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The Quiet Ascension of LA Fitness Case Solution & Answer

The Quiet Ascension of LA Fitness Case Study Solution

Introduction:

The building of the prototype club – LA Fitness in the year 1995 with the notion to increase the development in new localities. With the development of the club, it significantly provided its customers to pay through electronic withdrawal service. About two years after its establishment, approximately 75 percent of the members at LA Fitness wasfemale based on the fact that it was primarily designed to appeal to women. The early growth of LA Fitness was mainly driven by referreals. Other than women as the members at the club, LA offered time-bound memberships to the people over the age of 55 years and group classes i.e. SilverSneakers and Senior Fit.

In 1998, the LA Fitness successfully expanded its clubs to about 36 of which 21 was acquired in California. As LA prioritized the need to retain customers, the cash flow wasuneven in comparison to other players in the market due to increased payment for the group classes. By the year 2016, LA was primarily known as the leading chain of non-franchised fitness clubs in the North American region representing about 676 clubs, approximately 4.9 million members, and increased revenue growth i.e. over $1.9 billionsupported by the employment of about 24000 employees. (Ellsworth, 2016)

Problem Statement:

Despite the increased revenue growth and a successful leading position in the market, a number of issues have been faced by LA Fitness. The core issues that are influencing the growth of LA and poses a dilemma whether it would be able to maintain its growth mainly included the poor management of the organization in each club division, increased debt to expand the services across the different divisions. Furthermore, the organization lacks the security of the fitness culture at the club resulting in the increased dissatisfaction of the potential customers which might lead to a significant decline in the sales.

Analysis:

SWOT Analysis:

Strength:

  • LA Fitness is one of the leading fitness organizations offering its services to different age groups i.e. children, youth and older people.
  • LA group demonstrates its core focus primarily on the mid-price segment with full-line offerings including the offering of a variety of amenities.
  • One of the key factors behind the success of LA was its expansion strategy based on the well-defined protocol for the effective management of new clubs.
  • It significantly served approximately one thousand to fifteen hundred customers every day at the Fitness club.
  • It also offeredpersonal training to the members and the signed deals resulted in a significant increase in the traffic regardless of peaktime.
  • It represented creative skills in the redoing of the available spaces for the addition of amenities such as sports courts and pools.

Weakness:

  • The inefficient management of the club leads to increased occurrence of incidents that were mainly associated either with safety, harassment or discrimination.
  • The company lack employee retention as the hiring of the sales force was quite common due to which more part-time employees were working at the fitness club.
  • In terms of expanding the fitness service, the organization took adebt of about to about $2 billion.
  • The debt was considered to be used by the organization in refinancing its debt due to the uneven cash flows.

Opportunities:

  • Through the change in the organizational structure and the way how the business operations are conducted the customer satisfaction would be improved.
  • Actions against the security concerns will bring a reduction in the complaints and occurrence of sudden and increased incidents.
  • The hiring of professional, skilled and permanent employees would improve the customer interaction i.e. highly satisfied management-member interaction.
  • The management of different factors would allow the organization to experience increased sales growth assisting the Fitness club to effectively manage its debt and generate more profits.

Threats:

  • Inability or lack of focus to bring improvement in the organizational operations would lead to increased dissatisfaction of the employees.
  • Increased incidents would negatively affect the reputation of the club in the fitness industry.
  • The continuous decline in the sales would lead to increased financial instability, increased debt and might result in bankruptcy.

Porter Five Forces Analysis:

Rivalry:

Due to the lack of leading players in the market, the organization has been successfully expanding its services all over California and other regions of the United States. The increased expansion has led the organization to experience increased debt. Considering the performance of competitors in the fitness industry, they tend to provide customers with additional services positively influencing the customer experience. Despite the lawsuits faced by the organization, it had maintained its leading position demonstrating low threat of competition……………………………..

 

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