Business Analysis

A business analysis is important in forecasting future performance and evaluating the new concept’s business potential (Palepu & Healy, 2008; Kotler & Armstrong, 2012).  Components included in the business analysis are demand, cost, sales and profitability projections (Kotler & Keller, 2012).  Kotler (2001) states the importance in researching these aspects to improve the accuracy of the predicted profitability of the concept.  By evaluating all the components in the business analysis it becomes easier to determine whether the concept will attain the objectives for the concept and the company’s overall objectives (Kotler & Armstrong, 2012).  Trott (2008) supports this and highlights that this stage can identify potential problems which halt the development process. 

To start-up operating as a golf club manufacturer RA Concepts wrote a business plan to secure financing.  Included in this was a market analysis showing the potential demand for the clubs in different market segments over five years.  There was also a detailed review of start-up costs and how the finance would be attained.  RA Concepts included sales forecasts for three years, particularly highlighting the expected growth in year 2 sales and a break-even analysis.  The plan concluded with graphs showing projected profit and loss and a balance sheet in attempt to convince the potential funders of the financial viability of the company (Bplans, 2014).

Gymathlon

Gymathlon would be a franchise with fitness centres using the trademark of Gymathlon and running the sessions.  To ensure good brand reputation quality control and training support would need to be provided.  The franchisee’s fees are shown in Appendix A.

Cost Projections

Appendix B is a table of start-up costs for 10 franchisees, showing the required investment as £12,430.  Appendix C shows a breakdown of expenditure over three years, including the need for an employee on an annual salary of £15,000 per 30 franchisees and an office after reaching 30 franchisees at a cost of £120 per calendar month per employee. 

Participation Cost

£20 per session, incentives include:

·         Opportunity for participants to test themselves and compete on a leader board with others (inter and intra gym, friendship groups, clubs etc.)

·         Prize

·         Free T-shirt (additional promotion through participants)

 

Demand Projection and Sales

Appendix D is a monthly sales forecast for year 1 in one franchisee, showing an average of 30 sales per month per franchisee.  Appendix E shows projected income through the franchisees and sponsorship.

Sponsorship

Gymathlon would aim to attract a sports nutrition brand such as Beast or Muscletech as a sponsor.  The sponsor would pay for the production of T-Shirts, contribute the prizes and pay £500 annual sponsorship fee for each 10 associated franchisees after an initial 10.

Profitability

Appendix E shows Gymathlon is forecast to return a £14,205 profit in Year 1.  The forecast also shows Gymathlon to be a relatively low risk investment as the initial start-up investment of £12,430 should be returned by Month 8.  This forecast encourages the continuation of the format development as it shows profits increasing each year as Gymathlon’s number of franchisees grows.

 

 

 

Appendix A – Franchisee’s Fees

Start-up fee (inc. initial training & advertising)	£500
Royalty (inc. continued support & training)	£150 per month
% of unit sales (inc. leader board access, t-shirts, prize)	10% - £2 per sale

 

Appendix B – Start-Up Costs

Patent	£230
Format Testing & Development	£200
Website, Branding & Promotion	£2000 per 10 gyms
Legal Fees	£10,000 per 10 gyms

 

Appendix C – Expenditure

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix D – Monthly Sales Forecast Year 1

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix E – Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix F – Profitability Projection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Bplans (2014) RA Concepts Golf Club Manufacturer Business Plan. Available at: http://www.bplans.com/golf_club_manufacturer_business_plan/executive_summary_fc.php (Accessed: 10 December 2014).

GOV.UK (2014) Apply for a UK Patent. Available at: https://www.gov.uk/apply-for-a-patent (Accessed: 10 December 2014).

Kotler, P (2001) Marketing management. Millennium edn. Boston: Pearson Customer Publishing.

Kotler, P., & Armstrong, G. (2012) Principles of Marketing. 14th edn. London: Pearson Education.

Kotler, P., & Keller, K. (2012) Marketing Management. Global edn. Harlow: Pearson Education.

Palepu, K., & Healy, P. (2008) Business Analysis and Valuation: Using Financial Statements (4). OH: Thompson Higher Education.

Trott, P (2008) Innovation management and new product development. 4th edn. Essex: Pearson Education.

