LA Fitness: Company Analysis - Essay Example

? LA Fitness: Company Analysis of the of the Introduction LA Fitness is one of the privately owned healthclub chain operating through almost 500 clubs in Canada and United States. The company was established in the year 1984 and its’ headquarter is located in Irvine, California. The company had estimated revenue of $ 1.2 billion in the year 2011. The company seeks innovative strategies for enhancing the physical well being of the diversified customer base. The company is still planning for expansion. This part of the project would deal with the expansion of LA Fitness in England. The main reason behind expansion of LA Fitness is that it wants to offer a wide range of services in the new markets in order to ensure the success of the business in the international market as well. The company plans to expand in England. Some of the driving points, which would enable the company to expand its business in the foreign markets and achieve success, are given below: 1. The increasing awareness related to the health issues as well as concern towards obesity and its effects amongst the people of England, will act as one of the key element in acceptance of the business operations of LA Fitness in the country. 2. Increasing wish of controlling and maintaining weight, avoiding various health issues and reducing daily stress influences individuals to visit the health clubs almost regularly. This is one of the main reasons behind LA Fitness’s business expansion plans into the international market. 3. LA Fitness provides services to meet the needs of the customers and offer them facilities for most of their health and fitness needs. This would help them in achieving success in their business operations in the international market easily. 4. The consumers would be offered different exercise regimes. Well differentiated service offered by the company would enable it in developing recognition in the new market. LA Fitness provides customized training services for meeting the personal needs of each and every member and gives them chance to choose the best suitable work out for themselves. Industry Analysis using Porter’s Five Forces Analysis would help in understanding the reason behind the expansion of the company in the chosen Country. Porter’s Five Forces analysis Porter’s five forces analysis would help in performing the industry analysis of health and fitness industry in England (Alkhafaji, 2003; Porter, 1980; 1998). Competition from the existing firms- There are many health clubs in England, which offer health and fitness services to the customers. Thus the competition from the existing firms is very high (David, 1986). However, LA Fitness provides customer friendly services to its members. It is better than its competitors, as it treats its customers as family members and provide them good training. The fitness market is having a growth of certain percentage every year. The company has huge scope of achieving competitive advantage over its competitors by expanding the fitness clubs and hiring large number of employees in the new market, who would provide good services. Bargaining power of buyers- The bargaining power of the buyers is very high in England as there are a large number of fitness clubs offering services to the customers (Davis, 2008). There are a large number of alternative options for them. This increases their bargaining power. Moreover, 10 to 15 percent of buyers of the health clubs do not renew their membership as they do not find it interesting anymore. LA Fitness would have to advance its services by utilization of latest technologies in order to retain its buyers in the new market. Threat of substitutes: There are various substitutes for health clubs. People can consume healthy food; go for cycling or walking after eating. There are many individuals who play sports regularly in order to stay healthy. Some of them do labor work, which keeps them physically fit. Some visit doctors and maintain fixed diet in order to remain aware of the nutrients. Thus, the threat of substitutes for health and fitness industry in England is very high (Hitt, Ireland & Hoskisson, 2009). Bargaining power of suppliers: There are many suppliers providing equipments to the fitness clubs in England. This reduces the bargaining power of the suppliers. All the suppliers provide almost similar equipments, but at different quantities. Thus, LA Fitness does not possess threat related to high bargaining power of suppliers while expanding its business operations in England. Threat from new entrants: The country has a number of big existing health fitness clubs. Any fitness club entering new in the market would require high capital resource as well as human resource, in order to achieve competitive advantage in the new market place. The new firms would require strong financial resource to start their business operations in England. Thus, the threat from new entrants is low comparatively. Feasibility Study 1. For expanding business operations in England a) Technological feasibility The health clubs in England use advanced technology with highly sophisticated and modern equipments. The country facilitates the industry by providing them accessibility to the latest technologies (Janczak, 2005). The health clubs have huge scope of using various promotional materials: one being advertisements in media. The technology in this country enables the industry to make easy accessibility to vast customer information. Thus LA Fitness’s expansion in England is highly feasible in terms of technological feasibility. b) Political/ Legal Feasibility The legal framework of the country ensures safety related to the health and fitness of the individuals. The legal framework ensures high safety and increased health awareness for the disabled (Johnson & Scholes, 1993; 1997). Smoking is restricted in order to reduce health problems. The health