Executive Summary
This paper outlines a business proposal for a fitness center in Saudi Arabia for kids aged between 8 and 16 years. It analyzes the external and internal environments, the risks, the team, and prospective growth. The business proposal is quite viable owing to a number of factors.
For example, the economy of Saudi Arabia and its population present a healthy growth potential for business. The aim of this business is to curb the burgeoning problem of a sedentary lifestyle in Saudi Arabia. By targeting young people, the business is likely to grow a generation of health sensitive individuals especially considering the expansion objectives of the business to all major Saudi cities.
Business Idea
Children have grossly limited necessary outdoor activities. Hence, they have become more and more and more unfit and overweight. The youth centre and gym will have a specified range of cardiovascular and interactive fitness equipment specifically designed for ages 8 -16 years. The fitness centre even offers the latest and most sophisticated interactive games to help children engage in physical activity for longer periods. The focus is that youngsters can meet friends and socialize.
The centre will also have a dedicated nutrition section where nutrition plans will be tailor made for the customers. Moreover, the nutrition section also aims to educate the children regarding the subject so they can make smart and informed decisions when they are outside the youth centre in regards to nutrition.
Micro-Level Market Assessment
Target Market
The youth fitness centre will target kids of 8-16 years old. The kids will participate in activities that are different to those found in conventional gyms. Children with weight and obesity problems will also be a target for the facility. The fitness centre will give them a substitute to diet centres. The youngsters will exercise in a fun-filled and interactive environment. Additionally, the centre will impart valuable insights and knowledge regarding healthy nutrition.
Target Market: Size and Growth
Studies in Saudi Arabia show that there is close to 20% overweight prevalence rate. Close to 24% of the children, the fitness centre targets are obese (Obesity Research Center 2013). The rates are expected to keep rising owing to the sedentary lifestyles of most Saudis. This is naturally transferred onto their children.
This is compounded by the fact that there are no specifically designed gyms or fitness centres for young people. The centres would incorporate special needs for the young people. Hence, the business idea is likely to cure this problem by providing parents with opportunities to take their children for training (Obesity Research Center 2013).
Macro-Level Market Assessment
PESTEL Analysis
Political
Saudi Arabia entered WTO in 2005. The business environment in the country became more transparent and predictable. The taxation regime and rules in the country are clear and concise. For instance those that are subject to tax are:
- A resident capital company which owns non-Saudi shares
- A resident non-Saudi who carries out business in the country
- A person engaged in producing oil and other hydrocarbons, among others
The political climate in Saudi Arabia is also excellently serene with no major problems. This environment makes it easy for business (Central Intelligence Agency 2013).
Economic
Economically, the country is recovering from the effects of the global financial crisis and it is yet to grow exponentially. However, the economic recovery offers the fitness center with potential increased activity with many children visiting the center for health purposes. The country also rakes in high oil business providing the perfect place to do business. The following is the summary of economic performances in Saudi Arabia.
GDP $906.8 billion
GDP growth: 6.8%
GDP per capita: $24,500
By sector:
Agriculture 6.7%
Industry: 21.4%
Services: 71.9%
(Source: Central Intelligence Agency 2013).
The services sector as indicated above is quite robust. Saudis have a huge disposable income and would not find it hard to pay for the services offered to their children at the fitness center.
Social
The demographic nature of Saudi Arabia is such that the country has a population of close to 30 million (Obesity Research Center 2013). Close to 30% of the population fall within the criteria, the fitness center is interested in (Obesity Research Center 2013). The following is the Saudi age structure:
Age structure:
0-14 years: 28.8%
15-24 years: 19.8%
25-54 years: 44.2%
55-64 years: 4.1%
65 years and over: 3%
(Source: Central Department of Information and Statistics 2013).
Further research indicate that over 50% of the children between the ages 8-16 have weight issues ranging from overweight to obesity. This shows that the sedentary nature of the Saudis.
Technological
Most of the technological innovation in Saudi Arabia is connected to the oil refining industry. The Technological environment in Saudi Arabia is still at a very young. Most of the technology is being imported from Europe, East Asia, and North America. Hence, there is a huge gap for introduction of technological advances in almost all sectors of the economy (Solis, 2011).
Legal
The legal environment in Saudi Arabia is relatively predictable. The kingdom does not have the porous nature of a democracy where laws are constantly changed. The country is more inclined to values than laws. Hence, the business will not have an unpredictable legal environment.
Environmental
The fitness center will operate in a business environment whose major parameters are known. For example the competitors are not allowed to play dirty the business environment is bound by the code of conduct. Additionally, the business will shape its environment. A business will likely enjoy a better environment depending upon the relationship it establishes with its clientele.
