Risk Management in the Fitness Industry

This assignment delves into risk management within the fitness industry. It examines various risk factors, including those related to outsourcing, leadership styles, and organizational change. Students are tasked with applying theoretical frameworks to real-world scenarios in the fitness sector, demonstrating an understanding of how to mitigate risks and ensure successful business operations.

MANAGEMENT SKILLS
AND ENTREPRENEURSHIP

TABLE OF CONTENTS
INTRODUCTION................................................................................................................................1
TASK 1.................................................................................................................................................1
New venture concept...................................................................................................................1
Aim & objectives........................................................................................................................1
Opportunity Gap.........................................................................................................................2
Feasibility....................................................................................................................................3
TASK 2.................................................................................................................................................3
Requirements..............................................................................................................................3
Management skills......................................................................................................................4
TASK 3.................................................................................................................................................5
Market segmentation...................................................................................................................5
Competitor analysis.....................................................................................................................6
Market strategy...........................................................................................................................6
Business Model...........................................................................................................................7
SWOT Analysis...........................................................................................................................8
Porter Five Forces.......................................................................................................................9
Financial projections...................................................................................................................9
Proposed plan of action.............................................................................................................12
TASK 4...............................................................................................................................................13
TASK 5...............................................................................................................................................14
CONCLUSION..................................................................................................................................15
REFERENCES...................................................................................................................................16

INTRODUCTION
Entrepreneurship is a process which requires application of different types of management
skills. It is regarded as the capacity to develop and manage a particular business venture. This
research study is about a new business start-up. It finds out whether the new venture is feasible or
not. Opportunity gaps in the market are analysed. Further, requirements and management skills
needed for the business are also identified. It will also explain the risk assessment and conditions
which are required to avoid the failure. An appropriate business model will also be proposed within
the context of new business.
TASK 1
New venture concept
The new business is a health club named the Health Planet. It facilitates a great environment
under which people can achieve their respective fitness goals. The club will provide the latest
technology in term of health equipment and machines for the users. People will be trained in a
manner that they will have an unforgettable healthy experience (Allio and Randall, 2010). A choice
of healthy living options will be offered at very low and competitive prices. It will not only be a
gym but it will also offer a variety of aerobic, box, yoga and group classes for the customers.
The Health Planet is located in Hampshire that is one of the most beautiful countries on
Southern coast of England in UK and also known as the most populous Ceremonial Country in the
nation (Bangs, 2002). The gross domestic product and the per capita income of the city are strong
and quite effective as compared to other cities in the UK. The employment level is high as
compared to the national average. Visitors can find many places of tourism also. Demographic
conditions are very good and favourable for the new venture (Bowhill, 2008). Climate in Hampshire
is very mild and quite liked by the people. Residents in the county are capable of availing services
of the Health Planet. The location is quite suitable for the new business.
Aim & objectives
The major goal of the new venture is to open a highly flexible health club for the urban
people in Hampshire. Health planet’s objectives can be resumed in the following points:
 To create a healthy environment for the customers where they can come with confidence.
 To teach people about how they can lead a vigorous and stressful life.
 To assists them in achieving their respective fitness goals and objectives.
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Figure 1: Physical outlook
The Health Planet’s area will cover 5500 square foot location. It consists of two big exercise
rooms, one primary equipment room and one room for child care. The leisure centre has capacity to
hold 100 people at a time and offers wide type of fitness machines and health equipment which are
designed for human bodies. These include:
 Step mills
 Treadmills
 Rower
 Cross aerobic trainers
 Steppers
 Stairmaster
 Upright and recumbent bikes
Opportunity Gap
The main purpose of introducing this new venture is to raise the awareness of a healthy
lifestyle for local people. Special focus will be given on the females because generally speaking
males are highly concerned about their health and their body shapes, comparing to females who are
seen less concerned about all these things (Brunsman, DeVore and Houston, 2011). The urban
professional workers remain very busy with their life and they do not get chance to spend some
time on the fitness. They also seem to be conscious about maintaining a healthy life style. In such
conditions, opening a health club sounds a good opportunity for an entrepreneur (Morato, 2013).
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The Hampshire County is known for its good rate of employment. It is expected that the Health
Planet will find urban professional workers who are among the target customers.
