How to Start a New Business Venture - Case Study Example

How to start a new business venture Table of Contents Table of Contents 2 Introduction 3 Proposed Services 3 Analysis of the market in London 4 Evaluation of Management Strategies 12 Conclusion and Recommendation 13 Reference 14 Bibliography 15 Introduction The fitness and the health industry is estimated approximately £4bn with a growth of around 1% during the recession with customer base of around seven million users which has grown 12% over the last 20 years. With this growing industry, London is one of the major contributors for the growth in UK and the potential customer base in that region can act as a great catalyst to increase the business in future. People in modern world are more conscious about their health and the diets they take to be fit physically and be more active in their daily life. For this booming industry trend there is a great prospect for the new business venture in the fitness and healthcare industry. In this report we have a proposal for a new business venture at Mayfair in the City of Westminster as it is one of the growing regions at UK and the people nearby Mayfair region are more aware of the health and sports fitness centre compared to other regions at UK due to the presence of many clubs and hotels at nearby streets like Marshall Street Leisure Centre, Seymour Leisure Centre, Little Venice Sports Centre, Queen Mother Sports Centre, Porchester Centre etc (City of Westminster, 2011). As far as the UK Fitness Industry report by FIA, over the last few years’ regions of London has immense growth in Fitness Industry and has been forecasted to grow even more in future if people are educated with its benefits to their health and wellbeing (FIA, 2010). Proposed Services The new sport fitness centre should provide its customer with a variety of services. It would include first class fitness centres and some sports centres which will accommodate many types of sports like basketball, tennis, boxing etc. There should be a food and beverage area where customers can also relax during workout. Massage centre with training on fitness exercises are one vital service which should be there. A medical therapy clinic is also a modern trend in the fitness industry. Various other facilities like the conference room and the children centre, protective lockers and swimming pool are some attractive features which attract a lot of customers with the extra services they get from other fitness centres (Anything & Everything, 2011). Analysis of the market in London 7 P’s of Marketing Mix Fitness and Health industry being a service offered to the customer without any product thus the extended marketing mix is to be used i.e. 7P’s of marketing mix. In order to formulate the right marketing mix the company needs to evaluate all the segments and work in the improvements of the each segment to compete with the other players of the market (Gupta, 2006, p.22). Product The product mix is the range of products that are available with the company. It may be broaden with different services or it can also be extended in order to fit the market scenario. The services of the fitness centre located near Mayfair road in the city of Westminster at London are very advanced with many facilities like swimming pool, recreation centre, modern equipments, therapy clinic etc. Thus to survive in this competitive environment the new business venture of fitness centre should also posses the existing services along with some added new differential services (Nargundkar, 2006, p.46). Place Place is one of the most vital factors which needed to be considered while placing the product or services. The place determines the cost of transportation of materials, scope of new customers. If the right service is properly placed at the right time at the right place then it will be best accepted by the customers. UK being a very flourishing country for the fitness industry especially in London the people is very aware of the services provided by the different fitness centres and since there are no fitness centres located at proper Mayfair street there is a great demand of the health and fitness services in this particular location, thus it’s a great place to start a new business in this industry. Price Price is the one which drives sales and increase the revenue of the firm. All the other aspects of the marketing mix are involved in the cost. Price is the only factor which reflects the revenue of the firm. Thus price of product or service needs to be evaluated very carefully. If the price is not suited for the market there will be no demand for the product or service and it will not survive for long. Though there is no competitor at Mayfair Street but at nearby locations there are many players in the same industry. The service cost should be very attractive to the customers without degrading the quality or quantity of services. The pricing of the services of the competitors are needed to be analyzed and then the cost must be determined with some extra benefit for the customer like discounts to attract them. To penetrate the market, pricing policy is the most important weapon for any services (Needham, 1999). Promotion The communication bridge of the company with the customer is the promotion mix. It helps the company to reach to the customer and make them aware of the services or product. Through promotion the customers get the opportunity to know the product or services and then decide according to their need. But while promoting a service the company should be very