Saudi Arabia Fitness Centre: Company Description Report

Executive Summary

This paper outlines a business proposal for a fitness centre in Saudi Arabia for boys aged between 8 and 16 years. It analyzes the external and internal environment, the risks, business teams and conditions, and the prospective growth. The business proposal is quite viable owing to a number of factors. Firstly, the economy of Saudi Arabia and its population presents a healthy potential growth for the fitness 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 into a generation of health sensitive individuals considering the intention to expand the business into all major Saudi cities.

Company Description

Promoters, shareholders, and the board

Having realized the obesity tragedy in Saudi Arabia, a group of youths came up with the idea of establishing a health and fitness centre. The main promoters of the fitness centre comprise of a group of young individuals who are advocating on the importance of healthy living. Currently, there is no particular shareholder of the intended investment, and the group of youths intend to borrow funds from Angel Investors.

In future, the fitness centre plans to have its initial public opening, where, it will have its stock listed in the Saudi’s stock exchange market. The management structure of the venture will comprise of two directors, and several employees in the administration department, training department, and the nutrition department. One of the managers will have articulate business management skills while the other manager should have some experience in managing a fitness centre. All employees will report to the two managers, whereas, the managers will forward their appeals to the board of directors.

Services offered at the fitness centre

As indicated, the centre will mainly focus on the physical well being of all its members. The trainers will ensure they help overweight members to shed off some weight through vigorous activities, and they will help normal-weight members to maintain their physical well-being. At the initial stages, the centre will offer their services to boys aged between 8 and 16 years. However, with time, the centre will welcome female members of the same age group, and it will proceed to offering its services to the adults.

Other than the physical exercises, the centre will have a dedicated nutritionist who will tailor the nutrition concerns of the clients. Young boys, especially those aged between 8 and 10 will obtain nutrition education. The nutritionist will enlighten the boys of the best eating habits that would upgrade their health. The youth gym will have a specified range of cardiovascular, resistance and interactive fitness equipments specially designed for youngsters. Specifically, the nutrition services to be offered at the centre are as follows.

1. Nutritional and health analysis
2. Nutritional plans or diets
3. Nutritional education
4. Appropriate meal and snacks suggestions

Long term aims of the venture

The team of young youths will purpose to deliver the promise of reshaping the lifestyles of the young boys. The youths will work together to ensure that they fulfil their aim of eradicating obesity in Saudi Arabia. Although the fitness centre will start at low grounds, its vision is to grow into other cities. The promoters of the fitness centre will aim at bringing awareness of the healthcare conditions that obese and overweight people encounter. They will promote the culture of keeping fit, and in spite of all the challenges that might occur, the team will keep on with the spirit of remaining in business without compromising the business motives.

Objectives

The main objectives of the young youths are to attain various milestones in every year. The objectives are as listed below.

1. To have registered a minimum of 350 members into the fitness program by the end of the first year;
2. To have a turnover of approx. SAR 1,575,000, and to have a variable costs of not more than SAR 1,308,750 by the end of the first year;
3. To manage to service the loan that will help in raising the start up cost for equipment by the end of the first year;
4. To manage to break even by the end of the second year, and start gaining some profit in the third year of operation;
5. To have registered at least 600 members, which equates to 14.6% of the target market of the selected schools by the end of the third year;
6. To be established, well known to the public, and to comfortably raise the membership fee from SAR 4500 to SAR 5000 in the fourth year.

S.W.O.T. Analysis

Strengths

A stringent analysis of the existing fitness centres reveals that there is a deficit in their service provision. Therefore, the fact that Saudi Arabia fitness centre will offer the latest and most sophisticated interactive games to help the boys to engage in physical activity for longer periods is a great strength. Moreover, the youth centre and gym will enable the youngsters to meet friends and socialize. The specialized interactive fitness equipments that would strengthen the fitness centre are as listed below.

1. Active floor and wall in the training rooms
2. XBI-bikes with PlayStation gaming
3. Specialized cardiovascular equipment
4. Dance Mat Zones
5. View-Do Boards

Boys aged between eight and twelve years will have specialized equipments to meet their needs. Most importantly, the fact that fitness centre will offer nutrition training will serve to increase its competitive advantage. Additionally, the center will feature games and other products specifically designed for young boys to have fun while participating in the program.

