Critical Evaluation of an Australian Business: Jetts - Case Study Example

Critical Evaluation of an Australian Business: Jetts Introduction In this assignment, a critical evaluation of Jetts fitness club in Australia is presented. Three key issues are about the business are examined as follows. The first one is how the business has managed to use its unique model to gain competitive advantages over its competitors in the industry. Different ways in which the business model employed by Jetts has revolutionised the health and fitness industry in Australia are presented. The second issue involves evaluating specific ways in which the company has achieved success in the industry. This covers different areas such as resource utilisation, consumer value proposition and profitability. Lastly, general recommendations are presented to the management of the enterprise. The recommendations, which cover a broad range of issues, seek to provide different ways by which the company can improve its position in the market. Critical evaluation Jetts is one of the leading chains of fitness clubs in Australia. Started back in 2007 as a fully owned Australian chain of fitness clubs, the business has grown into one of the leading players in the health and fitness industry in Australia (Jetts 2014). This success has been demonstrated by its performance in the market in terms of expansion and profitability. Currently, the business is operating 210 clubs in Australia (Jetts 2014). Its financial performance has also been improving over the years. Since the overall performance of an organization is determined by how different factors interact with each other, the entrepreneurial success of Jetts depends on how well it has performed with regard to these factors. To begin with, Jetts has succeeded in the Australian market and more recently the New Zealand market because of its revolutionary business model. Theoretically, a business model incorporates different ways in which a business uses its resources and capital to influence its sales and profitability by using strategy, management, innovation and processes (Nielsen 2012, p. 37). According to Porter (2008, n.pag), a business can create a competitive advantage in the market by utilising any of the four key strategies: cost, differentiation and focus. Additionally, a firm can leverage on any of these strategies by employing an appropriate business model typology that focuses on strategy, customer value or resource utilisation (Weinhardt et al., 2010, p. 74). Jetts has utilised these concepts in its business model. Initially, the fitness club was started based on a lean concept that achieved a competitive advantage in the market by minimising its operational costs. The benefits derived from this model are transferred to clients in the form of reduced prices for services. This revolutionary business model has a strong basis on theoretical development. This was achieved by differentiating the services of the new organisations from those of traditional gyms in the market. Whereas large traditional gyms focused on a wide range of classes and other services to their members at relatively high costs, Jetts focused on providing to the market a new type of gym services that are characterised by unlimited access and reduced prices (Cooper 2010, n.pag). Price reductions were based on introducing shorter and cheaper monthly contracts with clients unlike traditional gyms that offered contracts that lasted for a year. As well, the company has achieved cost leadership in the market by minimising its operational costs in the market. This has been attained by maintaining a lean workforce in its clubs. This way, the company has successfully used a strategic business model that has revolutionised the health and fitness clubs industry in Australia. Another area in which the entrepreneurial success of Jetts can be evaluated regards the way the company has managed to create and sustain an effective customer value proposition. Theoretically, organisations are able to create value proposition by matching inputs such as price, the experience of customers and alternatives to outputs such as profitability, overall growth and new as well as retained customers (Barnes, Blake & Pinder 2009, p. 22). Jetts has succeeded in creating the right value for customers by creating a unique service that caters for their needs. Although the lean and cost-efficient model that the business uses is not new, by pioneering it in Australia, the company identified a genuine need for affordable and 24-hour gym services in the country and successfully tailored its product offering to address the need in the market. Since customers were dissatisfied with the traditional services that were then being offered by existing gyms in the country, the company can be said to have managed to create a high customer value proposition by offering a better alternative at a relatively lower price. Apart from creating value for its customers, there is need for a business to ensure its own growth and survival in the market by creating value for itself through profitability. In order for an organisation to be profitable, it has to take into consideration different factors such as its overall revenue, costs, margin and general utilisation of resources (Den Ouden 2011, p. 136). Jetts has taken these factors into account in its operations in several ways. For instance, the company has focused on reducing its direct and indirect costs. In addition, the business has sought to develop economies of scale by pursuing a growth strategy that has seen its rapid expansion in different states in Australia as well as New Zealand (Jetts 