Analysis of Health Club Market in UK - Essay Example

Analysis of Health Club Market in UK Introduction A health club (also known as fitness club or fitness centre) is a place where exercise equipments are available for performing light exercises. In today’s world, most of the individuals prefer going to health clubs in order to keep themselves stress free. These health clubs offer simple exercises along with luxurious environment. The health clubs are the modified versions of the gyms. Here modern amenities and special facilities like spa, steam bath etc., are provided along with the light exercises to the members. The health club business in UK is at its peak. As there are a large number of players competing in the market, it is very difficult to distinguish any one club from its competitors. In the first part of the project, an industry analysis of the health club market in the United Kingdom will be done. In the next part an opportunity and a threat analysis will be performed for the major players in the health club market of the United Kingdom. Finally in the third part, the business strategies of these competitors will be described. Industry Analysis: Porter’s Five Forces Model (Source: Author’s Creation) There are a large number of health clubs operating in the United Kingdom. An industry analysis of the health club market will be done to understand the threat that these companies possess from one another. The industry analysis will be done using Porter’s Five Forces Model: Rivalry from Existing Firms - In an industry, there are a large number of competitors competing in order to achieve competitive advantage. The intensity of this competition is one of the major determinants in the industry analysis. The business strategies of a firm help it to distinguish from the competitors. The merger activities of the health clubs have increased the competition in the market. Whitbread Plc has acquired David Lloyd Leisure in the year 1995. Canon and First leisure have also merged their fitness and health clubs. The merger or acquisition of the companies helps in the market extension as well. Thus the threat from the competitors in the health and fitness industry is very high. Threat of New Entrants- If the existing market yields high return to the companies operating in the market, it attracts new entries. But the entry of the new firms results in the decrease in the profitability of all the firms operating there. If barriers are not provided to these new entrants, the profitability of the firms will show an abnormal decrease. There are certain barriers to these new entrants. In case of health and fitness industry, the threat of new entrants is not a matter of high concern as there are a large number of barriers to the entry. Modern equipment using latest technologies and expert employee requirement makes it tough for the fitness clubs to enter into the existing market. Thus the threat of new entrants is low. Bargaining Power of Customers- It is the ability of the buyers to put the firms under huge pressure. The bargaining power of the customers is directly proportional to the number of firms competing in the market. In case of the health and fitness industry, there are a large number of players competing in the industry. When the number of members rises steadily and the market becomes oversaturated, the bargaining power of the buyers increases. The quality of services available will help a company to distinguish itself from the others and achieve competitive advantage in the market. Bargaining Power of Suppliers- The suppliers of raw materials and other services to a particular company is an important source of its ability. If the suppliers deny working with a company, then it has a negative impact on the business. The suppliers can even charge higher prices for their services. As there are a large number of suppliers, the threat of the suppliers is very high. The strategy of maintaining long term relationship with the suppliers will help to reduce such threat. Threat of Substitutes- The existence of various products and services outside the domain of the present product and service boundaries increases the chance of the buyers to switch to those alternate options. There are various factors which determine the threat of the substitutes. It may be the buyer’s inclination towards the substitutes, the pricing strategy of the substitutes etc. There are very few companies in the market of United Kingdom which can substitute the fitness clubs. Thus the threat of the substitutes is very low. Opportunity and Threat Analysis of the Major Players The health and fitness industry is performing well from the past few years. There are a large number of health clubs operating in this industry. Three major players in this industry are Holmes Place, David Lloyd Leisure and Fitness First. An analysis of these three companies will be done to identify the main opportunities and threats of these companies. Holmes Place Holmes place was established in England in the year 1979. The expansion in Portugal started in the year 1998. In 2005, Holmes Place Iberia was created after buying the Portuguese and the Spain clubs. In 2008, around 22 health clubs opened in Spain and Portugal by the company. The company has planned to open clubs in some other area as well. It is a leader in the health club market and prefers making business relationship with likeminded companies (Holmes Place, 2011a). The 3000 square foot fitness centre provides area for free weight and cardiovascular exercises, floor work areas etc. It also provides area for the practise of martial arts by the pregnant women. It has a well managed team of experienced health and fitness professionals who are always ready to help the customers. It differs from the competitors by providing an interior garden that gives the feeling of peace to the customers. Besides providing aforementioned services, these clubs conduct three to four check-ups to take the measurements and discuss about the healthy meals that should be consumed. Among them the first check-up would be free of cost. Opportunities A rapid growth of health and fitness clubs has been seen in the United Kingdom. This is an opportunity for the company. Nowadays, every individual is suffering from various health diseases such as obesity. This is forcing them to join various health clubs and gym and pay more concentration on exercises and other health care practises. It has become a part of the daily routine for most of the individuals. Holmes Place can bring differentiation in the services by providing some additional benefits to the customers, which will make it more attractive. Another opportunity of the company is that, it can become one of the top gyms in Lisbon by opening a premium gym where the customers will be different as compared to that of the other gyms. Threats Holmes Place has opened a large number of gyms. The chain introduction of so many gyms can have a negative impact on the brand image of the company. It can appear to the customers as a repetitive activity performed by the company every time. Fitness First Fitness First is one of the largest health clubs in the world. It is a privately owned company. It consists of 540 health clubs having about 1 million members covering more than 15 countries (Fitness First, 2010a). The company possesses 80 health and fitness clubs with 233,000 members in the United Kingdom only. In 2005, the company was acquired by a private equity group known as BC Partners. It presently owns 93 gyms in Australia. In 2006, the company had a turning point when it had an expansion by opening 500 fitness centres worldwide. Fitness First offers a wide range