Weaknesses

As indicated, the program starts by targeting a small group of individuals. Moreover, boys aged between eight and 16 years are too slippery, and dealing with the group is too demanding. The newly trained employees may have difficulties handling the group. Another major weakness is the fact that the boys depend on their parents’ approval and funding. Therefore, the promoters may have difficulties in marketing the program and they may employ a pull strategy. The strategy may not work efficiently, and the centre may experience low enrolments. It is worth noting that the start up cost is quite high and the process of recouping the investment may be inefficient.

Opportunity assessment

Indeed, the increasing number of obese children in Saudi Arabia is a clear indication that there is a need for a fitness centre. Studies in Saudi Arabia show that there is close to 20% overweight prevalence rate (Central Department of Statistics and Information 2013b). In fact, 24% of the children are obese, and the rates are expected to keep rising owing to the sedentary lifestyles of most Saudis (Department of Paediatrics 2010).

A customer survey in 20 parents proved that the youngster’s fitness centre was indeed a viable business. About 80% of the respondents said their children only exercised in schools in one or two days (Obesity Research Centre 2013). More than a half of the parents would not take their children to convectional gyms as they are unsafe, and interestingly, 70% of the parents would enrol their children in youngster gyms if there were one present. From the survey, it is clear that there are no specifically designed gyms or fitness centres for young people. Therefore, establishing a fitness centre for young boys would be a great opportunity to capture the unfit boys. Saudi Arabia fitness centre will be the safest place for children, and parents will indeed find it worthwhile to register their children, which will be a great opportunity of growth and expansion.

Threats

The greatest threat in establishing the fitness centre is the existing traditional gyms. With the evolving technologies, the existing traditional gyms might want to expand their products line and compete for the market share. Many people strongly recognize traditional gyms such as Fitness First and Fitness Time centre in Saudi Arabia. Therefore, such a fitness centre would be a great threat to upcoming fitness centres.

Another threat for the fitness centre venture is the recovering economy that forces people to budget all their monies in business developmental projects. It is noteworthy that Saudis have a huge disposable income, and in usual economic conditions, they would not find it hard to pay for the fitness services. However, with the recovering economy, some Saudis would have very little money left to spend for fitness programs, as they would find it luxurious.

The fitness centre is dependent on the suppliers of various equipments and children’s outfits. The few suppliers in the market may decide to inflate the prices for selfish reasons, which is a great threat to the Saudi Arabia fitness centre. Moreover, there is a very high possibility of experiencing supply shortages frequently. The supply shortages are a great threat to the small fitness centre (Rae 2007).

Market Analysis

From a critical analysis, it is evident that the current young population needs a health and fitness centre where the youngsters can exercise comfortably without intimidation. The current gyms are meant for the adults, and youngsters who join the adults to train feel intimidated. Indeed, there is a viable market for the fitness centre for the youngsters as described in the following market analysis.

Macro business analysis

This analysis focuses on the factors that the business will be incapable of controlling. The PESTEL analytical framework considers the Political, Economic, Social, Technological, Environmental, and legal factors of the industry in which Saudi Arabia Fitness Centre operates.

Political factors

Saudi Arabia entered WTO in 2005, and since then, the business environment in the country became transparent and predictable. The taxation regime and rules in the country are clear and concise; therefore, the group of youths intending to establish a fitness centre will experience some smoothness in registering and running the business (Department of Zakat and income tax 2012). The taxation laws are simplified; for instance, people and companies subjected to tax include:

1. Resident capital companies owning non-Saudi shares
2. Non-Saudi residents who carry out business in the country
3. People engaged in producing oil and other hydrocarbons.

Indeed, the political climate in Saudi Arabia is excellent, and new businesses will enjoy the serene work environment with no major problems (Doing business in Saudi Arabia 2009).

Economic factors

Saudi Arabia is recovering from the effects of the global financial crisis, and it is yet to grow exponentially. Although the recovering economy is a threat to an upcoming fitness centre, it will offer the centre with an opportunity to have new residents desiring to enrol their young boys into the fitness program. The fact that Saudi Arabia rakes in high oil business would provide a perfect place to do business, as foreign income will be circulating in large numbers. The following summary of economic performances in Saudi Arabia is a clear indication of a thrilling economy that will offer an ample business environment in the future.