Macro-Level Industry Assessment
Porters Five Forces Analysis
Threat of New Entrants
The economies of scale current players are experiencing, the level of product differentiation, and the capital required to begin operations in the industry determine this force. The Saudi fitness industry has comparatively moderate obstacles when it comes to entry into the market. Large fitness centers already experience huge economies of scale because of widespread operations and have the advantage of experience.
There is the threat that the existing traditional gyms might want to expand their products line and compete for the market. The capital requirements for entering the market makes it more difficult to obtain for new entrants as we estimate a cost of SAR 1.5 Million – SAR 2.5 Million. Moreover, we expect the fixed costs to be approximately SAR 1,150,000 per center. Access to suppliers is also difficult as not many suppliers globally focus on fitness equipment for 8-16 year olds.
Supplier Power
The bargaining power of suppliers is high if there are few suppliers and many buyers and if the product supplied is critical to the buyer’s business. In the Saudi Fitness industry, there are many independent players. Hence, the bargaining power of a fitness center as conceived in this paper is relatively low.
The suppliers for the equipment are international corporations as there are no available suppliers within the country. The suppliers are also concentrated as there are not many manufacturers of kids training equipment. The suppliers have a high to moderate power, as they are the only manufacturers of the products that are different to those of adult gyms. In this case, the supplier will be “KidsFit”, who are global leaders in the manufacturing of youth cardiovascular and resistance equipment.
Buyer Power
The power of buyers is high. There are very many buyers and the market is fragmented. Fitness services buyers seldom make collective purchase decisions in order to minimize costs. Usually, individual buyers decide what products to buy. Corporate buyers have slightly higher power but they are rare in this case.
Fitness is perceivably not a critical commodity. This gives the customer an upper hand and heightens the buyer’s bargaining power. The buyers currently only have traditional gyms to go to which does not cater to their interests which is why youth fitness center will offer product differentiation that will suit the target market (Obesity Research Center 2013).
Threat of Substitutes
Alternate products serve almost a similar function as the product that a business produces. However, it may not be in the same product line. There are few substitutes for a fitness industry as services are similar. The major alternative for fitness participation is a sedentary lifestyle.
Competitive Rivalry
Product differentiation for the youth center will be the main competitive advantage. There is the threat that the existing traditional gyms might want to expand their products line and compete for the market. Moreover, the suppliers have a high to moderate power, as they are the only manufacturers of the products that are different to those of adult gyms.
Micro-Level Industry Assessment
Price
The price of a yearly membership will be approximately SAR 4500. The forecast is that within the first year, 350 new members will join.
Costs per Centre:
Fixed costs, total = SAR 1,150,000
- Rent: we believe it will cost SAR 500 per square meter. Size need between 1000-2500 Sq. mtrs (SAR 500,000- SAR1,250,000)
- Head trainer x 1: SR 70000 per year
- Trainers x 10” SAR 50000 per year per employee
- Receptionist x 2: SAR 45000 per year per employee
- Nutritionist x 1 SAR 65000 per year per employee
One off costs:
Equipment: SAR 1000 per square meter (SAR 1 Million – SAR 2.5 Million)
Marketing Strategy
The target market for the business is young people. Some are likely to be highly educated and working in the corporate world while others are kids. This means that they will have high demands in terms of quality. They will also have high information needs. The customer should be earning enough to be able to spend on fitness.
The following will be the overall marketing strategy majorly employed (Obesity Research Center 2013).
The youth fitness centre will move to reach its target market through local schools. Local schools will be able to offer their students special rates to join the youth centre. Moreover, the local schools will also be given commissions of 5% based on the number of student referrals. The youth centre will first be present in Dammam, Saudi Arabia. The plan is to have at least one centre in each major city within 6-7 years. The following is the plan of spreading out.
- Khobar (year 4)
- Riyadh (year 6)
- Jeddah (year 6)
- Mekkah (year 7)
- Madinah (year 7)
Unique Selling Proposition
The youth gym will have a specified range of cardiovascular, resistance and interactive fitness equipment specifically designed for ages 8 -16 years.
The following are the specialized youth fitness equipment provided by suppliers and their costs.
Specialized interactive fitness equipment
- Active floor and wall
- XBI-bikes with PlayStation gaming
- Specialized cardiovascular equipment
- Dance Mat Zones
- Vew-Do Boards
The youth centre will also offer nutritional service such as the following:
- Nutritional and health analysis
- nutritional plans or diets
- Nutritional education
- Appropriate meal and snacks suggestions (Leigh, 2009).
