Australian Health and Fitness Industry - Case Study Example

ANALYSIS OF AUSTRALIAN HEALTH AND FITNESS INDUSTRY Name: Course Instructor’s name Institution Date FITNESS INDUSTRY 1. Summary of the industry and market Australian health and fitness industry has over the years show resistance to the current global economic downturn. This particular industry in Australia has been growing steadily over the past few years. The importance of adoption of a healthier lifestyle in Australia is claimed to be the main instigator behind this industry’s growth and stability. In this case, it has been proven that keeping Aussies healthy and fit is big business with this industry being claimed to generate one billion dollars on average in revenues. In line with Australia’s health and fitness industry, the number of fitness centres and gyms across the country is said to be approximately 2,856 which has collectively created employment for an approximate of 17,000 people (Boland 2015). By the year 2014, the number of people using professional exercise and fitness services in Australia was estimated to be 3.3 this show how big this industry really is. On the other hand, by the year 2020, Australia’s health and fitness industry is predicted to grow by 4.8% (Fitness Industry Workforce Report n.d.). However, in the year 2009, the industry faced a slight decline which was caused by the bad economic climate which led to a huge number of customers seeking alternative health and fitness services which were much affordable. The Australian industry is enhanced by the strategic priorities put in place by the government which entails; tax reforms, uniform registration system nationally. In line with this quality workforce and standard reputation have also fostered the industry’s growth. Despite the fact that the Australian health and fitness industry appears quite glamorous, it is actually a competitive industry where longevity is not guaranteed (Evans, Cummins and Brown, 2013). This can be blamed on the saturation in the current market which is caused by the recent sprouting of gyms and health and fitness centres which is estimated that in every year there are up to sixteen gyms and health and fitness start-ups which come up in the major cities in the country. 2. Industry analysis: PESTEL Analysis 2.1. Introduction The PESTEL analysis framework or tool used in screening and external marketing environment of a business, industry or company. This is a strategic management tool which is used in gauging the macro environmental factors. The results, in this case, make decision-making process much easier (Evans, Cummins and Brown, 2013). On the other hand, the different macro-environmental factors influence different strategies; the aim of the PESTEL framework, therefore, is to assess how these factors influence the business performance. Through the PESTEL framework, one can judge up to six types of environmental influence which include; political, economic, social, technological, environmental and legal(Woolf 2008). 2.2. Figure 1: PESTEL analysis 2.3. Element narrative 2.3.1. Political factor The political situation in Australia has as been stable which has offered the industry stability to grow and operate smoothly. The government has also provided the industry with financial support ranging from grants and loans which have been injected into the industry in order to ensure its success and sustainability. On the other hand, the government has also implemented the initiate of free registration and subsidising the registration fee in the privately owned fitness and health gyms (Sassatelli 2015). This encourages more people to register in for these health and fitness service session while on the other hand has created awareness of living a healthy lifestyle. 2.3.2. Economic factors Economic issues are a key factor in Australian fitness and health industry. In this case, the slow market growth has affected a significant part of this industry. In this case, the slow market growth has fostered competition in the industry which also has instigated stagnation in the industry growth.In line with this, the economic recession that Australia recently experienced in the year is said to affect the industry (Robb 2015). Some of the effects of this economic recession can still be felt more than five years after it took place. Market saturation is one of the consequences blame on the economic recession since the industry suffered a slow growth, therefore, limiting the space for expansion for the players in this industry. 2.3.3. Social, cultural factor Population demographics is a social-cultural aspect that has influenced the growth of the health and fitness industry in Australia. In this case, health and fitness services have been customised for every age group, sex and individuals income. This led to a shoot in demand for these services with both the young and the adults seeing these services. On the other hand, these health and fitness gyms have also provided an opportunity for people to socialise, this has influenced the people's decision to register for these health and fitness services (Pavlidis 2012). In line with this, the need to live a healthy lifestyle has also been an influential factor for people to register. 2.3.4. Technological Modern and technologically sophisticated equipment are some of the aspects of technological factor which have fostered the growth of the heath and fitness industry in Australia. On the another hand, the advanced marketing strategies which come with the technological advancement have also fostered the growth of this industry. 2.3.5. Legal In line with the legal factor, the Australian government has enacted and emphasised on the health and safety issue. Through this effort, the government has created awareness on the need to live a healthy lifestyle which has convinced more people in Australia to seek preferring health and fitness services (Norton and Norton 2008). On the other hand, the government has also enacted the smoking ban law and encourage the need to people to live a healthy lifestyle that entails exercising. 2.3.6. Environmental factor One environmental aspect that has fostered the growth of the health and fitness industry in Australia is energy consumption. In this case, most of the equipment run on electricity as stipulated in the environmental protection laws. 3. Industry analysis: Porters five forces 3.1. Introduction The Porter's Five Forces tool is an analysis tool that is used for showing where power lies in a business and understanding this concept. The Porter's Five Forces is also an essential analysis tool since it helps in understanding the business strengths, that of a current and competitor, the business market position and the strength of the competitor (Norton and Norton 2008). 