Feasibility
According to the report, UK health and fitness industry is in good shape. The market value is
greater than ever before. High number of clubs and members can be seen. It has been calculated that
1 in every 8 people in the country is the member of a health club or a gym (The UK Fitness Industry
Report, 2014). Recent years have witnessed a positive growth along with 5.4% increase in the
value, 5.8% increase in the members and 3.3% increase in the fitness services in the current year.
Particularly, the growth has been notified from the increasingly growing low cost market in the
private sector (Health & fitness industry guide, 2015). At present, total value of the Health &
Fitness market is projected at £4.3 billion that is up to 5.4%.
TASK 2
Requirements
In order to start a new venture, there is a need of some important resources. The Health
Planet will also be requiring certain resources which are as follows:
Health machines & tools – Setting a health club will require installation of highly durable machines.
In case of new venture, following fitness tools will be installed:
 Step mills
 Treadmills
 Rower
 Cross aerobic trainers
 Steppers
 Stairmaster
 Upright and recumbent bikes (Craighead and Meredith, 2008)
Services such as aerobic, yoga, muscle conditioning etc will also be given to the clients. The
aim is to create a healthy environment where people can come and improve their health lifestyle.
 Manpower – Another important resource essential for the new venture is talented workforce.
New venture will require people like lead trainer, personal trainers, childcare staff,
receptionist etc (Hoag, 2011). A main lead trainer will be employed who will guide and look
after the needs of personal trainers in respect with health advice, training style, diet
recommendation etc. Personal trainers will be appointed who will impart fitness training to
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the clients. Childcare staff will be appointed specially for the mothers who are not able to
work out because of their babies or children.
 Location – The Health Planet will be placed in the southern parts of Hampshire. As the
surrounding environment is very calm and peaceful (Jugdev and et.al., 2013). It is expected
that clients will appear in large numbers by seeing the location.
 Infrastructure – The infrastructure of health club is very eye catching. All the fitness tools
are specially designed for the human bodies. People will be trained in an environment under
which they will have an unforgettable healthy experience.
 Finance – Financial requirement is also very crucial as the entire business set up is
dependent on it. Funds are required to meet up all the expenses and to meet up the liquidity.
In this new venture, funds will be arranged through bank loan and personal savings. The
cost of fitness tools is very high in the market (Knight, 2012). Therefore, those sources of
funds are to be selected which are stable and sustainable for a long period of time.
 Suppliers – Good business relations are to be maintained with the suppliers. The Health
Plant will need highly flexible and durable fitness machines which can provide high level of
comfort to the users. Maintenance of these tools requires high amount of costs. Healthy
relations can be maintained with the suppliers with the purpose of gaining long term benefits
from them (Panneerselvam, 2012).
Management skills
Along with the resources, the new venture will also require good management skills so that
success can be attained. These skills are as follows:
 Planning – Planning is the most essential function of the management. Plans are prepared to
make sure that all things are performed with ease. It is needed at all the levels of the
business (Eom, 2012). Lack of planning may result in bad consequences also. It may hamper
the achievement of business objectives. Hence, demonstration of good planning skills is
required from the entrepreneur.
 Leadership – Leaders are said as the lifeline of the business. They hold majority of
responsibility in terms of managing the employees. They must know how to get the things
done from others (Jones and Hood, 2010). The entrepreneur must show effective leadership
skills in communication, motivation and support. The personal trainers and supervisors at
the Health Planet will pursue the role of leaders. They people will be responsible for
imparting right fitness training to the clients (LEADERSHIP, STRATEGIC PLANNING AND
ORGANIZATIONAL CHANGE, 2009).
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 Decision making – It is not easy to take decisions within new venture at immediate point of
time because everything is new and entrepreneur has lack of experience. Decisions are to be
taken after taking into consideration all the factors. Here there is a need to apply good
decision making skills (Thomas, 2011). It is important that entrepreneur should take sound
decisions which can generate good business results.
 Forecasting – The business owner must also be capable of showing good forecasting skills.
These skills are required in the estimation of resources, finance, manpower etc. Different
types of related methods can be applied such as regression analysis, time series etc. Budgets
are to be prepared on the basis of estimation (Tushman and O’Reilly, 2013). This skill is
needed to be strong and effective as bad judgement can hamper the business conditions.