 

 

 

 

Marketing Strategy and Development

A marketing strategy is created based on the product concept developed in the previous stage whereas market development consists of identifying new market segments and developing the marketing mix to help the product to grow (Kotler & Armstrong, 2012). 

Li (2000) highlights the importance of a marketing strategy in setting a structure and direction to the specific marketing activities for that product to aid it in meeting the set marketing objectives.  Kotler and Keller (2012) identified the following three main elements of a marketing strategy:

·      Target Market – Who the target market is and why, and what is the size, structure and characteristics of the market.

·      Initial Price, Distribution and Promotion – What will the price be and how will it be distributed and promoted.

·      Long Term Goals – What are the sales and profit goals and what is the long term marketing mix.

Prior to the release of a golf GPS application by iGolf, the organisation developed a marketing plan.  This included a market analysis identifying the broad target market as golfers who owned cellular phones.  Their plan included statistics collected from many different sources resulting in iGolf calculating an accurate target market size of 1.82 million. 

iGolf’s pricing strategy included a comparison of competitor’s prices and an explanation to their plan to set a premium price using brand reputation to target the product towards those looking for a quality product.  The promotional plan was aligned with past L1 Technologies products with a small percentage of the product development budget being spent on promotional activities.  In addition the plan included a sales strategy and six marketing objectives although these could be improved by making them SMART.

Gymathlon’s target market is regular gym users.  In England in 2008/09, 14.7% of the 60% of men and 13.4% of the 46% of women who take part in sport go to gym.  51% of fitness participants were men and 49% women, therefore the competition could potentially appeal to both genders.  Of those gym users participating in weight training 84% were men, taking this into account the women’s circuit could be adapted to make the sport more appealing to the female market (DCMS,2011).   

 

The product will be targeted towards those competing monthly and encouraging repeat sales making it a frequently purchased product, although some participants may purchase infrequently as a personal test. 

Gymathlon’s competition includes Personal Trainers and fitness classes, their prices are shown in Appendix A.  Using this information the price for a session of Gymathlon would be £20.00.  This takes into account the need for a referee to record scores and the cost of the use of facilities.  Although this is higher than other activities the opportunity to compete and test fitness with the opportunity to win should encourage sales. 

Distribution would be through leisure centres and the competition would be promoted through the centres as well as being showcased at events such as triathlons and other endurance competitions.  The long term aims include gaining enough participants to run competitions between different gyms and regions.

 

Appendix A

Activity	Price
Personal Trainer Session	£35.00
Yoga	£7.40
Gym Session	£6.70
Aquafit	£4.65
Swimming	£3.90
Krunch & Kore	£3.80
Boxercise	£3.50
Metafit	£3.00

 

 

 

 

 

References

BSmart Fitness (2013) ‘Membership, Fees, Prices and Pay as You Go’. Available at: http://www.b-smartfitness.co.uk/#!classes/c1yws (Accessed: 2 December 2014).

DCMS (2011) ‘Adult participation in Sport’. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/137986/tp-adult-participation-sport-analysis.pdf (Accessed: 2 December 2014).

Freedom Leisure (2014) ‘Woking Leisure Centre activity prices’. Available at: http://m.freedom-leisure.co.uk/centrepage.asp?section=871&sectionTitle=woking+leisure+centre+activity+prices (Accessed: 2 December 2014).

iGolf (2014) ‘Company Info’. Available at: https://www.igolf.com/#ft_companyInfo (Accessed: 2 December 2014).

Kelsey Kerridge (2014) ‘Fitness Classes’. Available at: http://www.kelseykerridge.co.uk/index.php?pageid=4007 (Accessed: 2 December 2014).

Kotler, P. & Armstrong, G. (2012) Principles of Marketing. 14th edn. London: Pearson Education.

Kotler, P. & Keller, K.L. (2012) A Framework for Marketing Management. 5th edn. Harlow: Pearson Education.

Li, S. (2000). ‘The development of a hybrid intelligent system for developing marketing strategy’. Decision Support Systems, 27(4), pp. 395-409.

Midlothian Council (2014) ‘Leisure Centre Prices’. Available at: http://www.midlothian.gov.uk/info/524/prices_and_memberships/690/leisure_centre_prices (Accessed: 2 December 2014).