1. Average GDP is $906.8 billion
2. Average GDP growth is 6.8%
3. The average GDP per capita is $24,500

The agriculture industry contributes to about 6.7% of the nation’s GDP; the production industry contributes 21.4%, while the service industry has a contribution of more than 71.9% of the GDP (Central Intelligence Agency 2013). From the above economic analysis, the service industry in which the fitness sector will operate is quite robust. Therefore, Saudi Arabia fitness centre will have a great opportunity to thrive and contribute to the economic growth of the country.

Social factors

Saudi Arabia has a population of about 30 million people, where, about 30% of the people are either obese or overweight (Saudi Arabia Demographics 2013). With the rise of obesity-related medical conditions, the affected individuals will definitely need the health and fitness services. Saudi Arabia’s age structure is as follows.

• 0-14 years: 28.8%
• 15-24 years: 19.8%
• 25-54 years: 44.2%
• 55-64 years: 4.1%
• 65 years and above: 3%

A critical analysis of the age structure implies that the population has some significant number of youngsters aged between eight and sixteen years (Saudi Arabia fact book 2012). Further, research indicates that over 50% of the children between the ages 8-16 have weight issues ranging from overweight to obesity (Central Department of Information and Statistics 2013a). This shows that the sedentary nature of the Saudis. Therefore, Saudi Arabia fitness centre will have a great opportunity in scooping large profits after its full establishment.

Technological factors

The presence of the oil refining industry in Saudi Arabia has played a great role in upgrading technology in the nation. Saudi Arabia’s citizens are able to import improved technology from Europe, East Asia, and North America. Therefore, the fitness centre will have an advantage of being able to import latest fitness equipments with much ease. Since the youths who intend to establish the fitness program are enlightened, they will take advantage of the young technological environment in Saudi Arabia to gain a competitive advantage. The youths will buy the latest fitness equipments to fill the technological advancement gap before the existing gyms discover the new technologies.

Environmental factors

It is encouraging to note that the business environment in Saudi Arabia is free from impurities. No competitor is allowed to play dirty business games at the expense of those in the same line of business. The Saudi Arabian business environment is bound by a code of conduct that obligates the businesspeople to be answerable to all their actions (Muffet 2010). Therefore, the fitness centre will operate in a business environment with known parameters. Additionally, the business will shape its environment, and it is likely to enjoy a better environment depending on the relationship it establishes with its clientele.

Legal factors

The legal environment in Saudi Arabia is reliable and predictable. The kingdom does not have the porous democratic nature that changes laws constantly. Essentially, the country is inclined to values than laws, and the fitness venture will enjoy working in a favourable legal environment.

Target market

The fitness centre venture will target adolescent boys. Most of the boys aged between eight and sixteen years are students who are dependent on their parents for financial support. Therefore, the parents will sign up for their kids to join the fitness program. The parents will have high demands in terms of quality. They will be inquisitive about the program, as they would want value for their money. Therefore, the program managers will instil the patience virtue in all the employees of the fitness centre, who will have to answer the same questions repeatedly..

The youth fitness centre will reach its target market through local schools. Local schools will be able to offer their students with special rates to join the youth centre. To motivate the local schools, the students will receive a commissions of 5% based on the number of student referrals. Therefore, in case of a school referral, the following procedures will follow.

Firstly, the youth centre will be based in Dammam, Saudi Arabia. Thereafter, the group of youths intend to expand and have at least one centre in all major cities within the first seven years of operation. The plan for spreading out is as follows.

1. Opening a new branch in Khobar in the 4^th year
2. Opening a second branch in Riyadh in the first half of the 6^th year
3. Opening a third branch in Jeddah in the second half of the 6^th year
4. Opening a fourth branch in Mekkah in the first half of the 7^th year
5. Opening a fifth branch in Madinah in the second half of the 7^th year

Market trends

The fitness centre is likely to take the primary markets trend that would have repeated market trends on a yearly basis. Essentially, the four seasons, winter, summer, spring and autumn will determine the market trend as they determine the periods during which students are on or off the school sessions. Moreover, students would prefer exercising more during winter than during summer. Therefore, the fitness centre will record maximum profits during favourable workout seasons. However, with the increasing population, and the enhancement of technologies, the seasons may have little effects on the workout times.

