Virgin Active China Market Entry

This assignment examines Virgin Active's prospective expansion into the Chinese fitness market. It utilizes PESTEL analysis and Porter's Five Forces to evaluate the opportunities, threats, and competitive landscape. The analysis considers political, economic, social, technological, environmental, and legal factors impacting the market. It also assesses the threat of new entrants, bargaining power of buyers and suppliers, threat of substitutes, and rivalry among existing competitors. Recommendations are provided for Virgin Active's successful market entry strategy in China.

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Table of Contents
Introduction...........................................................................................................................................3
Organizational structure and Leadership style.......................................................................................3
Leadership quality of Sir Richard Branson.........................................................................................4
General External Environment..............................................................................................................6
Competitive Environment......................................................................................................................9
Bargaining power of the customers...................................................................................................9
Bargaining Power of Suppliers.........................................................................................................10
Threats of new entrants..................................................................................................................10
Threats of substitutes......................................................................................................................11
Threats of existing rivals..................................................................................................................11
Recommendation and Conclusion.......................................................................................................11
References...........................................................................................................................................13
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Introduction
This assignment is based on various marketing techniques implemented by Virgin Active
Health Clubs in order to expand the business into the dynamic and newly evolving market
such like China which is considered as a country of East Asia. Besides that, the
organizational structure along with the leadership style of Richard Branson will be discussed
in this study. In addition, various types of external business factors how to influence the
business will also be evaluated through proper argument and justification. Moreover, a
competitive analysis of Virgin Active Health Clubs including internal strength and weakness
will be analysed in this assignment. At the last stage of the assignment, a suitable
recommendation will be provided for the future growth of Virgin Active Health Clubs
regarding international expansion (Young, 2013).
Apart from that, it is very critical for a firm to understand the opportunities of the dynamic
market to conduct a prospective marketing. Besides that, Virgin Active Health Clubs holds
the top position by developing the psychological and health synergy. Along with that, with
the help of various analytical-theoretical structure, the marketing practice of Virgin Active
Health Clubs will be analysed. Thus, as early mentioned PESTEL analysis and Porter’s five
force theory both models will be used to determine the competitive analysis of Virgin Active
Health Clubs(Fogarty, 2005).
Organizational structure and Leadership style
The structure of the organization is playing an essential role in order to achieve desired goals
and objectives. On the other hand, the leadership styles are one of the most significant
elements which lead an organization to the success. Talking about the Virgin Active Health
Clubs which mainly operates some major countries such as Australia, Italy, Spain, Portugal,
United Kingdom and South Africa. In addition, near about 190 fitness clubs which are
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operated in many nations. Mr Richard Branson is the CEO of Virgin Active Health Clubs
which fall under the Virgin Group established in 1999 with tremendous profit growth of 18%
on average. Moreover, it includes over 9000,000 satisfied members worldwide. In other
sense, the organizational structure of Virgin Active Health Clubs is perfect which indicates
positivity of international expansion in the China.
