Fitness Industry - Assignment Example

a The strong and growing trend towards the importance of attaining quality of life has spawned the global fitness and health industry. Fitness and exercise are components of a high quality of life. Exercise stimulates both physical and mental wellbeing according to the World Health Organization. It decreases the risks of heart disease and obesity by 50%. (BBC News). Developed countries have healthy citizens. Adopting healthy lifestyles increases personal awareness for health issues. Sicknesses can be prevented with fitness programs. In most high-income countries, fitness and wellness programs have slowly taken root. Keeping fitness is a family affair as parents and their children gain the benefits of bonding together and keeping physically fit. Families have discovered the importance of finding the time to exercise on a regular basis. Exercise has been seen as a reliable resource for helping children and adolescents' handle daily stress. Children and adolescents who exercised a lot were able to tackle stress and retain positive outlook compared to those who did not. Nutrition, exercise and a healthy lifestyle are becoming achievable goals with the establishment of fitness clubs in various parts of the world. Most of the fitness clubs offer state-of-the-art exercise equipment, individualized personal fitness training, group classes and nutrition advice. Indeed, the fitness industry is an emerging sector which can capture a wide and affluent clientele in carefully chosen business sites of Global PLC Ventures. The company must choose very interesting locations such as developed economies which guarantee growth and profitability for its fitness operations. b.) Global PLC Ventures will enter the fitness industry in Dubai and Brunei. Dubai is one of the most prosperous countries in the Middle East. Brunei is the most prosperous country in the Southeast Asian region. Both countries have stable governments and have upheld the rule of law. The citizens of Dubai and Brunei enjoy one of the highest per capita incomes in the world. Their citizens enjoy higher and stable purchasing power compared to other countries in their respective regions. Consumption growth has pushed their respective economies to higher growth levels. Dubai's Gross Domestic Product growth is projected to be between 4 percent and 6 percent in 2009.The population of Dubai is very young. Approximately 78% out of the total population of 4.6 million belong to the 15-64 years old age bracket which represents the target market of the fitness club of Global PLC Ventures. Another 20% of the total population is below 15 years old. These two population segments comprise the future consumers of the new fitness centres in Dubai. The extremely robust private sector growth has created the need for new workers. Dubai had received US $32 trillion dollars in foreign direct investment that had funded the construction of new office buildings, residential towers and condominium residences in 2007 and 2008. These new businesses require many new workers. The labour force has increased to 4% per annum as new companies and enterprises open next year. Expatriate workers have been hired to work in new companies. Dubai has a very young and growing population: 47% of its population are below 15 years old. This fast-growing young population and the business executives are the target market of the Fitness business of Global PLC Ventures for its health and fitness business. Dubai has an open policy towards foreign businesses. It allows 100% foreign ownership and offers tax breaks to foreign companies. The most interesting development of Dubai is the three man-made islands: The Palm Islands, The s The Palm Dubai and The Palms. The project is being handled by Al Nakheel Properties. This property development will establish new residential, leisure, and entertainment areas. The two man-made artificial palm tree-shaped resort islands established Dubai's position as a top tourist destination in the Middle East. The Palm Islands is now known as 'The Eighth Wonder of the World'. The Palm Jumeirah and The Palm Jebel Ali, are constructed in the shape of date palm trees and consist of a trunk. The three islands will have luxury hotels, high-end residential villas, water homes, apartments, marinas, food spots, sports facilities and fitness clubs. The Global PLC Ventures can open three fitness clubs in the three islands to address consumer need. Brunei's citizens have the highest per capita income at US$ 35,000 in Southeast Asia. (Loman, 2008) The population of Brunei is 390,000 with 50% of the population belonging to those who are 15 years old and below. The annual population growth rate is at 2.8%. The citizens enjoy a comfortable lifestyle due to its strong and resilient economy. The Government of Brunei provides all its citizens free health care and education, subsidized rent and interest-free housing loans for civil servants. The economy is supported by a steady stream of oil and gas revenues. Oil and gas production make up 50% of Brunei's Gross Domestic Product and 90% of its exports and government revenue Brunei welcomes new foreign businesses by offering holiday tax breaks for five years. It also offers a well-educated work force. Most of the business executives of Brunei are London-educated. Foreign businesses have easy registration procedures and deal with competent state bureaucracies. c.) Opportunities and Threats There are many opportunities and only one threat to bringing the fitness business to these two countries. Brunei provides a host of opportunities for new entrants. The first opportunity is that there is a lack of fitness centres in Brunei. Brunei has three medium-sized fitness centres: Harun's Gym, Fitness Zone Health Club and Joie de Vivre Fitness. These three fitness centres cater to a diverse clientele. Harun's Gym owner is Harun Hj Ahmad with total assets of about US $1 million. He worked as an instructor and supervised the gym operations. Harun's Gym opened in 1991. Some of the gym members have evolved to become personal trainers. Fitness Zone Health Club is a classy fitness gym which caters to high-end customers. The club believes fitness will improve the cardiovascular strength, flexibility, and improve stress management and weight control for their members. Joie de Vivre is an aerobics studio and gym for ladies. Its training programs are medium-priced and within easy reach for the working professional women. The second opportunity is that Brunei has a growing population. Given the increasing population of the country, these three centres are not enough to service the entire fitness industry. The three local fitness centres have simple facilities and less personal