The tremendous population growths may cause the market trends to adopt the secular trends. The continuous emphasis on physical well being will inspire the Saudis to take health matters seriously. The children will become great inspirations to their parents, and the more parents would enrol their children into the fitness program. Therefore, the fitness program is likely to have an increasing market trend in future.

Competitive advantage

The greatest competitive advantage that the fitness centre has is its location. The centre is conveniently located to capture the interest of the children. Secondly, the equipments to be installed in the fitness centre are incredible for the targeted population. It is noteworthy that the business has a renewable life cycle and will produce returns indefinitely. Moreover, in relation to opportunity creation, the centre will try to expand into traditional gym markets. The women fitness centres, for example, are underdeveloped. The intention to expand into that market will make the fitness centre to have a competitive advantage.

Profile of competitors

One of the main competitors in the market is the Fitness First and Fitness Time gym. The gym has existed for a considerably long period. The Saudis know the gym very well, as such; it has a large market share. However, the gym does not have a suitable fitness centre for the youngsters. Therefore, Saudi Arabia fitness centre for young boys will scoop the youngsters who are in desperate need of the fitness services.

Benefits to clients

The youngsters who have grossly limited necessary outdoor activities will have an opportunity to exercise and shed off excess fats (Leigh 2009). They will have an opportunity to interact and share with their peers in a comfortable environment. Moreover, the parents will have value for their money. The chart below summarizes all the activities that will generate benefits to the customers.

Pricing strategy

Yearly membership will cost youngsters approximately SAR 4500. The forecast is that within the first year, 350 new members will join. The amount would vary across the years depending on the following factors.

1. Prices charged by the competitors
2. competition level in the market
3. customers’ perception on quality of the services of the fitness centre
4. Production and overheads costs
5. The customers’ bargaining power

Competitive strategy

Product differentiation and high quality services will be the main competitive strategies. For the youth fitness to do well and stay ahead of the competition, the executives will employ the following competitive strategies.

Format

The centre will offer a wide variety of activities ranging from classes, sports, and specific training that are interesting to the 8-16 year olds.

Location

The location of all the new branches will be easily accessible. The location must be central, close to schools and possibly, near traditional gyms. This will enable parents to drop and pick their children from the centre during their gym sessions.

Staff

The fitness instructors will be experienced professionals with credentials from recognised institutions. Prior experience in dealing with youngsters would be an added advantage to the staffs.

Safety

The layout and instructions will promote safety and avoid injuries at all cost.

Insurance

The centre will have updated liability insurance to protect all the customers who are injured during the workout.

Staffing and Operations

Management Organisation structure

Director 1

1. A current masters students with a bachelor in business management.
2. CF30 qualification by the financial services authority (FCA now)
3. Former asset investment manager
4. Reports to board of directors

Director 2

1. Former business development employee at “alqoua fitness”
2. Relevant experience in fitness centre construction and expansion
3. Reports to the board of directors

The staff members will report to the two directors who will forward their pleas to the board of directors.

Staffing

An important critical success factor for the business relates to the human capital employed. The fitness instructors at the centre should be experienced professionals and hold certifications from organizations. It would be also be preferable that some staff members have prior experience in dealing with youngsters.

Educational levels and experience of the trainers

1. Should be experienced professionals (at least 2 years)
2. Hold certifications from fitness education provider.
3. Preferable that some staff member have prior experience in dealing with youngsters

The roles and responsibilities of the trainers are as follows.

