Sspo16 The Gym Consists Of Assessment Answers
The report is prepared to develop a business plan for a new gym to be opened in Brazil and the name is M45 Gym. The entire business plan was aimed at developing a fitness centre or gym that could be beneficial for people to try out various activities that should improve their health and wellbeing and keep them fit as well. The company’s mission statement is to improve the quality of lives of people within the community by providing services through management of fitness philosophies, programs, facilities along with delivery of products and services to ensure value creation regarding health and fitness.
Answer:
The gym consists of great features such as a great layout, i.e., enough space available within the gym along with abundant fitness equipment available within a well maintained and clean gym environment. The M45 Gym has other features that are managed well by the people who are assigned with the roles of reflecting the goals and they also must be helpful. They must understand the company’s vision and mission statement and understand what it means to become a healthy and fit person. Due to enough space within the gym, the main workout area consists of free weights while there are also cardio area, management of group exercise classes along with sports facilities and availability of personal trainers who customize the health and fitness routine.
The benefits could include availability of services and membership packages ranging from 1 month to more than a year at reasonable prices. The gym also must include the modern amenities and equipment required to make sure that the health and fitness of people are intact. The gym holds health shop selling equipment, snack bars child care facilities and also member lunges.
The cost of membership packages is very low, i.e., $50 for a month, which is quite lower than the other health and fitness clubs that offer amenities to over $100 per month. The costs of SOLE F63 Treadmills and other products start from a mere $800, which is cost effective for influencing consumer buying behaviors.
The substitute products of the gym’s offerings are PowerMax Fitness Treadmills, DOMYOS, etc. The substitutes are offered by the competitors including Fitness Gyms Way, BodyTech, Hemmers Gym Brazil, etc.
Description of market
The market segments to be targeted include mostly the individuals aged between 24 to 35 years while there are other people as well aged between 18 to 40 years within the Piracicaba region of Brazil who are health conscious. The consumers are mainly targeted from the market based on their personal income and those who are more enthusiastic about exercising and engaged with the fitness activities. Less than 20 percent clients would be over 35 years because of their lack of interest and motivation in trying physical exercises at gym.
Key characteristics of the industry
The fitness industry in Brazil has grown at a CAGR of 13 percent and the revenue generated annually by the fitness and health clubs in Brazil accounts for more than 2.1 billion US dollars. The increase in revenue is based on the rising cases of obesity in Brazil, which sometimes has slowed down the economic growth of the country. The fitness equipment at M45 Gym should be based on the domestic fitness and health equipment, which could result in creating a good brand presence in the marketplace and enhance the market share too.
Major trends
The major trends of the industry are to remain fit and healthy, reduce cases of obesity and overweight while the organizational trend is to expand its business through extension of service range and targeting different market segments. The recent trends for the new business would be to implement the cost leadership strategy and ensure promotional and advertisements with the involvement of social media platforms too.
Competitors’ analysis
The competitors’ analysis evaluates strengths and weaknesses of the competitors within the industry. Fitness Gyms Way has a great brand name and image, though the weakness is lack of quality of products.Hemmers Gym Brazil provides great quality products and services, through the promotional and distribution strategies are not effective much to influence consumers
SWOT analysis
|
Strengths · Positive brand image achieved with its introduction due to great layout, design and great quality services · Availability of wide range of products and services at reasonable prices · Spreading in adjoining areas of Brazil · Celebrity endorsements
|
Weaknesses · Poor financial management · Excessive competition within the health and fitness industry · Lack of promotional approaches to spread awareness among consumers |
|
Opportunities
· Targeting the right market segments comprising of people aged between 18 to 40 years, 25 to 40 and also over 35 years · Value added services and wide range of products available at reasonable price range · Growing cases of obesity and other health concerns |
Threats
· Threats of competitors · Substitute products and services · Poor brand awareness · Economic slowdown |
Marketing Plan
The marketing plan set for M45 Gym will cover deciding target market, pricing, promotional strategies and distribution methods or location of business of the new gym business.
- Target Market- The target market for this business will include both male and female, particularly from 18 years to 40 years old those reside withinPiracicaba (SP)area of Brazil. The target consumers will believe in the idea of fitness and might find it difficult tomotivatethem for getting involved in fitness activities. The consumers will also be targeted based on their personal income around $ 40000 annually. 50% of the consumers will be among the age group of 24-35 years as they is the consumer’s interested n staying fit and active. They are the major target consumers those have enough time and energy to become an active member of this gym. In addition, 20% of the consumers will be more than 35 years of aged as this target consumer base is of old generation and has less motivation to work out.