Team Assessment
Team leader 1:
A current masters students with a bachelor in business management. The team member also offers financial background where he has a CF30 qualification by the financial services authority (FCA now) in addition to working 2 years as an asset investment manager.
Team leader 2:
A former business development employee of one of the biggest fitness chains in the eastern province in Saudi Arabia with relevant experience in fitness centre construction and expansion.
They will be supported by
1 x Head trainer:
- Developing training sequencers and strategies
- Creating training materials, manuals to support staff and customers
- preparing and supervising trainers
- Organizing feedback and reports on training, and goals.
- compliance with safety legislation
10 x Trainers
- Implementing head trainer strategies
- Report progress of customers (health and weight)
- Reports to head trainer
2 x Receptionist
- Sales
- Administrative tasks
- Promoting the business to potential customers
- Deal with complaints and general enquiries
1 x nutritionist
- Analysing tests
- Recommending nutritional plans or diets
- Nutritional education
- Appropriate meal and snacks suggestions
- Observing progress
Team’s Mission, Aspirations, And Propensity for Risk
The team’s mission will be to work as a group in delivering the promises of the youth center while ensuring that it grows to other cities. The aspirations will be to rid Saudi Arabia of the problem of obesity and overweight by promoting a culture of keeping fit. This will start from a tender age so that it grows within somebody. The team will take measured risks to remain in business and without compromising the business motives.
Team’s Ability to Execute on Critical Success
The following are the critical success factors.
- Format: The center will offer a wide variety of activities from classes to sports-specific training that are detailed to the interest of 8-16 year olds
- Location: The location should be easily accessible to the target market. The location must be central, close to schools and possibly even near traditional gyms as this will allow parents to drop off and pick up their kids at the center before and after they go to the gym (Obesity Research Center 2013).
- Staff: The fitness instructors should be experienced professionals and hold certifications from organizations. It would be also be preferable that some staff member have prior experience in dealing with youngsters.
- Safety: The layout and instructions of the fitness center needs to promote a safe environment and help avoid injuries.
- Insurance: Liability insurance must always be up to date; this can be done by paying premiums early. Liability protection can keep the center going even in the event that a customer is injured and wants compensation (Obesity Research Center 2013).
SWOT Analysis
Strengths
The center will offer specialized equipment for kids. The fact that it will also offer nutrition training will serve to increase competitive advantage. Additionally, the center will feature games and other products specifically designed for young people, which create fun while participating in the program.
Weaknesses
The targeted market is highly dependent on the parents’ approval and funding. Hence, the marketing approach that employs a pull strategy. The strategy may not work and the center may experience low numbers. Additionally, the cost of setting up is quite high and the process of recouping the investment may be too long.
Opportunities
The population of Saudi Arabia continues to grow. The target markets’ population is especially experiencing tremendous growths. Hence, the center will experience continuous business. People in Saudi Arabia do not take their health seriously and the fact that the center will sensitize children means a generation of health conscious people will be born. This is good for future business.
Threats
Entry of new competition
There is the threat that the existing traditional gyms might want to expand their products line and compete for the market. Many traditional gyms in Saudi Arabia such as fitness first and fitness time have a strong presence in the fitness industry in Saudi Arabia where they also have a significant budget for business development.
Supplier threat
The centre will be very dependent on the suppliers in order to differentiate itself. There is the threat that the supplier “kidsfit” will start supplying future competition, which will significantly reduce the competitive advantage of the youth fitness center. Moreover, if the suppliers encounter difficulty it will most likely affect the youth centre as well.
Summary and Conclusions
The fitness center is a viable business. As noted above, Saudi Arabia has a huge population with surging numbers of kids experiencing lifestyle problems at a tender age. The government has failed to do something. The consequences may be catastrophic. However, it is also a perfect business opportunity.
The business will experience growth as noted by the analyses above because Saudis have a huge disposable income. The economy has been performing well because of oil sales. Additionally, the fact that the business plans to enjoy the goodwill of both supplier and market is likely to affect positively to its growth.
Reference List
Central Department of Information and Statistics 2013, Latest Statistical Releases. Web.
Central Intelligence Agency 2013, The World Fact book: Saudi Arabia. Web.
Leigh, B 2009, Anatomy of Strength and Fitness Training for Speed, McGraw-Hill, London.
Obesity Research Center 2013, Obesity in Saudi Arabia. Web.
Solis, B 2011, Engage: The Complete Guide for Brands and Businesses to Build, Cultivate, and Measure Success, John Wiley & Sons, Melbourne.