careful as it may sometimes give a very bad impression on the mind of the customers about the services or product if anything goes wrong with the promotion process. UK market being very familiar with the fitness services especially areas around Mayfair, customers need to be attracted with special promotion techniques like giving discount coupons for joining, giving membership discounts to the customers. Marketing of special features of the centre in different media can also drive sales revenue for the company. People The employees of the firm are the representatives who directly interact with the customers. Customers are loyal to the organization which provides them with quality services and give the feel to the customers that the company cares for them. Thus the employees of the firm need to be well trained in their respective fields to serve the customer with quality services. The fitness centre should have a very well trained trainer and supervisor to guide and train the customers (Kumar, 2010, p.47). Process The supervision of the whole process of the firm is very essential. Handling the customer’s complaints, identifying their needs of the customer and identifying the needs for new services helps to manage the whole process very effectively. Physical Evidence The physical evidence is another important factor nowadays for the customers. Giving the customers a properly organized and appropriate surrounding will help to attract many customers as they will be able to feel the quality of services they might get from the company. In service industry it’s very difficult for the company to convince the customer since there are no physical products to show to the customers (Crane, 1993, p.15). Porter’s 5 Force Model Porter’s five force model was developed by Michael .Porter in the year 1979 is mainly used to determine the competitive environment of the market and also to find the attractiveness of any product or services in market. The five forces which are needed to be analyzed to find its market position or to enter the market are New Entrants in that particular sector of the market, Suppliers bargaining power, Customers bargaining power, substitutes of the product or services which are there in the market and the market competitors of the services (Kurtz, MacKenzie & Snow, 2009, p. 56). Figure 1: Porters 5 force model (Source: Hill & Jones, 2009, p.43) Threat of new Entrants At London it’s an easy way to enter the market with its gradual growth in the health and fitness industry but there is a strong competition in the market as there are many players around Mayfair Street like Marshall Street Leisure Centre, Little Venice Sports Centre, Porchester Centre etc which might be very difficult for any new entrants to successfully survive in the market. Introducing a new sport fitness centre in this competitive market needs to have a difference in the service from the competitors. Bargaining Power of Customers The bargaining powers of the customer at London are not very strong as compared to other regions of UK but on the other hand there is no switching cost for the customers in this region. Bargaining Power of Suppliers There are large number of suppliers in the UK market for the supply of equipments for the fitness industry and other raw materials, the suppliers bargaining power is very less for the target market. Threat of Substitutes The substitute at UK market in the fitness industry varies from low to high according to the location of the centre. Regions nearby Mayfair are very competitive with many players in the market but on the contrary there is a great prospect in this region for any new entrants in fitness industry as the people are more aware and eager to experience new sport fitness centres with their new services. Rivalry among Existing Players The main competition for any new fitness centres at Mayfair Street are the competitors like the leading UK Fitness network with over 100 centres and swimming pools all over UK along with other Leisure centres and Youth clubs around the location. The new sport fitness centre needs to develop high quality of services and a very good price strategy in order to compete with the leading names in the industry (UK Fitness Network, 2010). Ansoff Matrix Ansoff Matrix which was developed by Igor Ansoff is often implemented to identify the opportunity for growth of the company. This matrix helps the companies to decide their market growth and product strategies. These growth strategies can be described as follows– Market penetration strategy is employed for an existing product into the existing market to increase their market share. Since the nearby streets of Mayfair already have many fitness centres thus for a new business venture market penetration will be most suitable to enter the market. Various techniques like discounts coupons, membership cards and low cost registration can be used to enter the competitive market. By making a difference in the service from other centres will help the company to penetrate effectively. Product Development strategy is adopted by the companies who want to introduce a new product into an existing market. Developing a modified new product which can appeal to the target market segment is required in this market strategy. Diversification is the strategy used by companies to grow their business by introducing new product into a new market. Since there is very few knowledge about the target market it’s a very risky strategy to implement. Market Development is the strategy taken by companies who want to introduce