- Pricing Strategy- M45 Gym will develop its pricing strategy to be premium pricing for all its services in promoting that services offered by the gym are of high quality and ensures exceptional fitness guarantee for all its target consumers. Moreover, this pricing strategy will be justified for the reason that the target market of the new gym business will be high class people those are willing to spend extra money for its fitness brand.
- Promotional Strategy- The gym business will be promoted through celebrity endorsements by using famous personalities such as Arnold Schwarzenegger and Tiger Woods. Moreover, the brand positioning statement for the company will be “getting in shape together” and the logo will also be developed that will communicate its social aspects in a clear manner.
- Distribution Methods or Business Location- The new gym business will start its operations in Piracicaba (SP) area within Brazil. M45 Gym will operate is business as a franchise system that will position itself as one of the largest gym chain for physique and bodybuilding and will gradually spread its presence in other branches in Brazil. The company will operate its business in through its location selected in Brazil. This distribution method or location for its gym services are selected for the reason that the place chosen has an increased target consumer populace.
To ensure smooth running of business, the new gym business will include certain important operational aspects indicated below:
- Physical resource requirements:The necessary physical resources that will be included within the new gym business will be gymequipments, furniture, fitness classes amenities, steam roomsalong with athletic and country clubs.
- Human resource requirements:The HRM requirements of the new gym business will include the managing director, center head, marketing head, accountant, common trainer and personal trainer. The marketing head will be responsible for making sure manage the overall organization along with managing the trainers and overall staff base of the company. The overall human resource structure will facilitate the business to build the reputation of the new gym in order to position itself as the most renowned business in the locality.
- Consultation plans:The consultation plans for this new gym business will include consumer membership through which its target consumers can attain fitness consultation regarding session with trainer, fitness plan for thirty days and offering personalized recommendations to all the consumers of the gym. The consultation plan will also
- Production processes:The productionprocess in the new gym business will include operating the gym through rearranging the floor plan along with arranging all the gymequipments and spaces as per the comfort of the consumers. In addition, a fraction of the company'sprofit will be set aside to make necessary purchases and fixing the machines whenever they break. Moreover, the production prices in the gm will also include selling gym memberships and watching over the safety of all the associated members.
- Stock and inventory needs:The stock and the inventory needs for this new gym business along with the allocated budget for purchasing such inventory are indicated under:
Startup Expenses
|
Startup Expenses | |
|
|
|
|
Buildings / Real Estate |
|
|
Purchase |
$ 40,000 |
|
Construction |
10,000 |
|
Remodeling |
- |
|
Other |
500 |
|
Total Buildings and R / E |
$ 50,500 |
|
|
|
|
Leasehold Improvements |
|
|
Gym training equipments |
$ 5,500 |
|
Zumba dance services |
$ 5,500 |
|
Health supplements |
$ 5,500 |
|
Nutritionalist services |
$ 5,500 |
|
Cardio theatre |
$ 22,000 |
|
|
|
|
Capital Equipment List |
|
|
Furniture |
$ 55,000 |
|
Equipment |
$ 1,500 |
|
Fixtures |
$ 1,500 |
|
Machinery |
$ 6,500 |
|
Other |
$ 2,500 |
|
Total Capital Equipment |
$ 67,000 |
|
|
|
|
Location and Admin Expenses |
|
|
Rental |
$ - |
|
Utility Deposits |
5,500 |
|
Legal and Accounting Fees |
4,500 |
|
Prepaid Insurance |
55,000 |
|
Pre-opening Salaries |
5,500 |
|
Other |
5,500 |
|
Total Location and Admin Expenses |
$ 76,000 |
|
|
|
|
Opening Inventory |
|
|
Gym training equipments |
$ 2,560 |
|
Zumba dance services |
$ 2,560 |
|
Health supplements |
$ 2,560 |
|
Nutritionalist services |
$ 2,560 |
|
Cardio theatre |
$ 2,560 |
|
Total Inventory |