Leadership quality of Sir Richard Branson
At the age of 15, Sir Richard Branson was dropped out from high school and founded his
very first business. Young entrepreneur’s ambition was displayed when he proposed a joint
venture with airline industry. Many years go, in current days, he is the CEO of Virgin Group
which can be described as a diverse entrepreneurial venture. Behind the success of Richard
Branson, his unique passion, vision and leadership qualities were involved. In other words,
the success of Virgin Group is the reflection of his mind-blowing leadership quality(Miller,
2012). Mr. Branson is famous for his competitive and energetic leadership. Through different
verbal and non-verbal channels, leaders develop values and beliefs to the subordinates since
leadership is very critical in the management. On the other side, almost every executive gave
the value and attention to the customers, at that time Richard Branson is the only man who
realized that the employees should be equally prioritized. He firmly believed that with the
help of employee satisfaction, an organization could improve its productivity. In addition, if
employees properly execute the tasks, the customers will be satisfied automatically, and the
business will reach its desired profit margin(Miller, 2012). Moreover, Richard Branson
effectively focused and make sure that the employees of Virgin group are happy and get job
satisfaction. Apart from that, he additionally determined that an organization includes a lot of
people who required to being motivated by the leader in order to address difficulties by
helping each other or make efficient teamwork. Motivation is one of the key element which
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directly influences the employees to be part of the organization. in addition, with the help of
the motivational theories and models, Richard Branson able to motive his subordinates in
order to work harder and archive success in the professional career. Thus, with the help of the
motivation and encouragement, Richard Branson inspire employees to achieve goals which
are settled by the Virgin Group. Along with that, he successfully utilised the theoretical
framework of Abraham Maslow's Hierarchy of Needs in order to develop the motivational
strategies for his employees. The nature of the immediate needs is oriented by the practised
activities of the employees(Lowitzsch, 2009). Besides that, the financial incentives are one of
the effective motivation tools which was implemented by the Richard Branson in Virgin
Group. Be that as it may, the financial needs are the most necessity of the employees. On the
other hand, encouraging employees in order to explore various areas of the work help them to
gain competitive knowledge for facing challenges. Although, the manager additionally
provide an opportunity and individual flexibility in the workplace to apply innovative
techniques. Thus, the employees will ultimately invest themselves to the objectives of the
company. In addition, the staffs of the company also will be considered as personal gains of
company success. Therefore, with the help of the approach of the leader, the effectiveness of
the employees will be increased which help to execute different types of job in the workplace.
Along with that, in order to make an effective workflow structure inside the organization, the
motivational theory and model are playing an essential role. Including the employees in the
decision making process can enhance more benefit to the organization as well as the
organizational structure will also be improved by this(Lowitzsch, 2009). When the
suggestions of the employees are included in the decision making process, they feel as an
important part of the organization. Richard Branson has a vision to minimize the impact of
the globalization with the help of employee’s cooperation. The leader of an organization
needs to understand the point of interest by communicating with employees and stakeholders.
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In order to meet intended objectives, the collaboration of the work is required in an
organization. The Virgin Group has a goal to ensure that, each and every employees are
engaged with enough information in order to get awarded about future planning, forecast, and
modifications and focused places. According to the economic changes, the Virgin Group is
identifying the essential changes which need to be made as soon as possible(KUNY, 2010).
According to the model of Cammock, the vision of the Virgin Group was created which
significantly includes three elements such as envisioning, enacting and engaging. Moreover,
Richard Branson effectively and successfully managed and provided a sense of proper
direction to all stakeholders of the organization. In addition, he introduced voluntary talks
with the employees for freely exchange the thoughts and opinions related to the vision of the
organization. In order to critically assess the activities of the organization, Richard Branson
arranged many meetings and seminars for summative and formative evaluations. The brand
value is playing an essential role in addressing undesirable outcomes of the business. Apart
from that, there are various types of steps included in the managerial perspectives of Richard
Branson. The first thing is approach which is based on an identical vision for an organization.
therefore, an appropriate leadership styles enhances and boosts the accomplishment of
organizational vision which is based on integrated shared values, culture of the organization
and employee satisfaction. He seriously applied a good leadership styles for providing a
conductive working environment to the employees(KUNY, 2010).
General External Environment
PESTEL analysis is one of the effective and beneficial business tools by which an
organization can determine its current market opportunity. The major parts of the PESTEL
analysis are political, economic, socio-cultural, technological, environmental and legal factor.
Each and every factor includes personal significance at the respects of Virgin Active Health
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Clubs which wants to expand the business in China. Moreover, the purchasing power of the
customers is directly influenced by different marketing choices of household preferences.
Political factor: this factor includes various types of official rules and obligation for
international business expansion in the China. There are different types of problems may
create barriers to the expansion of Virgin Active Health Clubs into the foreign country. China
has a very strict and dominating government. In order to do business in a smooth way, Virgin
Active Health Clubs needs to follow every government policies and legislation. Besides that,
there are different types of political parties involved in the government with individual
demands. Virgin Active Health Clubs needs to satisfy different political parties in order to
expand the business in a legal and ethical way. Moreover, the structure of the governmental
regulations is based on taxes which needs to be paid by the international
companies(Dollinger, 2012).