clubs must offer services by maintaining compliance with all these matters. LA Fitness’s expansion plan in England is highly feasible in terms of its legal feasibility. c) Economic Feasibility The economic environment of a country has high impact on the business performance. There is a slow growth in the economy of the country after the period of economic recession. The country needs time to recover from the financially distressed situation as a result of the economic recession. The growth of unemployment has resulted in worsening of the economic condition even further. Thus, the company might face certain economic difficulties in executing its expansion plan in England. d) Cultural Feasibility The country has increased rates of obesity and overweight. This has become one of the major concerns of the country. Thus, the country has urgent growing requirements for maintaining mental and physical health. The best opportunity to reduce the health and fitness issues for the individuals of this country is joining health clubs. This would help them in reducing their health problems associated with overweight, obesity, inactive lifestyle etc. Thus expansion of LA Fitness in England is feasible in terms of cultural feasibility. Interpretation: It can be interpreted that expansion of business operations of LA Fitness in England is feasible. The technological and legal environment of the country would highly support the business operations of LA Fitness in England. Increased health consciousness of the people in England and the immediate growing requirement of the country towards maintenance of health is incrementing the scope of LA Fitness’s operations in England. Although the economic environment of the country is not favorable but it is expected that it would recover soon from the financial crisis situation. The business operation of LA Fitness in England is favorable in all aspects. 2. For expanding business operations in France The feasibility study would help in understanding whether the strategy of expansion of business operations in France is feasible or not. The fitness industry of France gets advantage from the growing awareness towards health issues. The people belonging to this country understand the necessity of exercise for maintaining good health. a) Technological feasibility Technological factors mainly include those, which have high impact on the industry as well as the workplace (Pettigrew, Whittington & Thomas, 2006). Factors such as improved efficiency because of automation, increased reliance on computerization, use of latest and highly advanced machines and equipments etc impacts the strategic planning of any organization to a great extent. France is one of the leading exporters of technologies all over the world. The country has a large number of colleges and universities which gives classes on ‘Basic and Applied Science’ in order to strengthen their knowledge associated with technology from the base. The country has high technologies, which facilitates the health and fitness industry with advanced machines and equipments to serve the customers according to their needs and demands. Thus LA Fitness’s business expansion plan in France is feasible in terms of the technological feasibility. b) Political/Legal Feasibility Political factors play an important role in determining the feasibility of an expansion plan of the business operations of an organization in any country. There is some concern in the health and fitness industry related to tariff and other trade restrictions. Most of the employees in the health clubs are part time employees. The government provides huge scope and encourages the parents to allow their children work on part time basis. This would enable the health and fitness clubs to have growing number of employees working under them. There are a large number of health clubs in France. The political environment of the country supports the health clubs in continuing their business operations successfully. LA Fitness might face some challenges due to the increased trade restrictions such as tariff in the country. c) Economic feasibility France is a country having an economy which is very close to the rogue economy. The workers in the country go into strikes and lock outs frequently. This disturbs the efficient functioning within the organizations and results in declining economy for the country (as a whole). The rating of France has deteriorated presently from AAA to AA+ according to the ratings of Standard & Poor. The French economy is in a doldrums situation and the organizations in this country are facing barriers in continuing their business operations without any disturbances. d) Cultural Feasibility The individuals are health conscious and avoid fast foods. They have high concern towards increased obesity and other health diseases. They prefer intake of healthy foods, which would enable them to remain fit and avoid several health diseases. However, the cultural analysis of the country states that it is highly masculine in nature and supports high competition. Thus, any company expanding its business operations in France for the first time would face high competition. LA Fitness would have to face tough competition, if it expands its business operations in France. Interpretation: The expansion of LA Fitness in France is not feasible in all aspects. The social and economic factors provide threat to the company. Although the technological environment would support the business operation of the company in France, but there are constraints from the political environment of the country such as the tariff, quota and other trade restrictions. Thus, the company would face severe challenges if it expands its business operations in France. 