$ 12,800 |
|
|
|
|
Advertising and Promotional Expenses |
|
|
Advertising |
$ 1,500 |
|
Signage |
$ 1,500 |
|
Printing |
$ 1,500 |
|
Travel & Entertainment |
$ 1,500 |
|
Other / Additional categories |
- |
|
Total Adv and Promo expenses |
$ 6,000 |
|
|
|
|
Payroll and payroll taxes |
|
|
Expense 1 |
$ 25,000 |
|
Expense 2 |
25,000 |
|
Total Payroll and payroll taxes |
$ 50,000 |
Break Even Point Analysis
|
|
Fixed Expenses |
|
Fixed Expenses |
|
|
Bldgs / Real Estate |
$ 50,500 |
|
Leasehold Improvements |
22,000 |
|
Capital Equipment |
67,000 |
|
Location / Admin Expenses |
76,000 |
|
Opening Inventory |
- |
|
Advertising / Promo Expenses |
6,000 |
|
Other Expenses |
50,000 |
|
Total Fixed Expenses |
$ 271,500 |
|
|
|
|
|
Variable Expenses |
|
Inventory or Materials |
90000.0 |
|
Direct labor (includes payroll taxes) |
91000.0 |
|
Other expenses |
98000.0 |
|
Other expenses |
99000.0 |
|
Salaries (includes payroll taxes) |
100000000.0 |
|
Supplies |
10000000.0 |
|
Total Variable Expenses |
11037800000% |
|
|
|
|
Breakeven Sales level = |
0 |
Profit and Loss Analysis
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
|
|
|
|
|
|
|
|
|
Gross revenue |
|
$80,000 |
$81,600 |
$84,864 |
$89,956 |
$97,152 |
|
|
Cost of goods sold |
|
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
Gross margin |
|
$80,000 |
$81,600 |
$84,864 |
$89,956 |
$97,152 |
|
|
|
|
|
|
|
|
|
|
|
Other revenue [source] |
|
$21,000 |
$22,000 |
$23,000 |
$24,000 |
$25,000 |
|
|
Interest income |
|
$8,000 |
$7,000 |
$6,000 |
$5,000 |
$4,000 |
|
|
Total revenue |
|
$109,000 |
$110,600 |
$113,864 |
$118,956 |
$126,152 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
| |
|
|
Sales and marketing |
|
$6,000 |
$6,120 |
$6,365 |
$6,747 |
$7,286 |
|
|
Payroll and payroll taxes |
|
$50,000 |
$51,000 |
$53,040 |
$56,222 |
$60,720 |
|
|
Depreciation |
|
$27,900 |
$28,458 |
$29,016 |
$29,574 |
$30,132 |
|
|
Maintenance, repair, and overhaul |
|
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
Total operating expenses |
|
$83,900 |
$85,578 |
$88,421 |
$92,543 |
$98,139 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$25,100 |
$25,022 |
$25,443 |
$26,413 |
$28,014 | |
|
|
|
|
|
|
|
|
|
|
|
Interest expense on long-term debt |
|
$1,500 |
$1,545 |
$1,591 |
$1,639 |
$1,688 |
|
|
|
|
|
|
|
|
|
|
Operating income before other items |
|
$23,600 |
$23,477 |
$23,852 |
$24,774 |
$26,325 | |
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of assets |
|
$330 |
$320 |
$310 |
$300 |
$290 |
|
|
Other unusual expenses (income) |
|
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
|
|
|
|
|
|
|
|
Earnings before taxes |
|
$23,930 |
$23,797 |
$24,162 |
$25,074 |
$26,615 | |
|
|
|
|
|
|
|
|
|
|
Taxes on income |
30% |
$7,179 |
$7,139 |
$7,249 |
$7,522 |
$7,985 | |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$16,751 |
$16,658 |
$16,913 |
$17,552 |
$18,631 | |
|
|
|
|
|
|
|
|
|
Cash Flow Analysis
|
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Total |
|
Operating activities |
|
|
|
|
|
| |
|
|
Net income |
$25,000 |
$26,000 |
$27,000 |
$28,000 |
$29,000 |
$135,000 |
|
|
Depreciation |
$27,900 |
$28,458 |
$29,016 |
$29,574 |
$30,132 |
$145,080 |
|
|
Accounts receivable |
($76,000) |
$44,000 |
($13,000) |
($13,000) |
($13,000) |
($71,000) |
|
|
Inventories |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
Accounts payable |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
Amortization |
5,000 |
5,000 |
$5,000 |
$5,000 |
$5,000 |
$25,000 |
|
|
Other liabilities |
25,000 |
25,000 |
$25,000 |
$25,000 |
$25,000 |
$125,000 |
|
|
Other operating cash flow items |
0 |
0 |
$0 |
$0 |
$0 |
$0 |
|
|
Total operating activities |
$6,900 |
$128,458 |
$73,016 |
$74,574 |
$76,132 |
$359,080 |
|
|
|
|
|
|
|
|
$0 |
|
Investing activities |
|
|
|
|
|
$0 | |
|
|
Capital expenditures |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
Acquisition of business |
15,000 |
15,000 |
15,000 |
15,000 |
15,000 |
$75,000 |
|
|
Sale of fixed assets |
$10,000 |
$10,000 |
$10,000 |
$10,000 |
$10,000 |
$50,000 |
|
|
Other investing cash flow items |
0 |
0 |
0 |
0 |
0 |
$0 |
|
|
Total investing activities |
$25,000 |
$25,000 |
$25,000 |
$25,000 |
$25,000 |
$125,000 |
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
| |
|
|
Long-term debt/financing |
($43,500) |
$1,545 |
$1,591 |
$1,639 |
$1,688 |
($37,036) |
|
|
