Industry competitors

Potential entrants
Availability of substitutes
Buyer’s power
Suppliers power

Issue
Increasing number of health clubs in United States brought in a tight competition and are bring
the profits down for some. For example, total revenue of 24-hours fitness group financials is on
decline after peaking at 1000 million in 2001. In 2004 the net income decreased to 984 million.
Whereas other new competitors are on a raise, for example town sports international had 282
million in revenue in 2001. It increased to 343 million in 2003.
Analysis
 Health club phenomenon is driven by people getting more concerned about their
health.
 Health clubs create value for their customers by offering them different levels of service.
Some offer intense work outs, sports and separate health club for women.
 In 1 a and 1b it shows that more and more clubs are coming in the business and health
club memberships are increasing but the members per club are decreasing this is due to
more clubs per region.
 The strategy should include reforming the business model and creating value
proposition for customer in order to get the customers to come to our specific club as
compared to the competition.
5 force analysis

1. Industry competitors are growing day by day, there are new health club franchise
that are joining. The main competition is YMCA, 24-Hour health club, Bally Total
fitness, gold’s gym and curves international. The competition is not limited to United
State, this is become international competition as more and more franchises are
going global.
2. The potential for entrants is huge as this business is low investment. Companies
trying to start their new health club can do so by leasing a place and putting an
upfront investment of under 35,000.
3. Substitutes are widely available. We even have no profit organization YCMA offering
this service. They might have lower level or exercise machines to offer but they are a
substitute for people not willing to spend money.
4. Buyer’s power is tremendous as many of there are not many options available for
buying these products. There are multiple clubs available to choose from, they offer
different level or services. There are also wide range of prices you can pay to get
these services. If you need personal trainer services, they are available at extra cost.
Buyers in our case have wide level or services and price plans.
5. Suppliers hold limited power, they need to advertise, provide better service, better
rates and more customer value in order to attract customers.
Recommendations
We should start investing in new clubs where there are not many available and focus on the
states that have minimum number of members per 100 people (Exhibit 2). The other emphasis
should be on the people who have earn $25,000, we will create a new plan and offer special
services to people earning $25,000 and under. Most memberships are in commercial
multipurpose clubs so that, part of our plan is to make our club multipurpose where users can
come and do every exercise possible. We need to invest in personal trainers, massage therapist
and pro shop as they are most profitable programs currently available.