The Health Club Industry
This case provides an opportunity to practice analyzing the industry environment and how it might influence the strategic issues facing a firm. In essence, any industry analysis requires us to think about how broadly we should define the scope of the industry. Please be sure to identify the boundary of the industry.
In preparing your case for class discussion, please ensure you have read chapter two from Dess Lumpkin and Eisner, 2012, which is available on Blackboard. Further detail is available in Porter, M.E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86 (1), 78-93, which can be found via the library catalogue.
Please focus your notes on trying to apply each of the five
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The barriers could be reduced by offering no joining fees for first ## members to sign up | Capital requirements | Capital requirements are high when setting up a new health club. Nautilus estimate It would cost approximately $144,000 to outfit a 10,000 sq ft start up with equipment. The cost doesn’t include the actual premises itself which will also be costly. However studio sized clubs such as Curves franchises take considerably less capital to set up | High barriers to entry for larger traditional gym setups. However the barriers for entry for studio sized clubs are considerably lower. | Incumbent firms’ control of distribution | | | Incumbents’ control of suppliers/raw materials | | | Incumbents’ control of patents/technologies | | | Government policy | | | Expected retaliation | The only potential retaliation mentioned is larger chains buying out any smaller groups | Low barriers to entry because if a firm is bought out then it is most likely that they will sell for a profit | Bargaining Power of Suppliers (if this is different for different supplier groups, note the difference) | Evidence from the case. | Implications for the ‘power’ of suppliers … does this lead to stronger