The Academy: Evaluating Growth Alternatives Case Solution
The Academy, a local cross fit gym, is located in Kitchener. The company’s management is concerned about finding different ways of investment in the business. John Sharp, the co-owner, needed to find out alternatives to make the business more profitable. In order to expand the gym’s growth in future; John Sharp was confused on the two options, which were: opening up a new gym facility in a new location or upgrading the equipment of the existing facility. In order to analyze the alternatives financial statements of The Academy gym are put into consideration in order to advise John Sharp on the better option of growing the business in the future.
2. Problem Statement
The Academy management and its co-owner John sharp are concerned about finding out the expansion opportunities for growing the business profitability and its growth. Moreover, two possible solutions had been figured out for consideration. Jon Sharp had to decode among the two alternatives of growing The Academy’s business. The two alternatives included the upgradation of the existing gym facility and opening up another gym facility in a new location (i.e. East end of Kitchener).
3. Investment Alternatives
The case revolves around the two alternatives for investment where the owners are concerned to expand their business. The first is upgrading the facility and the other is expanding to other opportunity. However, upgrading would take the less investment but expanding would require higher investment.
3.1 Alternative 1: Facility Upgrade
The facility upgrade would create significant investment where the additional classes of different courses would be added, such as: athletes etc. It would also acquire to add on the equipment’s in the academy and reorganize the structure internally. This would also open the gateway for including new members in the academy where they would increase their stake holders as compared to their rivalry academies.
Sharp has the alternative to add the additional classes where they can increase their revenue and also students of the classes. This would decrease the operating expenses and maximize the net profit of them. It is the fortunate condition for them to increase their classes and upgrade the facility in the existing academy.
3.2 Alternative 2: Expansion Opportunity
The other alternative for the firm is to expand its academy where they can implement the satellite facility for the potential member where they can easily track the location for best academies. Moreover, the expansion opportunity is quite favorable where then expand the business with relevant category and generate the 40% revenue of the academy. The other factor is the academy may have the decrease in net income because of high operating expenses in expansion in new place. The expansion opportunity can bring the capacity of including the greater number of students because of increase in classes and additional space. The expansion can increase the business and profitability in coming years.
4. Situational Analysis
4.1 PEST Analysis
The political factors of any country influence in the businesses a lot. As the Academy of fitness is concerned, the political condition in Canada is sustainable and business policies are favorable. The per capita income is much better than other countries and Ontario is the highest populated city in Canada. The political condition is quite good and the government has made the significant policies for businesses. The fitness academy can have the better political factors in the city.
Economic factors are also the major issue for nay business. A business can run in the stable economy where the inflation rate and economic condition would be significant. The living standard of people must be good. In Ontario, the inflation rate is normal and not much higher than other regions. The economy is sustainable and the business policies are adequate. The owners of fitness academy can run their business because the economic condition and tax policies are quite favorable.
The social factors which involves the social and ethnic of the people. The fitness industry is quite demanding and high market concentration level in Ontario because people are conscious about their health and life. The owners can run their business because they have the social factors which are favorable and impacts significantly towards their business. Moreover, the demographics of the people includes the higher ratio of men which would love to join the gym and the fitness academy.
The legal factors are also the major factor which is kept while starting and expanding any business. Ontario’s legal factors are significant where the legal laws are implemented and intellectual property of any business is safe. Moreover, the government monitors the businesses and make the significant laws for the businesses. The policies are adequate which aids in expanding the businesses in the city.
4.2 Value Chain Analysis
The value chain analysis comprised of the supply chain analysis where the analysis are done from the raw material to the end customers. The Academy: Evaluating Growth Alternatives Case value chain analysis are described below;
The primary activities consist of inbound logistics, services, outbound logistics and sales of the company. However, the academy has the services of fitness where they provide the classes of fitness and gym training. Their students are in greater number which increase the sales of sale and provide them good net income. Moreover, the academy is concerned with the gym and fitness sector. They have to deliver the service by obtaining the trainers who trains the students. The primary activities of the academy have comprised of providing services to the students.
The supporting activities to deliver the primary activities are procurement, human resource management, technology and internal structure of the academy. The academy has the efficient technology where they have the machines for fitness and gym .Moreover, the staff is good and highly expert trainers which provide the tremendous trainings to the students. Moreover, the internal structure supports to provide the training. The infrastructure of the academy is developed where they have the compete ambience of gym and fitness institute with proper facilitation…………………….
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