an existing product into a new market. Since the target market is very well understood from the experience of the other players in the market it’s an advantage to introduce an existing product into the market (Luck, 2008, p.346). Figure 2: Ansoff Matrix (Source: Mercer, 1996, p.171) Porter’s Generic Model For analyzing the competitive environment, Porter’s Generic model can be a very useful tool. The Porter’s Generic Model strategy is often adapted by companies who want to get an extra edge in the market and grab the market share from other companies. The companies either goes for overall cost leadership or follow the differentiation strategy. Few companies also target a small segment of the market by focusing on a particular group of customers. This is called Niche marketing. This focus strategy can be dependent on cost focus or it can also be a differentiation focus strategy. The strategy which should be adopted by the new sport fitness centre is overall cost leadership and differentiation for penetrating into the market. The pricing policy for the services should be compared to the industry service rate and then the cost for the customers should be less than the competitor’s rate. This will help them to get many customers who are price conscious. Along with the price there should be a difference in the service like including sports area within fitness centre can be a very effective introduction as not many players in the market have this facility (Stonehouse & Campbell, 2004, p. 175). Figure 2: Competitive advantage (Source: Neil Botten, 2008, p.268) Evaluation of Management Strategies After implementing strategies according to the business needs the company should closely watch the effectiveness of the strategies. For a proper evaluation it should adopt the balanced scorecard method to analyze the different departments of the company. The use of balanced scorecard would not only help the firm to evaluate its financial strategies but to also analyze the non financial aspects. Each department will be given scores according to their performance and that will reflect the areas of improvement for the new business development. This would help to serve as a feedback mechanism for the organization and also in framing proper remedial measures so as to meet the challenges of the business environment (Vos & Schoemaker, 2004, p. 31). Figure 4: Balanced Score Card (Source: Hubbard, 2004, p.127) Conclusion and Recommendation London being a flourishing location at UK for the health and fitness industry especially at Mayfair Street as there are no fitness centres located at this place thus there is a great prospect for any new business venture on the particular segment. The people at these regions are very health conscious and amongst UK, people of London are most aware of the services offered by the fitness centres. With the increase in number of centres there is also a great competition amongst the players around Mayfair. The company with their different strategies and quality services attracts the customers. To enter into this growing market and capture the market share any new venture should analyze the market players’ activities and services very carefully to understand their pricing policies and place the services according to that. Difference in services, proper marketing, understanding the environment through extensive research and appointing qualified professionals into the business are the keys to success for the new business plan. Reference Anything & Everything, (2011), Fitness Centers – Reasons To Use Their Service. [Online]. Available at: http://www.anythingandeverything.org/fitness-centers-reasons-to-use-their-service/ . [Accessed on April 15 2011]. Crane, F., (1993), Professional services marketing: strategy and tactics. Routledge. City of Westminster, (2011), Sport and Leisure. [Online]. Available at: http://www.westminster.gov.uk/ . [Accessed on April 15 2011]. FIA, (2010), Conclusions of the TwentyTen Commission- an industry consultation, [Online]. Available at: http://www.fia.org.uk/2010-commission.html . [Accessed on April 15 2011]. Gupta, D., (2006), Marketing library and information services: international perspectives. Walter de Gruyter. Hill, C., Jones, G., (2009), Strategic Management Theory: An Integrated Approach. Cengage Learning. Hubbard, E., (2004), The diversity scorecard: evaluating the impact of diversity on organizational performance. Butterworth-Heinemann. Kumar, (2010), Mktg Of Hospitality & Tourism Serv. Tata McGraw-Hill Education. Kurtz, D., MacKenzie, H., & Snow, H., (2009), Contemporary Marketing. Cengage Learning. Luck, D., (2008), CIM Coursebook Assessing the Marketing Environment. Butterworth-Heinemann. Mercer, D. (1996). Marketing. Wiley-Blackwell. Nargundkar, R., (2006), Services Marketing 2E. Tata McGraw-Hill Education. Needham, D., (1999), Business for Higher Awards. Heinemann. Neil Botten, (2008), CIMA Official Learning System Management Accounting Business Strategy. Elsevier. Stonehouse, G., Campbell, D., (2004), Global and transnational business: strategy and management. John Wiley and Sons. UK Fitness Network, (2010), What is UKFN? A Network of 100s of Gyms, Pools and Fitness Centres. [Online]. Available at: http://www.ukfitnessnetwork.org/what-is-ukfn/ . [Accessed on April 15 2011]. Vos, M., Schoemaker, H., (2004), Accountability of communication management: a balanced scorecard for communication quality. Vos & Schoemaker. Bibliography Mullins, L. (2005) Management and Organisational Behaviour (7th Eds) Prentice Hall, Harlow:London Read More