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).