3.2. Porters five factors figuer 3.3. Forces narrative 3.3.1. Number of suppliers The number of suppliers under the Porters five forces analysis are categorised under the health and fitness equipment suppliers and their advent retail channels. As evident in the cases study, the supply power is low. This is characterised by the availability of poor quality equipment which are being supplied to the health and fitness stores. The suppliers, in this case, are not the manufacturers. Therefore, these health and fitness stores have been forced to seek the supply of these equipment directly from the suppliers (Mercer 2016). It is noted that the supplied health and fitness products are not distinctive. In this case, there is a market need to shift from the traditional fitness equipment to more superior equipment. Evidently, from the case study, it is notable that the Australian health and fitness industry is highly fragmented this can be due to the existence of few organised players in the industry which include both the institutional and individual buyers. The health and fitness market in Australia serves a diverse set of population as evident in the case study. However, the increment of service buyers in the decreased the buying power of the health and fitness services in this market. This industry also favours. Business to business or business to customers market, therefore, it does not support backwards integration (Keyzer et al. 2014). 3.3.2. Threats of new entrants Evidently, the major barrier to entry in this industry as seen in the case study is supply-side of the economy where access to capital being the main barrier. The other barrier in this industry as noted in the case study is low demand-side benefit to scale which has been affected by the market saturation (Keyzer et al. 2014). 3.3.3. Threats of substitutes As noted in the case study the major substitutes in Australian health and fitness industry is team sports, swimming and running clubs and outdoor gyms. On the other hand, it is also notable that the switching cost in this particular industry since very few fraction of the subscribed members pay for these services for a long period due to the financial constraints in the economies and the relatively high cost of these services. These substitutes, therefore, appear to offer the same value but at a much lower cost (Keyzer 2012). 3.3.4. Intra-industry rivalry It is notable that the numbers of the health and fitness service providers in this industry are quite many causing saturation in the industry. This has therefore hindered the industries growth; however, with the recent government intervention, the industry growth seems promising. The current slow growth in the industry means that the exit barriers also are decreasing over time. It is also noted that the service in this industry appears to be quite similar. However, some service are diversifying and incorporating different health and fitness services (Keyzer 2012). 4. KFS 4.2. KFS Figure 4.3. KSF narrative Ability to offer quality service and Health and fitness services that are cost effective As evidently seen in the case study the cost of the health and fitness services in Australian industry is the main factor which drew more people to purchasing the service. In this case, the customer's decision to purchase these services was influenced by the cost of this service. More customers purchased the health and fitness services which were relatively cost effective and which seem to be quality services (IBISWorld’s Gyms and Fitness Centres 2016). Therefore in order to succeed in this industry a health and fitness service provider has to focus on making the services he is offering more cost effective and also not compromise on the quality. 4.3.1. Conducting effective and result driven marketing Due to the evident market saturation in the case study, there is a need for the health and fitness service providers in Australia to conduct extensive and result driven marketing. Effective marketing, in this case, is essential due to the evident stiff competition in the industry. In this case, the health and fitness service providers can use a wide range of marketing strategies in order o achieve effective marketing for their service. This may entail; social media marketing, broadcast marketing and print media marketing (Fitness Industry Workforce Report n.d.). 4.3.2. Recruit train and retain profession staffs Due to the evident industry's saturation, it is ideal for the health and fitness service providers to maximise on professionalism. In this case, these service providers will need to offer high standard training to its employees inorder to ensure that it attains a high level of professionality in the service provision. This will, therefore, boost the quality of services offered which in return will guarantee more customers (Evans, Cummins and Brown 2013). 4.3.3. Implementing unwavering commitment to outstanding customer service On the other hand, the health and fitness service providers in Australia can maximise on the customer service in order to have a competitive advantage in the market. This will also boost the level of professionalism in these health and fitness service providers which ensure that the customer's needs are met, and the services are customised according to these needs. 4.3.4. Right-sizing, pricing and financing of facility This entails cutting the expense cost in the service delivery. In this case, the health and fitness service providers should ensure that the businesses expenses are put on check in order to ensure that there is limited overspending in the service provision process. However, the service providers should ensure that the quality of service being delivered is not compromised in this process (Evans, Cummins and Brown 2013). 5. Discuss the value of the rational models (such as PESTEL, Five Forces and KSFs) in contemporary strategic planning. These rational models are essential in management since they used to estimate a business performance in a particular market. This, therefore, guides the management on formulating the best strategic plan to be followed by these businesses. On the other hand, these rationale models are also essential in assessing the intrinsic strength and weaknesses of the business (Fitness Industry Workforce Report, n.d.). This also helps the business management in the decision-making process of the strategic plan to be taken up in line with the results gotten from these rational models. These rational models are also essential in gauging the performance of the business in the industry and also strategizing on how best to avoid the foreseeable constraints in the market. On the other hand, it also gives an objective measurement of the business performance and also gives a genuine prediction its future performance (IBISWorld’s Gyms and Fitness Centres 2016) . This will, therefore, help the business to strategically plan for the future in orde to improve it grown that revenue margins. These rational model are essential sources in strategic planning due to their ability to offer concrete results pertaining the performance of the business in a market and its predicted performance in the future. Read More