifies how attractiveness of a particular industry in terms of five competitive forces which are: the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the extent of rivalry between competitors. (Johnson & Scholes, 2008, p.54). Am using this analytical tool because an attractive industry structure is the one that offers good profit potential and therefore wants to know the profit potential of Wates Estates and the intensity of competition. If the five forces are high, it signifies much competition, high pressure on the business and that the industry is not attractive to compete within which ultimate lead to struggle to make profit. However once the critical issues are known, action can be taking to control excessive rivalry.

2.2.2 SWOT ANALYSIS

SWOT summarises the strengths, weaknesses, opportunities and threats likely to impact on strategic development that arises from such analyses (Johnson & Scholes, 2008, p.106). It’s useful and I’m choosing it because it helps to identify the extents to which a company’s strength and weakness are relevant to and capable of dealing with the changes in the business environment in other words a company can use its strength to capture opportunities and minimise its weakness to reduce threats.

2.2.3 GENERIC COMPETITIVE STRATEGY

This was devised by Michael Porter, this is concerned with how Strategic Business Unit achieves competitive advantage in its area of operation and competitive advantage is about how an SBU creates value for its users both greater than the costs of supplying them and superior to that of the rival’s strategic business units (Johnson & Scholes, 2008, p.199). He argues that a company can either gain competitive advantage by lowering its cost than its competitors or charging extra with additional value that the customer are willing to pay for. Am using this model for my analysis because it will help me understand what area Wates Estates belong either cost or differentiation to better position themselves in the midst of competitors and build competitive advantage.

2.2.4 PESTLE ANALYSIS

The PESTLE frame work categorises environmental influence into six main types which are political, economic, social, technological, legal and environmental, additional two has been discovered which are education and demographics and is renamed STEEPLED.( http://www.jiscinfonet.ac.uk/tools/pestle-swot). I will be using this particular frame work because it helps to find out the current position of an organisation in relation to their macro environment and their current role. For example Wates is assumed to be affected by economic recession which will have great impact on the business and what they can do about it.

2.2.5 7S MODEL

7S which signifies structure, style, strategy, system, skills, staff and shared value highlights the importance of seven aspects of an organisation harmonising together and pointing along the same direction thus the change in one of the S should lead to the change in other for organisational effectiveness. (Waterman, 1980, p.18). I will be using this model because it will serve as checklists for the organisational design exercise hence helping the organisation to know where to work on.

2.2.6 VALUE CHAIN ANALYSIS

This concept was developed by Michael Porter, he explains that there are several activities that go on in a company and he called those activities ‘value activities’ to describe the activities in which business is a collection for example marketing, production. A company can create value at each level of this various activities rather than at the company level to gain a competitive advantage. Am using this analytical model because it will help me analyse how Wates Estates gain or can gain competitive advantage at each level of the activities.

2.2.7 INDUSTRY/PRODUCT LIFE CYCLE ANALYSIS:

This will be used to analyse the industry, there are four basic stages of the industry life cycle which are the introduction stage, growth stage (early and growth), maturity stage and the decline. I will be using this model because it will help me analyse the current stage of life cycle of the industry and its position in the market.

2.2.8 7P MODEL:

Wates Estate is diversifying in to health and fitness which is more of a service company and that is why I’m using extension of 4P which is product, price, place, promotion, physical evidence, people, and processes. This will be used to assess the firm’s positioning based on its ability to maximise the use of its marketing mix to gain market share and to achieve profitability.

Assumptions:

1) Threats of competition in the market
2) Different cultural needs in different markets
3) Lack of core competencies in the new area of the business which is the health and fitness.
4) The world is experiencing economic recession.
5) Equipments are supplied by Crispins in the absence of adequate information about that.

CHAPTER THREE

In order to achieve consistency in business success an organisation needs ask itself questions about opportunities which exist in its market(s) and whether it can deal with its own weaknesses, perhaps by buying expertise or by acquiring other companies, it also needs to know and capitalize on its strengths, whilst avoiding its weaknesses, and then attempting to match these with appropriate opportunities in order to create a competitive advantage in an uncertain environment. This view is supported by Koontz & O’Donnell (1972).