Economic factor: the economic factors is one of the critical issues by which an organization
can expand the business in the foreign market. On the other hand, the economic factor
includes some critical aspects such as rate of exchange, GDP and currency value. The
currency of China is yen (¥) which one of the leading currency around the world. In order to
dominate the Chinese economy, the developing countries including America, Europe and
Russia are creating collaboration and they significantly want to increase the value of dollar
and euro by decreasing the value of yen. So, Virgin Active needs to pay more attention while
they are entering the market of China. Moreover, with the help of low currency value, Virgin
Active can offer low price scheme in order to attract most of the potential
customers(Dollinger, 2012).
Socio-cultural factor: the social factor is one of the vital factors which includes the
preference of the individual. According to demographic diversity, the preference of the
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individual depends on some factors such as occupation, gender, family, lifestyle and
behaviour. The Recent market report indicates that most of the people like to have a smart
and healthy lifestyle by joining a smart fitness club. Meanwhile, Virgin Active has a great
opportunity to grab the market of the China. Moreover, with the help of the socio-cultural
factor, Virgin Active able to determine the perfect place for expanding their business in a
profitable way. Be that as it may, Virgin Active can also target fit people from the Chinese
market who are mainly looking for a proper and effective fitness club at a reasonable price.
Thus, with the assistance of social factor, Virgin Active also grab the current market by
dominating other rival fitness hubs.
Technological factor: technology is one of the essential factors which influences a firm to
expand their business by adopting innovative and latest technology. Besides that, Virgin
Active includes technically developed workout equipment which help an individual to lose
weight with little effort. In other words, through the help of the technology, Virgin Active can
attract most of the customers towards their fitness club, for example, they can promote their
organization through deferent websites. In simple words, the online marketing is a simple,
time-saving and productive promotional strategy which is implemented by most of the
organization. Thus, the management of Virgin Active needs to pay more attention to the
technological factor in order to provide flexible and reliable service to their international
customers.
Environmental factor: the global warming is one of the main aspects of the environment.
Apart from that, Virgin Active is a famous fitness clubs which operates thousands of
branches all over the world. Moreover, Virgin Active should take this factor seriously to
minimise the impact of environmental law and acts. Thus, with the help of collaboration,
Virgin Active and government can easily save the environment and preserve the natural
elements while conducting their business in the foreign market.
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Legal factor: the governmental rules and regulations are the main part of the legal factor. If
Virgin Active breaks any rule of China democracy, the government will take serious legal
action against Virgin Active. So, in order to avoid the legal hazards, Virgin Active needs to
follow and obey the administrative rules and regulations. Thus, the government’s contract
and agreement all classified documents should be recognised by Virgin Active in order to run
the business in a legal way. Moreover, with the help of legal issue, Virgin Active can take
help from the government regarding claiming any accidental benefits.
Competitive Environment
In order to recognise the current market objectives including potential threats and weakness,
Porter’s five force theory is playing an essential role in an organization. There are five
different forces are included in this model which hold personal significance and these forces
are bargaining power of customers, bargaining power of suppliers, threats of new entrants,
threats of substitutes and existing rival companies. Each and every force of this model will be
discussed below:
Bargaining power of the customers
The customer is one of the critical factors of any organization. Besides hat, customers only a
stakeholder of an organization who directly influences the profitability of an organization by
purchasing the products or services. On the other hand, with the help of the customer’s
supports, an organization can focus on its desired target and objectives. On the other side, in a
new foreign market, it is very difficult to determine the price strategy of the customers. In
other words, the people who belong from completely different religion holds unique
preference and price estimation strategy, along with that, the customer are get replanted for
the payment which needs to be aid the customer itself by perusing the service. Moreover, in
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the Chinese market, Virgin Active needs to pay more attention to this specific forces in order
to sustain and expand the business.