Sport England (2014) ‘Who plays Sport?’. Available at: https://www.sportengland.org/research/who-plays-sport/by-sport/ (Accessed: 2 December 2014).

Studio Fitness NE Ltd (2014) ‘Membership’. Available at: http://www.studio-fitness.co.uk/membership.html (Accessed: 2 December 2014).

Concept Development and Testing

A product concept is a generated idea expressed in consumer terms (Armstrong et al., 2009).  Kotler and Keller (2012) acknowledge that although concept development is necessary in new product development, concept testing must also take place to distinguish the likelihood of success. Peng et al. (2011) support this believing concept testing to be important in preventing organisations investing significant amounts of money in poor concepts. 

Concept testing can include multiple different concepts being shown in various ways including through images, verbally or physically to a group of target consumers the objective of understanding their reaction and interest in the concept (Kotler & Keller, 2012; Shank, & Lyberger, 2014).  The next stage involves collecting consumer response, this can be recorded using a rating system or consumers answering questions, the reliability of this feedback can depend upon the accuracy of concept representation (Kotler & Armstrong, 2012).  Once this has been collated the organisation use it in their evaluation of concepts to help them decide which has the strongest appeal to the target consumer group.  If they feel a concept has the potential to be successful they will take it on to the marketing development and strategy stage (McDaniel et al., 2011).  

 

Nike carried out in depth research into what would motivate people to do more exercise, having gained this knowledge they then tested whether there would be demand for their potential new product the Nike+ FuelBand.  Feedback was positive and Nike created the software necessary, the FuelBand is now sold internationally (Nike, 2013).   

When considering allowing artificial surfaces at international level for professional football, FIFA carried out concept testing.  FIFA consulted many different types of people in football including stadium managers, sport scientists, coaches, players and spectators to collect different opinions on how the changes could impact the sport.  Another part of the testing process involved thoroughly analysing different types of turf, aspects they considered included player-to-surface and ball-to-surface interaction, durability and climatic resistance.  This concept has now been implemented although FIFA test every artificial surface in laboratories and then again after installation before awarding it FIFA Recommended status (FIFA, 2001).

The concept of Gymathlon is a gym event to find the most complete athlete.  The competition would be internal within each gym to begin with however as more gyms take up the format regional and national competitions could be developed.  Gymathlon would require a room with fitness stations and machines, these are facilities which already exist in most gyms.  In addition, a referee e.g. personal trainer/leisure assistant would be necessary to check for good form and record results.  Participants would compete individually at a time to suit the competitor although a 1v1 format could be administered.  

The target market to test the concept on would be regular gym users.  In 2012 it was recorded that there were 7.6 million gym users in the UK (The Gym Group, 2013).  By consulting this market it would show whether there would be interest in making this form of physical exercise into a competition.

 

References

Armstrong, G., Kotler, P., Harker, M. & Brennan, R. (2009) Marketing an introduction, 1st edn. Essex: Pearson Education.

FIFA (2001) FIFA Quality Concept for Football Turf.  Available at: http://www.fifa.com/mm/document/afdeveloping/pitchequip/fqc_football_turf_folder_342.pdf (Accessed: 26 November 2014).

FIFA (2014) What is Football Turf?. Available at: http://quality.fifa.com/en/Football-Turf/About-Football-Turf/What-is-Football-Turf/ (Accessed: 26 November 2014).

Kotler, P. & Armstrong, G. (2012) Principles of Marketing. 14th edn. London: Pearson Education.

Kotler, P. & Keller, K.L. (2012) A Framework for Marketing Management. 5th edn. Harlow: Pearson Education.

McDaniel, C.D., Lamb, C.W. and Hair J.F. (2011) Introduction to Marketing. 11th edn. Ohio: South-Western Cengage Learning.

Nike (2013) Band on the run takes you inside the creation of the Nike+ FuelBand. Available at: http://news.nike.com/news/band-on-the-run (Accessed: 26 November 2014).

Peng, L., Li, C. and Wan, X. (2011) ‘A framework for optimising the cost and performance of concept testing’, Journal of Marketing Management, 28(7/8), pp. 1000-1013, doi: 10.1080/0267257X.2011.615336.