 Risk assessment – Different types of risks are associated with the new venture. The
entrepreneur must be capable of assessing these risks in effective manner. Identification of
risks finds out the pros and cons of every aspect (Werhane and Morland, 2011). In this
regard contingency plans can be prepared. These risks include financial risk, market risk,
capital risk, etc.
 Communication – Good communication is also needed while performing business activities
of a start-up. The entrepreneur must demonstrate good communication skills with the
suppliers, lenders, employees etc. Lack of communication may lead to loss of integration
and dis-management. Coordination is required between all the people associated with the
new venture (Eom, 2012).
 Staffing – Another management skill needed is to do appropriate staffing for the business.
Skilled employees are to be selected who can give their maximum towards the achievement
of goals and objectives.
TASK 3
Market segmentation
The Health Planet will focus on two customer groups:
 Young urban professional workers – These working people are very concerned about their
health and fitness. They like to remain in a good body shape in order to live a healthy
professional life. These clubs are also preferred in order to avoid the work stress.
 Young customers – These are the youngsters which are in the age group of 18-24 years. It is
the college going population. These are targeted because they have a passion for body
building and fitness.
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Competitor analysis
Following are the major health clubs which can offer competition to Health Planet:
 The Curves Women Gym
 Meridian Fitness Club
 Gymophobics women only gym
 Downtown Fitness
As we can see the competition for Health Planet will be rude. The number of health clubs in
UK is increasing on wide level. They are giving different types of health services. It is essential that
new venture must have competitive advantages in front of other health clubs. It will be different
from others in variety of ways. Females can work out in very safe and flexible environment. They
will be feeling more relaxed and comfortable. A child care centre has also been established where
ladies can leave their kids and do workout without any concern. Certified trainers will be used for
fitness training. Hence these things will help the club in achieving differentiation.
Market strategy
Traditional as well as modern methods of marketing will be used for the promotion of the
fitness club. These are as follows:
 Advertisement on local TV channels
 Billboards and banners
 Newspapers Pamphlets
 Discounted offers
Mediums such as beauty salons, boutiques, tanning salons located in Hampshire will also be
used for promotions. In order to attract the clients, club will offer the first month of membership for
free. People can get to know about the services on different social media platforms like Facebook,
Twitter and WhatsApp, etc.
Marketing mix of Health Planet:
 Product Mix – The Health Planet offers fitness services especially for the young urban
professional workers and college going students. Further it offers services such as aerobic,
yoga classes, muscle conditioning etc.
 Place mix – The new venture is positioned in the southern parts of Hampshire. The opening
hours are from 8am in the morning till 9pm in the evening.
 Price mix – Club will put forward competitive and premium pricing methods. The
membership fee is 42 £ per month and fees for the personal trainer it will be 5 £ per hour.
 Process mix - Step mills, Treadmills, Rower, Cross aerobic trainers, Steppers, Stairmaster,
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Upright and recumbent bikes etc are some of the fitness tools specially designed for the
human bodies in bio-chemical manner
 People mix – The staff at Health Planet is highly skilled and efficient. Personal trainers will
be appointed for the clients. Childcare staff is also be employed who will look after the kids
of ladies while the workout.
 Promotion mix – An aggressive campaign will be used to promote the services. Not only
traditional but also modern methods will be used. Methods such as Billboards & banners,
Newspapers Pamphlets, Discounted offers, social media marketing etc will be used for
promotion.
Business Model
New Business
Drivers
Core
Customers
Superior Value Proposition Channels Key Activities
Value Chain Based
ResourcesCompetition / Competitive
Strategy
Relationship and
Network Alliances
Business
Structure
Costs and Cost Budget Revenue Streams & Cash flow
 Business drivers – Which is group of people who are held responsible for starting the
business. For our club it will be started under a sole proprietorship business, which means
that the sole owner will be handling and managing all the liabilities and responsibilities in
there. Approaches such as bank loan and personal savings will be used to arrange the money.
On the side of the owner, there will be lead trainers, personal trainers, cleaners, child care
staff and a receptionist.
 Key activities – The Health Planet offers special fitness machines which are designed for the
human bodies in biochemical manner. Professional trainers are hired to offer quality
services.