Bargaining Power of Suppliers
Suppliers are one of the major stakeholders of an organization who supplies the raw material
for producing goods and providing service to the customers. In this case, Virgin Active
seriously depends on the supply chain management of the Chinese market. Due to the typical
rule of the government of China, Virgin Active unable to bring Gym equipment and other
machines for the fitness club from outside of the country. In other words, all supply of gym
equipment will be provided by the state owned company of the China government. Also, the
demands are already high of the international market which may create some financial
problem for Virgin Active. Thus, the management of Virgin Active needs to contact more
than one suppliers of China in order to minimise the impact of the bargaining power of the
suppliers. Although, with the help of market analyse and accounting survey can be more
profitable for Virgin Active in order to save funds which can be used for future prospective.
Threats of new entrants
The threats of new entrants are one of the significant force of the model which includes a
substantial contribution. In this competitive market, every day a new small business is
growing up by a support of small investment. Besides that, the business of fitness clubs
includes a solid investment which can’t be possible for any private or small enterprise. So,
the possible rate of new entrants is comparatively low in the international market of the
China. On the other hand, the management of Virgin Active needs to pay more attention to
the new emerging market and regularly investigate if there any possibility created for new
fitness club’s arrival or not. If any strong competitor will come in the market, Virgin Active
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needs to implement low price strategy in order to retain their existing customers which can
also attract the potential customers because the customers basically price sensitive.
Threats of substitutes
The threats of substitute are not high in the case of Virgin Active because most of the fitness
institution are offering little competition. Across the international market of China, there is no
huge substitute exist. Along with that, Barrows stated that critical susceptibilities of a
competitive brand enhance the improved performance of the band as the substitute in the
market.
Threats of existing rivals
In terms of big giants of the international market of China, some existing companies are
controlling and ruling the current market such as Alexander Health Club, Megafit Club,
Miracle Fitness Club, Powerhouse Fitness club, Ozone Fitness Club, Bodyworks Fitness
club, Beijing Ouyi fitness club and Bally Total Fitness. The above-mentioned fitness clubs
are presently ruling the gym market of China, and they will give a strong competition to
Virgin Active. Along with that, Virgin Active needs to be prepared for a tough competition
with those giant companies which has a strong customer’s base. Moreover, the management
of Virgin Active needs to implement some effective competitive strategies to draw the
attention of the customers from those competitors to their fitness club.
Recommendation and Conclusion
According to the PESTEL Analysis and Porter’s five forces theory model, the scope of the
international business expansion of Virgin Active is very positive and beneficial. Apart from
that, there are some potential threats and barriers which be faced and also can be successfully
defeated by Virgin Active during the business expansion in the international market of China.
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Moreover, the management of Virgin Active needs to focus on the strategy of their leader as
Richard Branson’s employee satisfaction strategy. In simple words, Virgin Active needs to
appoint skilled and efficient local employees of China and provide them flexible working
place including a handsome salary. Moreover, with the help of effective competitive analysis
like Porter’s five force model, Virgin Active can get a clear impression about the
international foreign market which will be their target place for business expansion.
Furthermore, consumers desire to acquisition services or pursue services from businesses
they touch they tell and can belief, and known products give them that declaration. When
individuals are mindful of the organization’s trademark, they are alert of the constructive
features they signify. Extended earlier consumers get equipped to mark an obtaining; they
touch that they distinguish the Virgin Active Health Clubs and what sole worth they can
depend on. In order be strong and to be the most multipurpose and hardy business in China
and worldwide, firms should develop brand loyalty. Advertising is a key element for profit
expansion, powered by adequate service message.
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References
Dollinger, M. (2012). Politics, government, and business. Business Horizons, 55(5), pp.399-
401.
Fogarty, K. (2005). Health clubs. 1st ed. Glen Cove, NY: PBC International, Inc.
KUNY, Y. (2010). Federal Employees' Compensation Act. 1st ed.
Lowitzsch, J. (2009). Financial participation of employees in the EU-27. 1st ed. Basingstoke:
Palgrave Macmillan.
Miller, K. (2012). Strong local leadership, quality public services. 1st ed. London: Stationery
Office.
Young, L. (2013). The marketer's handbook. 1st ed. Hoboken, N.J.: Wiley.
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