trainers. Other businesses which offer fitness exercises are the international hotels which offer very expensive rates and fitness packages. The hotels cater to tourists and expatriates. The Empire Hotel and Country Club offers excellent gym facilities to its guests and club members. The third opportunity is that the citizens have discovered the importance of personal fitness. Global PLC ventures can come in as a high quality fitness club catering to a mid-range Brunei clientele composed of young students and young business executives. This particular market segment has not been addressed by the local fitness centres. The Brunei citizens value health and lifestyle. Due to their increasing prosperity, more citizens will seek fitness clubs which cater to a serious yet well-priced personal fitness training programmes. The fourth opportunity is that the Brunei citizens have an increasing level of per capital income. This high income level will enable them to get memberships in fitness gyms and enrol in personalised fitness training sessions. The fifth opportunity is the increasing media presence of fitness and exercise topics. The media highlight of promoting healthy lifestyles will help increase the level of awareness of fitness gyms. The sixth opportunity is the emerging interest of female executives and workers regarding fitness programs. There are fitness gyms which cater to female customers only as provided by Islamic regulations. This presents a possibility for Global PLC Ventures to set up an exclusive women's fitness centre. Only the Shell Fitness Club of the Royal Dutch Shell Company pose a serious threat to a new entrant of the industry. The Shell Fitness Club may open its membership to the non-Shell employees and family members once Global PLC Ventures opens its fitness club. However, this potential threat can be handled well if the management and staff of the new fitness centre will offer excellent fitness service and provide advanced exercise equipment. There is minimal possibility for the establishment of home fitness gyms as the citizens prefer to do work out with a personal trainer. Moreover, the consumers prefer to do fitness programs with their colleagues and friends. Only the Brunei Royal Family can have a home fitness gym for security and privacy reasons. The Dubai fitness industry although highly competitive, presents many opportunities and only one threat. The first opportunity is that Dubai only has two excellent fitness centres. The first one is the Big Apply Gym at Dubai' Jumeirah Emirates Towers. Single membership for one year starts at 8,385 Dhs (US$2,282). This health and country club offers a state-of-the-art gym, swimming pool, facilities and extra facilities such as the tennis and squash courts, yoga studios and a spa. The second one is the Aviation Club which is a popular leisure facility which offers excellent sports and recreation facilities. The club charges 6,050 Dhs (US$1,647) annually for single membership. The international hotels also offer fitness programs for its hotel guests and local members. However, the membership costs are extremely high. The hourly rate for a personal training session is pegged at US$200 dollars. Hence, the hotels have limited membership to business executives. Global PLC Ventures can establish a high-quality fitness centre at affordable prices for corporate executives, expatriate workers and student members. The second opportunity is that the three new islands will need fitness centres that have an international reputation and service standard. Global PLC Ventures can create three new centres in the three islands to address the needs of new consumers. The third opportunity is that the citizens have a high consumer purchasing power and lifetime employment. Thus, they can afford fitness programs and training. (d) Barriers to entry Michael Porter (1980) stated that an industry's competitive forces exist in business environments. However, in terms of barriers to entry in the fitness industry in Brunei and Dubai, it will be low. These two countries welcome new and foreign businesses in the fitness industry. The fitness industry is open to 100% foreign direct investment and 100% foreign ownership and management. Michael Porter (1985) also stated that in order to remain competitive, businesses must invest in new equipment and in human resources development. In terms of industry rivalry among the industry players, it is high. The existing fitness centres constantly update their gym equipment and formulate new and interesting fitness and exercise programs. They have even added dancing lessons to add complement and new flavour to the regular fitness exercises. The new fitness centre of Global PLC Ventures must always have the best gym equipment and it must have the best-trained professionals in order to compete in this industry. There is a low pressure from substitute products such as home fitness gyms as the citizens of both countries prefer to exercise under a personal fitness trainer. Moreover, they prefer to do fitness programs with other friends and colleagues. In terms of the bargaining power of buyers, it will be low since most of the consumers get high salaries as executives and employees of government firms and government controlled corporations. There are also many citizens who are working in multinational corporations as key executives. Public and private corporations give very high compensation and benefits packages for the citizens. Hence, the possibility of establishing fitness centres is nil for Brunei and Dubai citizens and residents as they do not have the appropriate technical training and business knowledge pertinent to management of a fitness business. In terms of the bargaining power of suppliers, it will be low because the fitness gym business is highly capital intensive due to high rental costs, high human resource costs and high maintenance costs of the equipment. A regular supplier of gym equipment cannot just easily venture into the fitness gym business; he must have a high capital. References Akande, A, C De Van Wyk and J. Osagie. 2000. Importance of Exercise and Nutrition in the Prevention of Illness and the Enhancement of Health. Education. Vol 120, issue 4, Page Number 758. Kirby, Alex. "WHO issues fitness plea". BBC News. April 4, 2002. Loman, Herwin. "Country Report of Brunei." Rabobank Nederland. September 2008. Porter, Michael. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press. Porter, Michael, 1985. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. Siddiqi, Moin. "Gulf Poised for Heady Surge into 2008 & Beyond: The Oil Boom Experienced over Recent Years Shows No Immediate Signs of Abating." The Middle East. Issue: 387. March 2008. Page Number 42. Read More