 Value proposition – Services such as aerobics, yoga classes, muscle conditioning etc are also
given to the people. The exercising machines are highly durable and sustainable. The
infrastructure of the club is high class and free first month membership will be an added
advantage.
 Customer Relationship – The club’s staff will be provided personal attention. Their inputs
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and suggestions will be taken for improvements at regular intervals.
 Key Resources - Health machines & tools, Manpower, Location, Infrastructure, Finance and
Suppliers are the key resources. All the trainers are skilled and certified. The location is also
very favourable as there is presence of both the targeted customer segments
 Channels – Traditional as well as modern methods of marketing will be used for the
promotion of the Health Planet. Approaches such as Billboards & banners, Newspapers
Pamphlets, Discounted offers, social media marketing etc will be used for promotion.
SWOT Analysis
Strengths Weaknesses
 Lowest prices
 Management of health care sector
 Qualified and trained employees
 Special focus on ladies
 Relaxed and comfortable environment
at the club
 First mover advantage
 Urbanized business location
 High costs of personal training services
 High maintenance costs
 Lack of health awareness among the
masses
 Lack of brand image
 Non-sustainability in maintaining liquid
cash
Opportunities Threats
 Rapidly growing market
 High rate of Obesity disease
 Need of hard core promotion and
advertising
 Increasing health concern among the
people
 Female have desire for a fit body
 Excellent customer services
 high level of competition from other
health clubs
 Availability of low cost health care
equipment
 Decreasing purchasing power of
customers
 Economic impacts such as recession,
inflation
 High investment costs
 Customer dissatisfaction
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Porter’s Five Forces
 Buying power – The buyer’s bargaining power is very low in the industry. The management
team of the health club cannot compromise on the prices to a very high extent.
 Supplier power – The bargaining power of the suppliers is high in case of these kinds of
services. It is because the service is unique and valuable and extra cost of switching from
one option to another is also very high.
 Threat of substitution – Many substitutions for fitness clubs exist nowadays such as online
yoga classes, private massages, private health trainers, homer services, etc. Therefore, the
threat of substitution is high in this industry.
 Competitive rivalry – The level of competition in the fitness sector is high. The number of
health clubs has increased from the last year in UK.
 Threat of new entry – Threat for new entry is quite low. There are no barriers to entry and
exit. However, the costs of maintenance in these clubs are very high.
Financial projections
Income statement
Particulars Year 1 ($) Year 2($) Year 3 ($)
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Sales 139,554 167,464 200,957
Total Cost of sales 69777 73,266 76,929
Gross Margin $69,777 $94,198 $124,028
Expenses
Salary 54,000 84,000 92,000
Marketing &
promotion 1200 1200 1200
Insurance 1200 1200 1200
Taxes 8100 12600 13800
Web expenses 1200 1200 1200
Total operating
expenses 65,700 100,200 109,400
Profit before
Interest & expenses 4077 (6002) 14628
Taxes incurred 1223 0 4388
Net Profit 2854 (6002) 10240
Cash flow statement
Year 1 Year 2 Year 3
Cash Received
Cash sales 139,554 167,464 200,957
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Total cash from
operations
139,554 167,464 200,957
Expenses
Cash spending 54,000 84,000 92,000
Bill payments 68052 96760 97957
Total expenses 122,052 180,760 189,957
Net cash flow 17501 (13296) 11000
Cash balance 23676 10380 21381
Balance sheet
Particulars Year 1 Year 2 Year 3
Assets
Current Assets
Cash 23676 10380 21381
Other current assets 2000 2000 2000
Total Assets 25,676 12,380 23,381
Liabilities
Accounts payable 14,647 7,353 8,114
Paid in Capital 12000 12000 12000
Retained earnings (3825) (971) (6973)
Earnings 2854 6002 10240
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Total liabilities 25676 12380 23381
Break Even Point
Break even Analysis
Monthly revenue Break Even $10,950
Assumptions:
Average Percent Variable Cost 50%
Estimated monthly fixed Cost $5,475
Break even diagram
The break even analysis of Health Planet is based on average revenue per sale. The mark up
cost on the service is fixed at 100% and the monthly fixed fees for business are in the form of
operating expenses, salaries, etc. The breakeven point will be achieved at $10,950.