2014). Lastly, compared to other players, the company offers its franchise at a relatively lower price (Cooper 2010, n.pag). Jetts can also be evaluated in terms of how it has utilised its key resources to enhance its overall performance in the market. Theoretically, a firm can achieve a competitive advantage in the market by making use of its bundle of resources that are unique and only available to it. For this to happen though, the bundle of key resources that the firm has access to must be valuable, rare, inimitable and non-substitutable (Sehgal 2010, p. 43). This approach is based on the assumption that the resources that businesses have access to are neither homogenous nor perfectly mobile among different firms within an industry (Keig & Brouthers 2013, p. 14). There are several such resources that Jetts has access to. One of them is technology. It can be seen that the company has successfully used technology as a key resource in its operations. This has been achieved by using state-of the-art equipment and other technological innovations to help the company offer enhanced value to its customers (Jetts 2014). Furthermore, the company has used technology to support its business model in several ways. For instance, since the company seeks to maintain cost leadership in the market by operating with a minimum number of staff, it has employed advanced systems that easily allow for integration, access and control of operations for clients. Also, the business has used technology as a key resource in supporting its customer management operations. By using systems that allow customers to have easy access to services using a single card, the company has turned this technology into a key resource in its operations. It can be seen that the business has transformed technological advances and successfully used them as a key resource to support its business model in the market. Recommendations There are a number of recommendations that the management of Jetts should consider implementing. These recommendations are based on the need to continuously create change in the industry and leverage on it to gain and maintain a competitive advantage in the market. The first recommendation regards the need to maintain a competitive advantage in a market that is slowly being saturated by other competing entities offering the same services to clients. With the existence of competitors such as Feelgood Fitness, Stepz Fitness and Snap Fitness, there is need for the management of the business to develop new strategies that will ensure that the business maintains its competitive advantage in light of changes in the competitive landscape of the industry. The second recommendation for the management of Jetts regards their growth strategy both in the Australian and New Zealand markets. As a franchise, the company has pursued a rapid expansion strategy, competing with other leading brands in the industry in opening new clubs in different parts of the country. Currently, the business is actively operating clubs in Australia and New Zealand. Although this is remarkable, there is need for the business to take into account different trends in the health and fitness industry in the country (key among them being a surge in demand as a result of demographic changes) when strategising for growth (Fitness Australia 2012, p. 18). This will be important for setting the strategic objectives of the business in the current business environment in Australia. Conclusion In conclusion, the success of Jetts as a medium-sized business in Australia can be evaluated in terms of several criteria. These are: (1) how the business has successfully used its unique model to transform the way fitness clubs operate in the country; (2) different ways in which the business has successfully created and maintained a high customer value proposition; and (3) the way in which the business has used its key resources and processes to achieve profitability in the market. From the discussion, it can be seen that Jetts has successfully used different aspects to achieve and maintain a competitive advantage in the market. Although the company can be said to have had overall success since its inception back in 2007, there is need for the management of the company to revise its growth strategy as well as develop the right strategies to deal with increasing competition from new entrants in the market. References Barnes, C, Blake, H & Pinder, D 2009, Creating and delivering your value proposition: managing customer experience for profit, Kogan Page, London. Cooper, J 2010, ‘Idea that works out: no-frills gyms that stay open 24 hours a day’, The Australian, November 26, 2010, viewed 18 April 2014, Den Ouden, E 2011, Innovation design: creating value for people, organizations and society, Springer, Verlag. Fitness Australia 2012, ‘The Australian Fitness Industry Report 2012’, viewed 19 April 2014, Jetts 2014, ‘Our Journey’, viewed 19 April 2014, Keig, D & Brouthers, L E 2013, ‘Major theories of business strategy’, in T J Wilkinson (ed), Strategic management in the 21st century, Praeger, Oxford, pp. 3–24. Nielsen, C 2012, ‘Moving towards maturity in business model definitions’, in C Nielsen & M Lund (eds), Business models: networking, innovating and globalizing, Bookboon.com, Copenhagen, pp. 33–58. Porter, E M 2008, Competitive advantage: creating and sustaining superior performance, Simon and Schuster, New York. Sehgal, V 2010, Supply chain as strategic asset: the key to reaching business goals, John Wiley & Sons, New York. Weinhardt, C, Blau, B, Conte, T, Filipova-Neumann, L, Meinl, T & Michalk, W 2010, Business aspects of web services, Springer, Heidelberg. Read More