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The American economy is undergoing fundamental change. Due primarily to globalization, industries continue to innovate and change. In particular, the rise of the information age has altered the manner in which business is conducted. Technology has now become an integral aspect of all business operations. In many industries however, technology has had very little impact on the fundamental operations of the business. It is these businesses that are unlikely to undergo fundamental change that are particularly appealing to me. For one, these businesses are relatively stable over the long-term. Earnings, profits, and revenues may increase or decrease over subsequent periods. The underlying business however will remain intact. As such, the business that I will own will be a fitness center.
A fitness center is relatively stable in its value proposition to society. More than one billion adults worldwide are overweight. In the United States alone obesity is responsible for an estimated 300,000 deaths annually. What's interesting is that nearly all of these deaths are preventable through proper exercise and nutrition (Lee, 2012). A direct result of our nations current obesity epidemic is the subsequent ill affects from our behavior. With obesity comes a litany of potentially fatal health conditions that result in a lower quality of life not only for the individual, but for society in general. Health care regulation causing overall costs to rise, the baby boomer generation retiring, and a growing obese population damage the entire society in which we live. The main culprits of this epidemic are various forms of coronary heart disease, high blood pressure, and excessive levels of fat. Its effects are far reaching as they are numerous (Reamy, 2009). The chart below depicts obesity rates worldwide.
As the chart indicates, CHD has implications for the world if left to grow unabated. The pervasive nature of health concerns worldwide, I believe, makes a fitness center an ideal candidate for a business. The need for health is very widespread. Foods are very unhealthy, diseases such as CHD continue to manifest themselves throughout the world, and individuals want to look youthful. All these factors bode well for my business operations as many of these health concerns can be eliminated through proper diet and nutrition (Morris, 1958)
Formulate an operations strategy for your business.
To begin the operations strategy will at first rely on a heavy fixed cost structure. The operations of the business will therefore be fixed irrespective of customer traffic or membership. Aspects such as workout equipment, basketball courts, locker rooms and so forth all require extensive fixed cost investments to begin with. Our operations strategy will rely on first securing financing for this fixed cost investments. Today's interest rate environment is relatively low. As such, I believe that interest expense for the business will be relatively low as compared to historical averages.
Once financing is secured for the fixed cost investments, variable costs must then be added. These variable costs include maintenance personnel, desk attendants, personal trainers and management. Being a start up business, many of these variable costs will be limited in nature. For instance, personal trainers will be independent contractors, only getting paid when they bring a client into the gym. In many instances, management will serve multiple functions within the overall operations of the firm. For example, management may also need to attend the front desk, while monitoring members in the gym. This multitasking ability will be critical as the business begins operations. The business will be positioned as middle market offering with many options and amenities. The quality of the business must be flawless in regards to the operations strategy. The quality of equipment, facilities, lockers, bathrooms and so forth will be used to show the customer a very compelling value proposition. As such, multitasking and being knowledgeable at multiple positions will be an integral aspect of the operations strategy.
The final component of the operations strategy will incorporate cross selling of various products to members and visitors. This cross sell strategy execution is critical to the success of the business. As member or visitors enter the building, our staff must be able to effectively sell products to help within their fitness needs. For example, members may need personal training services, or fitness evaluation. Our staff must be able to sell the benefits of each of our product offerings in order for the operations of the business to continue in an effective manner.
This cross sell strategy is important in the overall operations strategy for numerous reasons. First, it helps differentiate the business relative to competitor in the field. Second, it allows our brand to represent the quality and diversification that our offerings provide. Our brand will ultimately attract customers who desire quality at a reasonable price. Finally, cross sell drives overall customer loyalty. As more members have more products with us, they will be less likely to leave to a competitor offering similar products. Our operations strategy positions the company to be best in class within its respective niche. As such the strategy will allow the company to capture market share from competitors.
Explain how your operations strategy impacts product design and process selection for your business.
The operations strategy impacts product design in a profound manner. First, our products must be scalable across the entire organization. Being a start up, products must appeal to a majority of our smaller customer base. Products such as cycling classes or aerobics classes appeal to a wide range of customers and are scalable. This coincides with both our multitasking and cross sell strategy. In regards to the multitasking component mentioned earlier, our personnel must be competent in multi-facets of the business. Therefore, the products we offer must be understood by all our staff and subsequently implemented in a quality manner. Cycling classes, many of our personnel can learn to teach and implement effectively, as the product is scalable. Our business can then sell this product to our customer base as it appeals to a wide array of our constituents. A Hip Hop Dance product however, would not be an ideal product offering as it doesn't appeal to a wide array of our customers. It instead, appeals to only a niche market within an already small base. Our personnel would not be able to easily and seamless implement this class into their knowledge base. It takes time to learn hip hop dances, and to subsequently teach it to others. As indicated above, our strategy is to be a quality organization at a reasonable price. The Hip Hop Dance product offering would be subpar due primarily to personnel competencies and therefore not reflect the brand image the organization is attempting to build.
In addition, our products must generate recurring revenue as oppose to simply one time gains. Our strategy mentioned above, focuses on cross sell to drive customer retention. The model therefore focuses on revenue from customers that are loyal and purchasing multiple products from the company. Our products must then reflect the need to generate loyalty. Services such as personal training for instance build customer relationships and loyalty. As the personal trainer, the client has a very intimate relationship with the individual. If the relationship is strong, the client will provide the business with recurring revenue for years to come. In addition, the client will be less likely to leave in the event that a competitor enters the market. The personal training product therefore coincides with our strategy of deepening relationships with members, generating recurring revenue, and thus building a loyal customer base.
Third, our products must be easy to implement but difficult for our competitors to replicate. This relates to the relationship aspect of our brand and service. In many instances, the fitness industry is much like a commodity. There is very little differentiation between workout equipment or basketball courts, or locker rooms. What makes he difference will be the client relationship. The feeling of genuine concern for the customer and desire to fulfill their fitness needs cannot be replicated by competitors. The great and favorable experience the company delivers to its customers can not be duplicated by competitors. As such, our products and strategy focus on delivering a differentiated experience that resonates with our members.
Determine the key components of supply chain management for your business including structuring, sourcing, purchasing, and managing the supply chain.
The company supply chain will be limited in that many of the components of the business have long useful lives. Deprecation of fitness equipment is very slow. Equipment can last for many years without significant innovations or changes. As such our supply chain will be strong, but not used as extensively as other forms of business. Purchasing for instance, will be sporadic and predicated on the needs of the business. The key components of the supply chain will therefore be reliability and timeliness.
Examine how the total quality management process is a strategy for a competitive advantage for your business.
Total quality management will be a competitive advantage for the firm in numerous ways. As…[continue]
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