Bally Total Fitness
In your document, analyze and explain using ANY OR ALL models/material from the course: a) What are the most important strategic issues that Bally Total Fitness is facing? Strategic assumptions * Health clubs would become more diverse as they catered to certain demographics or created niches for themselves. The next great bonanza has to be the kids”, baby boomers another “bonanza market” * The market will continue growing due to the concern about the health and well-being. SWOT Internal Strengths * Leading firm in 2004 in the U. S. Health Club Industry. * Boosted the accountability of club managers for profitability. Begun to strength its internal control system (pricing and selling) * Commitment to increase Bally members and maximize revenue per member * Has more than 50 years in the market * Positioned name * Revenues of USD 954 million in 2003 * 3. 6 million members * Operate over 360 outlets in the US and more than 50 internationally. * “He’s been a champion at finding ways to drive revenues out of their existing membership base. Bally’s non club products plus its 6,000 personal trainers contributes USD 150 million annually to the company’s revenue. * Bally enjoyed member retention rates that were higher than the industry average. During the second quarter of 2004, the numbers of new members increased 22% year over year and total membership fees increased 15% during the same period. Weaknesses * Bally’s stock prices had collapsed. Intense capital-market pressure. * The company had restated earnings. * Working in a health club was decidedly non-glamorous work. It’s difficult to find motivated staff to work on such conditions, including managing positions. * Running tow businesses: a finance company and an operating company. * Series of accounting and control problems at the end of the year 2003. SEC began to investigate. The company faced lawsuits from shareholders who accused Bally of financial misrepresentation and fraudulent accounting practices. External Macro Opportunities * Americans became concerned about their health and well-being. * National concerns about obesity, desire for overall mind and body wellness, and consumer dissatisfaction with myriad diet programs portended great opportunities for the health club industry. * Grow industry * 2/3 of the population were classified as being either overweight or obese (1/3 clinically obese) * 300,000 Americans died annually of obesity-induced diseases. 37% of exercisers were motivated by a desire to control weight * 17% of U. S. Inhabitants are hard core fitness participants * 63% of the population “uninitiated believers” (prime target of growth) Threats Micro (Porter 5’s forces) Opportunities * Barrier entrance: Capital required to outfit a 40,000 square foot Health Club, USD 1. 5 million with USD 500,000 in equipment alone. Threats * Intensified competition. Main one YMCA and Gold’s Gym, 24 hour Fitness and Curves international. Thousands of companies competed in the Health club industry.
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Studio-sized clubs that required minimal investment would continue to flourish. * US Securities and commission had begun to investigate Bally’s accounting procedures. * 30% of members failed to reenroll each year * Barrier entrance: Capital required to outfit a 40,000 square foot Health Club, USD 1. 5 million with USD 500,000 in equipment alone. But with leasing only USD 25,000-35,000 of upfront capital. * Pay per visit was likely to become the norm at clubs. * Health clubs would become more diverse as they catered to certain demographics or created niches for themselves.
The next great bonanza has to be the kids”, baby boomers another “bonanza market” Strategic Issues * Intense capital-market pressure (Bally’s stock prices had collapsed) * Running tow businesses: a finance company and an operating company * Specialization of the health clubs * Government control (accounting) * Demographic trends * Intense competition b) What options does Bally Total Fitness have? a. No-frills gym for serious fitness buffs. b. Small number of upscale clubs ins prestigious locations (social elite) c. Focused on women d.
Focused on amateur and professional athletes in training e. Focused on children f. Small regional health club chain g. Larger regional player h. Multi state players (Bally in 29 states) i. Sell the company to the competitors j. Segmentation: create two or three products/services for different segment market. k. Specialization: Focused only in one type of product l. Differentiation: Differentiate from the competitors on a radical way m. Cost leader c) What would be your recommendation(s) as to how Bally Total Fitness should move forward?