3.0 STATEMENT OF THE PROBLEM

According to British Heart Foundation Trends in coronary heart disease report 1961-2011, it was estimated that 32% of death in the UK were due to CVD (cardiovascular disease) in 2008 as well 266 million prescriptions were issued for CVD in England which is five times as many as issued in 1986. (http://www.bhf.org.uk/research/statistics.aspx). It was also estimated that one person dies of heart attack every six minutes in the UK. (http://www.squidoo.com/heart_conditions). According to the case study as well, over 35 million working days are lost every year in Britain due to employees’ heart condition and billions of pounds are lost every year due to this. Based on study of 30,000 people around the world, researchers have found out several factors that causes heart attack and they are: abnormal cholesterol, smoking, abdominal obesity, stress, sedentary lifestyle e.t.c. (Journal of Industrial Safety & Hygiene News; Risk factors you can manage: the cause of most heart attacks Oct 2004, Vol. 38 Issue 10, p14-14, 1/8p)

One of the ways to prevent heart attacks is by taking regular exercise, Dr. Christine M. Albert, a cardiologist and a researcher at Brigham and Women's Hospital stated that “The 12-year study of thousands of male doctors showed that men who exercised at least five times a week had a much lower risk of sudden death -- about sevenfold less -- than those who only exercised once a week”.( New York Times, 11/ 9/2000, p20, 0p). This shows that not only once in a while exercise is not enough to reduce heart disease but regular exercise is one of the key ways to reduce heart attack and this is where an opportunity comes in for Wates Estate in the area of health and fitness.

There are potentials in the area of health and fitness in which Wates Estate wants to capitalize on and that was what birthed Crispins concept and also Acotts Manor, however there are several challenges these fitness based concept and Wates Estates as the mother company is facing and they are:

3.1 Organisational Challenges

3.1.1 How to generate funds for Crispins to cover its fixed cost and run the business into profitability (Finance):

This is one of the areas the organisation is facing some challenges because the concept of health and fitness is new diversification for the company. The first director that managed the fitness concept business didn’t have adequate financial training so he didn’t handle the company’s finance appropriately, the business was under capitalised, the working capital needs was insufficiently budgeted for, the plan for breakeven and profit volume was unrealistic, because of all these the business was passing through some financial difficulties. The mother company has to pump substantial amount of money into the business to avoid the business from closing up. Also the company’s policy of no outside booking of club facilities is also frustrating its financial performance as more funds can be realised from outside bookings. All fixed cost are covered by Wates Estates and it will be recovered through the sum of management fee payable to the mother company and this put pressure on the Crispins to perform financially.

3.1.2 How to achieve a thousand member target ((Marketing):

The Company needs effective target marketing strategy to meet its membership target of a thousand members. Currently the current membership strength is 540, in order to meet the target, effective marketing strategy must be put in place. Different channels have to be used to get through to its market segment such as social media, word of mouth, and promotion and so on.

3.1.3 How to achieve balance in the usage of its facilities:

There is variation in the pattern of club attendance and usage of the club facilities, this is really a challenge, there needs to be regular usage and regular pattern in attendance.

3.1.4 The challenge of how to set up a franchise system within 3-5 years (International Business):

The Company is looking to expand and set up franchise system across UK and Europe within the next 3-5 years, this is a major challenge.

3.1.5 The challenge of Ascotts business model:

The Company is looking to open a health farm within the next eighteen month, the challenge of how to build business model for Acotts manor and set up the business and position it in the market.

Research Objectives:

1. To conduct a basic analysis of the company’s external environment and to clarify the key challenges it’s facing.
2. To explain how this analysis recommends successful strategies to meet the competitive situation of the industry in which the company competes.
3. To analyse the major resources and capabilities using value chain analysis and how it’s important to the company’s competitive positioning.
4. To analyse how attractive the industry is and its potential of maximum profit generation using Porter five forces and how sustainable the business will be.
5. To conduct SWOT analysis on the company and how it will be able to adapt and respond to changes in the environment.
6. To analyse corporate, business and operational level strategy and how it has position them in the industry.
7. To analyse Wates Estate promotional strategies over competitors’ strategy
8. To analyse the company’s human resource management and how it translate to organisational success.

Research Questions:

1. What is happening in Wates external environment, what are the key challenges it’s facing and how can it be minimised?
2. What are the strength and weaknesses of the company and does it have the capacity to respond, expand internationally within the next 3-5 years and adapt to environmental changes.
3. How attractive is the industry and does it have potential and maximum profit generation that will sustain the business and not just surviving?
4. What generic strategy is the company using and does it position them well in the market?
5. Are Wates Estates Marketing practices considering constant change in market requirements while adjusting the marketing mix to favour the success of the organisation?
6. How does Wates Estates create value in relation to competitors?
7. What impact does the company’s existing strategic frame work have on its positioning in the industry in relation to its competitors positioning and activities.
8. What advantage does Wates Estate promotion strategy have over competitors’ strategy?
9. Does Wates Estate human resources management make maximum capacity use of its employees and how does it transform to organisational success?
10. Does the present IT infrastructure present itself to take advantage of business opportunities and advance in technology?