1. Developing training sequencers and strategies
2. Creating training materials, manuals to support staff and customers
3. Preparing and supervising trainers
4. Organizing feedback and reports on training, and goals.
5. Compliance with safety legislation
6. Implementing trainer strategies
7. Report progress of customers’ health and weight
8. The subordinate trainers will report to the head trainer

Educational levels and experience of the nutritionist

1. Must be a registered dietitian at least for 3 years
2. Preferably specialized in nutrition for youngsters

The roles and responsibilities of the nutritionist are as follows

1. Analysing tests
2. Recommending nutritional plans or diets
3. Nutritional education
4. Appropriate meal and snacks suggestions
5. Observing progress

Educational levels and experience of the salesperson/ Receptionist

1. High school diploma
2. 5 years work experience
3. Preferable 2 years experience in sales

The roles and responsibilities of the salesperson are as follows

1. Sales
2. Administrative tasks
3. Promoting the business to potential customers
4. Deal with complaints and general enquiries

Training Plans

Training plans will take place in a progressive manner in the following order.

1. Learning the company rules and regulations
2. Impersonating the mission vision statements of the fitness centre
3. Equipment training
4. Health and safety training
5. Fire hazard training
6. Touring the eastern province to train on the identification of business opportunities

Operation plan

The following demonstration shows the regular process that a customer will follow when joining the gym. Essentially, tailored training, nutritional advice, and superior services of the fitness centre will play a great role in the success of the business.

Physical requirements of the fitness centre

The youth gym will have a specified range of cardiovascular, resistance and interactive fitness equipment specifically designed for ages 8 -16 years. The centre will require an initial capital of about SAR2, 800,000 (approximately GBP500k). The amount will cater for the equipments and shipping costs. The breakdown for the cost of equipments is as follows.

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.

Specialized interactive fitness equipments are as listed below.

1. Active floor and wall
2. XBI-bikes with PlayStation gaming
3. Specialized cardiovascular equipment
4. Dance Mat Zones
5. Vow-Do Boards

Opportunity vs. risk management

Risk analysis is very essential before settling on making a new investment plan (Ryan 2009). The five dimensions opportunity model and the RAMP model are very essential in making a risk analysis of a new business opportunity. The summary of the five-dimension model and RAMP model for the fitness centre in Saudi Arabia is as below.

RAMP model: Youth fitness

From the 5D opportunity model and the RAMP model, it is evident that the fitness centre investment is viable.

Financial projections

During the first year, the company should expect losses. This is because of the high onetime costs of purchasing and shipping of the required equipments (Solis 2011). Therefore, the company might have a margin loss of -78%. In the second year, the business will not have to make the same capital investments. It will only cater for the variable costs. Based on estimates, the company may start making some profit in year 2 with a margin of 34% and 49% in year 3. The estimates fixed costs through the years are as listed below.

Fixed costs, total = SAR 1,150,000

Rent: SAR 500,000- SAR1, 250,000; (rent per square meter is SAR 500*1000-2500 Sq. metres needed for the fitness centre)

One head trainer paid SR 70000 per year

Ten trainers paid SAR 550000 per year (SAR 55000 per trainer)

Two receptionists paid SAR 90000 per year (SAR 45000 per receptionist)

One nutritionist SAR 65000 per year

Capital investment costs:

Equipment: SAR 1000 per square meter (SAR 1 Million – SAR 2.5 Million)

Action plan

References

Central Department of Information and Statistics 2013a, Latest statistical releases. Web.

Central Department of Statistics and Information 2013b, Saudi Arabia. Web.

Central Intelligence Agency 2013, The world fact book: Saudi Arabia. Web.

Department of Paediatrics, Saad Specialist Hospital, Al-Khobar, Saudi Arabia 2010, Obesity in Saudi children: A dangerous reality. Web.

Department of Zakat and income tax 2012, Income tax. Web.

Doing business in Saudi Arabia 2009. Web.

Leigh, B 2009, Anatomy of strength and fitness training for speed, McGraw-Hill, London. Web.

Muffet, T, 2010, Business news. Web.

Obesity Research Centre 2013, Obesity in Saudi Arabia. Web.

Rae, D, 2007, Entrepreneurship: From opportunity to action. Palgrave Macmillan, Hampshire. Web.

Ryan, PA, 2009, Business Idea and opportunity recognition. Web.

Saudi Arabia Demographics 2013, Demographic profile. Web.

Saudi Arabia fact book 2012, Facts and figures. Web.

Solis, B 2011, Engage: The complete guide for brands and businesses to build, cultivate, and measure success, John Wiley & Sons, Melbourne. Web.