of services to the customers. It provides group fitness classes, team workouts, cardiovascular exercises etc. International Fitness Week held every year in the month of February is conducted by Fitness First. It provides various membership plans consisting of different terms and conditions. Some plans have a membership term of one year and requires a cancellation fees on the exit of such members. The other plans are made on biweekly basis and can be cancelled within a notice period of 4 weeks. The members under the ‘home plan’ can make an access to any one of the fitness clubs of Fitness First. There are other plans which offer access to any of the standard locations of the Fitness First gyms located within Australia. Opportunities Fitness First has opportunities for acquisition of various health clubs. This will help the company to expand the operations into the emerging markets. Innovation in the services offered by the company will help in product and service expansion. The company can promote the new services that will be available by means of online advertisement. This will help to attract new customers. Threats The company possesses the threat of high competition from the competitors who are offering lower prices to the members. There are many low cost competitors in the market. This can result in losing the valuable customers of Fitness First. The external changes like changes in the government policies, tax rate etc. can also be a threat to the company. The company needs product innovation in the business as there lies a threat of product substitution. The company has sold 24 clubs out of total 97 health clubs. This might be a reason of losing the customers as well. David Lloyd Leisure David Lloyd Leisure is an operator of a large number of health and sports clubs. It was established in the year 1980. In 1990 the company opened the first family oriented health and fitness club. In the year 1995, it was acquired by Whitbread PLC. The company provides fitness clubs having gyms, spa and separate steam rooms. Whitbread was operating more than 50 health clubs of David Lloyd Leisure in the United Kingdom, Ireland, Spain, Belgium and the Netherlands. Unfortunately this business was giving very poor financial return to Whitbread. As a result the clubs were sold to Bank of Scotland and London and Regional Properties. Thus, presently it is operating as a subsidiary under the parent companies named London and Regional Properties and Bank of Scotland. Opportunities The general fitness and the health condition in the United Kingdom are low all the time. This gives an opportunity to David Lloyd Leisure to prove its excellence through high quality services. There are a large number of competitors in the health club market. The company needs to adapt new technologies in order to achieve competitive advantage over the competitors. The child fitness is deteriorating in the United Kingdom. The child health care and fitness training is one of the best opportunities for the company. The company should focus on the quality of services being provided to the customers in order to earn good revenue. Threats The debt burden of David Lloyd Leisure is a matter of concern for the company. If the company is unable to improve the debt conditions, then it is a serious threat to the company. Moreover the economic slowdown due to the current global and UK recession can have a negative impact on the financial position of the company. The company should use new technologies to retain the existing members. The cheaper technology can be a threat to the company in the future. Business Strategies of the Major Players In this part of the project, the business strategies that have been implemented by the major players in the health club market will be discussed. Holmes Place The company aims at maintaining long term relationship with its members. It tries to develop a strong bonding with these members, making the services available to them all the time. The company provides high quality of services to the customers. The service is provided through four dimensions. They are listening, instructing, gratifying and rewarding (Holmes Place, 2011b). It maintains differentiation from the competitors by providing some additional services. The clubs have interior gardens which give the feeling of peace and pleasure to the members. It does not maintain an exact price table. The clubs have one private reunion with an employee who has been given the responsibility to expose the different prices based on the different demanded conditions. It also gives discounts to the students depending upon their schools and universities. Thus the pricing strategy of the company is affordable for the members. The company focuses on the customer choices. It is expected that in future the company will differentiate the product and services and will extend the operations into new and emerging markets. Fitness First The company believes in providing excellent services to the members. It appoints expert employees having the right talent. The company implements appropriate recruitment processes to select talented employees who can provide quality services to the members (Fitness First, 2010b). In order to achieve success, it splits the strategies into four pillars. These are sales, experience of the members, fitness and business management. Within every pillar it has been defined that the fulfilment of the customer’s expectations should be the primary and the main focus of the company and its employees. In the future the company is expected to renovate the services and achieve the goal of product and service expansion. David Lloyd Leisure David Lloyd Leisure aims in providing the best services to the customers. It states that it can provide the best health and fitness training because of the vast experience in this field from many years (David Lloyd, 2013a). It believes that the members should feel the difference. It creates the right environment to generate great experience for these members. ‘Spirit to Inspire’ was the creation of David Lloyd Leisure. The company has family oriented health clubs. Family time is very important for every individual and the company ensures that its members can utilise most of their time in the health club with their families (David Lloyd, 2013b). It follows the strategy of maintaining strong relationship with the customers by gratifying them with the quality services. In the future, the company is expected to reduce the debt burden by forming strategic alliances with some big companies. This will help the company to recover from the current situation of financial instability. Each of these major players has adapted different business strategies to achieve competitive advantage over the other. In order to utilise the opportunities available to them and protect themselves from the current threat, these companies are expected to implement new business strategies. This will be benefitted for the customers as well. Thus the health problem in the United Kingdom is expected to get reduced in the future days. ` References David Lloyd, 2013a. GOALS | HEALTH, FITNESS & WEIGHT LOSS. [online] Available at: [Accessed 8 March 2013]. David Lloyd, 2013b. Family time together. [online] Available at: [Accessed 8 March 2013]. Fitness First, 2010a. Club and Members by Country. [online] Available at: [Accessed 8 March 2013]. Fitness First, 2010b. FITNESS Firsters. [online] Available at: [Accessed 8 March 2013]. Holmes Place, 2011a. Business relations. [online] Available at: < http://www.holmesplace.com/> [Accessed 8 March 2013]. Holmes Place, 2011b. Company profile. [online] Available at: [Accessed 8 March 2013]. Read More