Preferred stock |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
Total cash dividends paid |
5,000 |
5,000 |
5,000 |
5,000 |
5,000 |
25,000 |
|
|
Common stock |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
Other financing cash flow items |
5,000 |
5,000 |
5,000 |
5,000 |
5,000 |
25,000 |
|
|
Total financing activities |
($33,500) |
$11,545 |
$11,591 |
$11,639 |
$11,688 |
$12,964 |
|
|
|
|
|
|
|
|
|
|
Cumulative cash flow |
($1,600) |
$165,003 |
$109,607 |
$111,213 |
$112,820 |
$497,044 | |
|
|
|
|
|
|
|
|
|
|
Beginning cash balance |
$0 |
($1,600) |
$163,403 |
$273,010 |
$384,223 |
| |
|
Ending cash balance |
($1,600) |
$163,403 |
$273,010 |
$384,223 |
$497,044 |
| |
In monitoring and controlling performance of the new gym business it will be ensured that skilled and experienced labor is employed for recruiting the business plan. To monitor the success of the business in the locality it will also be ensured that timely reports on the major areas of operations of the gym along with the promotional strategies implemented that can facilitate in measuring the financial and non-financial performance of the comp0any.
Analyzing business performance reports against the decided business objectives along with recognizing areas of underperformance can facilitate in maintaining control and evaluation of the implemented business strategies. Based on such analysis certain recommended actions can be taken to deal with such situation and increase the demand of services offered by this new gym in the locality. In addition, reviewing the system processes along with the work methods regularly will be taken into account by this new gym business as a part of continuous improvement in business. As on the areas of the business where there is under performance, it will be made sure that the employees are trained and coached to perform their job role in the gym.
The performance of the Gym will be measured through employing certain measures such as attaining regular feedback from consumers, impact of wider market and competitors along with analyzing the staff reports. If such reports indicate a positive review regarding the gym in comparison to its consumers, it can be said that the business is ensuring future success. In addition certain quantitative indicators will also be employed in measuring the performance of the gym for the reason that an increasing trend in company turnover, consumer satisfaction ranking along with lower staff turnover indicates growth of the new gym business in future. Certain Key Performance Indicators that will be used by this new gym business in attaining the necessary productivity and performance targets are indicated below:
- Quality of services offered in comparison to competitors
- Efficiency of workforce in attaining high consumer satisfaction through offering quality services
- Increasing trend of sales of its fitness services
- Efficiency of management to ensure smooth flow of operations
- Increase in consumer awareness or branding
An effective risk management strategy in recognizing the risks and managing contingencies for this new gym business will be developed. The possible risks and safety measures that will be taken in this new business are explained below:
- Financial risks: Certain basic structures must be maintained by the new gym business and necessary facilities must also be maintained for the gym in the area for its target consumers. In order to ensure that the consumers are satisfied with the business, the new gym business must take into account a considerable amount of capital outlay along with maintaining detailed financial planning on a constant basis that can facilitate in taking necessary steps in decreasing risk of loss in business.
- Trainers:The new gym business must make sure that the trainers and staff of the company needs to be familiar with proper operation of the gymequipments. This can facilitate in decreasing the risks of accidents in fitness trainings. Such risks can be decreased through offering consumers with suitable training sessions on the equipments. In case the trainer observes improper use of gym equipments by the consumers, suitableguidelines on safe usage andplacement of equipment will be provided to them so that risks of accident and impropertraining can be addressed.
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