Ethical Issues:

3.2 CONCEPT AND FRAME WORKS FOR ANALYSIS

In conducting this analysis, I will evaluate the industry in which Wates Estate operates to determine the company’s position and this will entail an assessment of competitor’s position and activities in contrast to the company’s activities, industry growth and trend in consumer demand will also be assessed. An internal analysis and evaluation of the breakdown of the company’s category of business activities with reference to the areas of focus will also be carried out to identify the link between internal operation and the industry requirement. A critical assessment of the present marketing strategy which is paramount to health and fitness Company will be carried out to ascertain its effectiveness in becoming the leading health and fitness company. This analysis will be carried out to forecast the position of the company in the future and advice on how to build business volumes at Crispins, set up franchise internationally within 3-5 years, and other relevant measures to be put in place to enhance the company’s position. The main sources of data will be secondary that is some from the case study, from academic sources, electronic journals and internet.

The conceptual tools of analysis I will be using are: Porter Five Forces, SWOT analysis, 7S model, PESTLE analysis, product life cycle analysis, value chain analysis and Generic competitive analysis.

Core Concept

The core concept of my analysis is contingency approach to management; this is different from the classical theories which has a definite ways of or one best way of doing a job, the reason I chose contingency theory or approach to management is because the environment we are now is changing rapidly so any organisation that settles for one best way of doing a job or making decision might settle for just survival or lost out completely, contingency approach put into consideration the entire makeup of the organisation such as the strategy the company is using, the kind of business they are into, the technology and the kind of people that works in the organisation and ultimately the dynamic environment (Hitt et al, 2009, Pg.513). People have different reason for joining health club, some to keep fit, some to lose weight and some for leisure, there is no best way to meet this people’s needs, it all depends on what they want to achieve and that was why I chose contingency approach to management.

3.2.1 Porter Five Forces:

This is useful because it explain the profit potential of the company’s industry and the intensity of competition. If the competition is intense and the five forces are high it indicates that the company is not attractive and there will strong rivalry and struggle for survival. An industry analysis usually begins with a general examination of the forces that influences the organisation. (Wit, B. & Meyer, R, 2004). The objective of using porter five forces is to use it to develop a competitive advantage and be able to defeat its rivals. Porter has suggested that it is the collective strength of these forces which determines the ultimate profit potential of an industry.

Abbildung in dieser Leseprobe nicht enthalten

Source: Michael E. Porter (2008) The five competitive forces that shapes strategy’, Harvard Business Review.

The crucial question in determining profitability is whether a company can capture the value its creating for buyer or whether the value has been competed away by rivals. The five forces are:

1) The threat of substitutes: This is about some other product that can meet the buyers need and thus determines the amount the buyers are willing to pay for a particular product.
2) The bargaining power of suppliers: this determines the extent to which value generated for buyers will be appropriated by suppliers rather than by firms in the same industry.
3) The bargaining power of buyers: This is very important because it deals with retaining most of the amount of value created for themselves, leaving firms in the same industry with modest return.
4) Rivalry: The intensity of rivalry determines the extent to which companies already in the industry will compete away the value they create for buyers among themselves, either passing it on in low prices or higher cost of competition.
5) Threat of new entrants: This determines how easy new competitors is able to enter the industry and compete away the value created for the buyers either passing it on in lower prices or by raising cost of competition.

[...]

Excerpt out of 46 pages

Details

Title
Business analysis for a company in the health and fitness industry. Challenges, trends, and recommendations
College
Cardiff Metropolitan University
Course
Masters in Business Administration
Grade
A
Author
Year
2012
Pages
46
Catalog Number
V1294310
ISBN (Book)
9783346761798
Language
English
Keywords
marketing, business, porter five forces, SWOT Analysis, Case Study., value chain analysis
Quote paper
Josephine Lawal (Author), 2012, Business analysis for a company in the health and fitness industry. Challenges, trends, and recommendations, Munich, GRIN Verlag, https://www.grin.com/document/1294310

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