IRR
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IRR Calculation
Proposed plan of action
Activity/ Months 1-4 5-12 13-17 18-21 22-27 28-30 31-34 35-40 41-43 44-48
Performing out
Market survey
Development of
business plan
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Fulfilling the
financial
requirement
Infrastructure
development
Setting the
physical
resources
Purchase of raw
material
Recruitment of
employees
Opening the
health club
Marketing and
promotion
Targeting
customers
TASK 4
Risk assessment is the most important activity in the entire business process. A new start up
is expected to face different types of risks. These risks are related to market, finance, operations,
employees etc. Different types of methods can be used in order to remove such incidents. These are
as follows:
Feedbacks – Taking feedbacks about different processes at all the levels in consistent
manner will help a lot. Feedbacks can be taken from the people associated with the business. They
can ask about the risks which have been possessed at different levels (Hall and Duperouzel, 2011).
It will help in finding all the errors and gaps. The remedial actions can be taken accordingly.
Meetings – Calling for meetings on frequent basis is also very useful. At these meetings, all
the risky aspects can be discussed (Hoag, 2011). People can ask for giving their suggestions for
14

remedies. A good effective option can be taken out from the list of suggestions. It will also find out
all the loopholes.
Forecasting techniques – Another approach for assessing the risks is to apply the
forecasting techniques. Different types of techniques such as time series analysis, regression
analysis etc. can be used for identifying the risks (Knight, 2012). If threats are assessed before time,
then it will assist in taking sound business decisions.
What if Analysis – It is another effective approach to identify the threats and hazards.
Under this technique, what if questions are asked about what could go wrong and about what would
happen if things do go wrong (Lee, Yeung and Hong, 2012). It is a kind of brainstorming activity
and it is performed by the people who know about the threatening conditions.
Preparation of checklist - The entrepreneur can also prepare a checklist of expected risk
and threats which may occur while the course of the business. This type of assessment depends
upon the quality of the checklist and the experience of the users.
FMEA (Failure Mode and Effect Analysis) – This analysis is being used to identify the
potential failures and also identifies what impact that these failures could have on the business. The
approach is applied by dividing the whole process into different elements and then after that risks
associated with each element is identified (Pellegrino, Vajdic and Carbonara, 2013). It is a very
effective technique finding the appropriate solutions for the problems.
Team of experts – Another approach for risk assessment is building a team of experts
within the business. Company will need employees who are efficient and skilled. They must be
capable of finding suitable solutions for the issues. Identification of threats is to be done effectively.
It can be done by appointing technical experts.
TASK 5
Under new business, different types of assumptions are made to ensure that business attains
success. There are success and failure factors. The success of project of Healthy Planet depends on
various factors which are to be taken into consideration by the entrepreneur. These factors are as
follows:
Appearing of target customers - The new venture is targeted at two segments of customers.
First is; urban professional workers who are very concerned about their health and fitness. They like
to have a nice and good body shapes in order to live a healthy professional life. They also like to go
to fitness club in order void the work stress (Rasid and et.al., 2011). The urban population is also
capable of paying the fees of these kinds of clubs. Second target segment is Young customers who
are in the age group of 18-24 years. It is the college going population and they are being targeted
15

because they have a passion for body building and fitness. Hence it is expected that these two target
group will appear in high number for the services.
Special focus on ladies – The Health Planet has also tried to give special focus on the ladies.
Child care staff will be appointed who will look after the kids of the ladies so that they can work out
without a concern (Pellegrino, Vajdic and Carbonara, 2013). It is expected that in this manner
females will appear in high numbers for the club.
Certified trainers – Health Planet will employ personal trainers in order to offer more
flexible services to the clients. People will be able to get tips about the exercise according to their
demands. It is expected that this strategy will bring more value for the business (Problems and how
to solve them, 2012)
CONCLUSION
From the above report, it can be concluded that managerial skills plays an essential role in
the entrepreneurship. Skills such as good Planning, Leadership, Decision making etc. are required
for achieving success. The Health Planet is feasible business concept. The market conditions are
very favourable along with presence of adequate resources. Risk can be assessed through adopting
techniques such as what if analysis, regression analysis, FMEA etc. Certified trainers and special
focus on females are two competitive advantages for the new venture.
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