Shank, M. and Lyberger, M.R. (2014) Sports Marketing: A Strategic Perspective. 5th edn. Abingdon: Routledge.

The Gym Group (2013) Press Release: Rise in UK Gym Members as consumers seek out a fitness bargain!. Available at: http://www.thegymgroup.com/blog/article/press-release-rise-in-uk-gym-members-as-consumers-seek-out-a-fitness-bargain-5454/ (Accessed: 26 November 2014).

Idea Screening

Idea Screening

Following the idea generation stage, organisations must screen the ideas generated to detect which have the most potential (Toubia and Florès, 2007).  The Idea screening process involves evaluating the ideas and marking them against criteria to decide which are most compatible to the objectives the organisation wants to achieve (Business Dictionary, 2014).  During the screening process, the ideas already generated are questioned considering aspects such as the size of the target market, potential for generating profit and the product or service’s ability to meet the needs of the target market (Kotler and Armstrong, 2012).

Law (2014) considers screening important in realising poor ideas early and therefore identifying the good ideas to carry on to the concept development and testing stage.  Kotler and Keller (2012) support this and state that it is important to eliminate poor ideas early in order to avoid wasting resources such as time and money.

An example of how a sporting organisation could utilise the process of idea screening would be a Sports Centre.  If the centre wanted an event to promote a new format of fitness classes they were launching it would be important they chose the right type of event to showcase the class.  Different criteria they may consider would include what would gain the most attention within the target market, how affordable the event would be to run and feasibility.  By using the idea screening process effectively the centre would have a greater chance of the event being an effective promotional tool and having a positive impact.

A decision matrix is a tool which structures the decision making process and selects the best option by evaluating and rating each option against specific criteria which are selected and prioritised depending on importance (Koppala, 2007).  The weighting of the importance of the criteria is done on a scale of 1-3 with 1 being the lowest importance and 3 being the highest.  Each new format is then score 1-10 on how well it meets that criteria, 1 being the lowest rating and 10 the highest. 

 

Decision Matrix for a new format of Sport

 

This matrix clearly identifies and scores the three new format of sport ideas generated in the last stage and rates them based on five different criteria.  These criteria are aspects which need to be considered when deciding which format is viable to continue developing and the weighting shows the varying importance of all aspects.  

The decision matrix for idea screening has therefore aided the decision making process and identified that ‘Gymathlon’ would be the best idea to take forward to the next new product development stage.  This decision highlights the importance of weighting of criteria as although Gymathlon would require the most investment, it scores higher in more important criteria such as being easier to implement than new formats of existing sports and offering superior value to consumers.

Appendix A – Definitions of Criteria

Criteria	Definition
Longevity	Could the new format grow and have a long life?
Superior Value	Will the new format offer superior value for consumers to current formats?
Ease of Implementation	How easy would it be for the new format to be implemented?
Potential Market Size	How large is the potential market for the new sport format?
Necessary Investment	How much money would need to be invested to implement the new format into sport?

References

Business Dictionary (2014) idea screening. Available at: http://www.businessdictionary.com/definition/idea-screening.html#ixzz3JPIYxtUO (Accessed: 18 November 2014).

Canice Consulting (2013) 4.3 Idea Screening. Available at: http://www.slmsc-project.eu/en/?page_id=2142 (Accessed: 18 November 2014).

Koppala, G. (2007) Project and Operations Management. Available at: http://books.google.co.uk/books?id=_Cx7XFW-yjsC&pg=PA77&dq=DECISION+MATRIX&hl=en&sa=X&ei=57xtVJX8E4XGsQSwu4LYCA&ved=0CEQQ6AEwAw#v=onepage&q=DECISION%20MATRIX&f=false (Downloaded: 18 November 2014).

Kotler, P. & Armstrong, G. (2012) Principles of Marketing. 14th Edn. London: Pearson Education.

Kotler, P. & Keller, K. L. (2012) A Framework for Marketing Management. 5th Edn. Harlow: Pearson Education.

Law, J. (2014) A Dictionary of Business and Management. Oxford University Press.

Toubia, O.& Florès, L. (2007) ‘Adaptive Idea Screening Using Consumers’, Marketing Science, 26(3), pp. 342-360.