September 22nd, 2014
1. What industry does FitTime operate in?
FitTime operates in the fitness industry. This is a very popular industry consisting of fitness centers and weight loss clinics. Our subject falls under fitness center. This type of fitness industry specific offers a large variety of exercise equipment. Some examples are free weights, leg presses, and treadmills. Also offered at most fitness centers are a range of classes such as aerobic or yoga. Fitness centers are becoming increasingly popular due to weight concerns of the general population. In years past, the main clientele of a fitness center were young adults. Now, you can visit most fitness centers and see a wide array of age groups.
2. Complete a brief industry analysis using Porter’s 5 Forces.
THREAT OF ENTRY:
Initial Capital costs are relatively low. After rent, staff costs are the second largest expense involved in operating a fitness center. Many larger established fitness center chains hire their own fitness instructors and trainers, but for a start-up you can achieve greater flexibility and lower costs if you hire instructors on an independent contractor basis. Fitness equipment is not only expensive it is a continually evolving technology. Equipment leasing is a more cost effective way to start up a new fitness center (Beesley, 2009). Additional initial capital expenditures include insurances, legal fees for business startup and licenses. There is no regulation for entering this market but there are numerous safety and health regulations that must be adhered to. These are outlined in the NSF International Standard for Health/Fitness Facilities (NSF, 2009). Economies of scale can be reached easily with moderate membership enrollment. After reviewing the different aspects of the threat from new entrants, into the fitness industry, it is obvious that the threat is high. Location and price appear to be the driving force in choosing one center over another. Other than the price/location factor and without a high amount of specialization in class offerings, fitness equipment, training and nutritional consulting, or niche membership, all fitness centers are viewed equally beneficial.
Within the fitness club industry competition is extremely high. Not only due to other fitness clubs, but also recreational facilities, universities’ and apartments’ exercise facilities, the YMCA, country clubs, and the home fitness equipment industry. There are always competitors that are offering lower prices for a lower level of service. To stay strong in a competitive industry, health club operators must focus on what makes their club stand out from the crowd (Britt, 2012). Exit barriers seem to be high due to the fact that clubs use industry specific equipment that could be difficult to sell upon shut down. Other fitness clubs may or may not be interested in purchasing used equipment so this could potentially be a huge loss to a club. The fitness industry has seen moderate growth in the last two decades with memberships totaling 51.4 million in 2011 (Britt, 2012). As the push towards a more health conscious society continues, and the aging population places a greater emphasis on staying fit, it is predicted that fitness clubs will continue to grow in membership numbers (Britt, 2012). After examining the different aspects of competitive rivalry, it is obvious that the threat is high. Fitness clubs must work hard to make sure their products are different from their competition. Fitness clubs have a large stake in the investment that they must make in their physical building location, and the amount of equipment that they must purchase. They must develop a strategy that will attract and keep customers returning to their particular facility.
THREAT OF SUBSTITUTES:
BARGAINING POWER OF BUYERS:
The bargaining power of buyers is