3. For expanding business operations in Brazil a) Technological feasibility Brazil has made a slight progress in terms of technology. The country has made small advances by increasing the sophistication in the business environment. The government has also taken various steps to improve the technological environment of the country. However, the country still needs to advance itself on technological grounds in order to compete with other countries. LA Fitness does not have much scope in terms of technology if it expands its business in Brazil. b) Political/Legal feasibility Brazil takes second position among the entire list of countries as it possesses the highest number of health and fitness centers or clubs in the world. The association of fitness centers in the country named as ‘Associacao Brasileira de Academias’ says that 3 percent of the total population of the country (over 5 million people) prefer attending health classes in the fitness centers. The Government shows its concern towards the health issues of the individuals in the country and ensures the fact that the health and safety of the people is primary importance for the country. Thus, LA Fitness’s expansion in Brazil is feasible in terms of the political/legal feasibility (Brazilbusiness, 2013). c) Economic Feasibility The domestic market of Brazil is less exposed to the external crisis as compared to the other countries (Mintzberg, Ahlstrand & Lampel, 2009). The companies operating within the country are benefitting to some extent from the present stable economic growth in the country. The financial sector in Brazil has faced gradual slow down. The rapid growth in the debt condition of the country is becoming a matter of concern for the organizations operating there. However, the lower interest rate on such credit is allowing the asset quality to stabilize widely. It is controversial whether the economic environment of Brazil would be supporting the business expansion of LA Fitness or not. d) Cultural Feasibility The country is highly diversified, in terms of its socio cultural background. It is known as a ‘land of contrasts’ where the individuals are health conscious and prefer having healthy food habits. Increased concern related to health issues would facilitate the business expansion of LA Fitness in Brazil. Interpretation: The expansion of LA Fitness in Brazil is not feasible in all aspects. This is so because the country requires further advancement in its technology. It needs to advance its efficiency in terms of technology in order to support the business environment. Moreover there are many barriers based on the economic environment of the country which would create obstacles in the efficient functioning of LA Fitness in Brazil. If the country plans to expand its business operations in Brazil then it would have to face high challenges. 4. For expanding business operations in Germany a) Technological Feasibility Germany’s reputation related to innovation and engineering excellence is very strong. The health clubs have been designed in such manner that they ensure the latest technologies. Moreover, the staff members in the clubs are well trained for using these equipments. Thus, LA Fitness’s expansion in Germany is feasible in terms of the technological feasibility. b) Political/Legal Feasibility There are large numbers of health clubs and fitness centers in Germany. The country has more than 6200 private owned health clubs and fitness centers, majority of which includes small non- licensed operations. The non licensed health clubs might possess certain threat from the legal framework of the country. If the government finds any illegal activity conducted by the health clubs then it would result in imposition of strict rules and regulations. Thus, LA Fitness’s expansion in Germany is risky in terms of the political/legal feasibility. c) Economic Feasibility The economy of Germany is largest in Europe. The stable economy facilitates the expansion of business operations by the organizations in Germany. The country has endured the global economic uncertainty as well as the Sovereign debt crisis. The Government has announced that the country possess sound financial condition presently. Thus, LA Fitness’s expansion in Germany is feasible in terms of the political/legal feasibility. d) Cultural Feasibility There have been increasing health issues in Germany. Increasing problems related to obesity, overweight etc have raised the concerns of the individuals. LA Fitness has huge scope to prove its excellence by reducing the health issues of the individuals in the country. Thus, LA Fitness’s expansion in Germany is feasible in terms of the cultural feasibility. Interpretation: The expansion of LA Fitness in Germany is not feasible in all aspects. The social, economic and technological factors support the expansion of the company in Germany. The legal framework of Germany possesses threat to the expansion of the organization in the country. Conclusion It can be seen that the country which is best suitable for business expansion of LA Fitness is England. The political, legal, economical, cultural and technological environment of the country would support the business operation of LA Fitness in England. It can get into a joint venture with an existing health club chain in England in order to increase its value and reputation in the new market. This would enable the company to achieve success and recognition within a short span of time. References Alkhafaji, A. F. (2003). Strategic management: Formulation, implementation, and control in a dynamic environment. 21st ed. London: Routledge. Brazilbusiness. (2013). The gym industry in brazil. Retrieved from http://thebrazilbusiness.com/article/the-gym-industry-in-brazil David, F. R. (1986). Fundamentals of strategic management. Columbus: Merrill Pub. Co. Davis, J. R. (2008). Does environmental scanning by systems integration firms improve their business development performance? Michigan: ProQuest. Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2009). 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