Introduction
For many people, the main aim of starting an industry is to make earnings and see the corporation grow. However, this notion does not always hold. Starting and running a business is always a challenge. One of the many challenges associated with business is the lack of enough cash flow to keep operations going. A business should produce enough profits to take care of its capital expenditures and receivable collections.
After starting their Zumba business, three friends and business partners, Alberto Perlman, Alberto Aghion, and Alberto “Bero” Perez realize that even though they have done everything to attract their target market, their business model is not giving them enough money. The Zumba business produced exercise video tapes as its product that was targeted to fitness instructors across the world, although it targeted the Latin-American market.
The three partners adopted the Business to Consumer (B2C) product type where they could sell their video tapes directly to their clients, including selling them through an online platform. Under the then business model, their cash flow was becoming very impulsive. If they did not do some something to rectify the situation, their business was at a risk of collapsing. With $14,000 in their bank account, they had a decision to make of either quitting and venturing into other businesses or holding on to find a way to make their Zumba business work.
Environmental Analysis
Environmental analysis is a strategic business tool that used to identify all internal and external factors that affect a business organization. This tool can be applied to examine the Zumba business situation to determine the factors that may be at play to bar it from moving forward (Buchanan 66). Environmental analysis assesses the threat levels or the opportunities that these factors might present. These evaluations are then used in the decision-making process. A detailed analysis of the business environment shows were a business stands in the current market, including where it is headed. It includes both internal and external business environments.
Internal Environment
A business internal environment involves the elements within the business organization. Such elements may include the employees, management, and/or its corporate culture. In this case study, some decisions made by the three entrepreneurshave proved to be counterproductive to their business. Because of a communication error between Zumba business owners and Crunch gyms, the Zumba business ended up losing a lot of time and money in legal negotiations concerning the rights of the songs used in their videos.
This internal atmosphere not only cost them time that they could use to reach more customers in the US market, but also led to a lose cash in the legal proceedings. After they won their legal rights to the songs, they had to start afresh to remake their business videos. All this time and money wasted would have been profitable to the growth and sustainability of Zumba fitness business.
External Environment
The external business environment comprises factors that are found outside the company, but ones that affect its ability to function. These elements can be manipulated by the company’s marketing strategy while others require the company to make some adjustments (Kurtz par.1). Some examples of external environment include the government, customers, economy, and competition.
However, such factors are either micro-environmental or macro-environmental in nature. In terms of the micro-environmental elements, Zumba business’ suppliers of video tapes seem to be doing a commendable work. However, the business’ costumers are not properly managed. The three partners have witnessed a situation where their clients come to record the training session with the motive of reselling the recorded materials to other clients.
The distribution is well done because the company has adopted an online portal where clients from different areas such as the US can access the content. –In terms of competition, the business needs to add extra efforts to advertise its brand to overcome competition from other established industries such as the Balanced Body Pilates and the Pilate Institute of America. One of their customers, the Crunch gym, failed to get the necessary authorization for the songs used in the Zumba videos.
Because of this miscommunication from the customer, Perlman, Aghion, and Perez had to put their business on hold and deal with their legal issues, which form part of the business macro-environment. After they got the rights to their songs, they collaborated with a Columbia firm that targeted the Latin-American customer base. Here, they had to deal with the issue of piracy (Aksomitis 34).
This situation caused a serious drop in sales as people could now access and download Zumba videos online free of charge. In addition, considering the customers were free to record the dance moves taught to them in their video cameras, they could show and/or teach other potential customers of Zumba business (Buchanan 67). This technology created the competition. Other music instructors would copy their original dance ideas.
SWOT Analysis
Every company has its strengths and weaknesses. A SWOT analysis, which is also referred to as a SWOT matrix is the analysis of company’s strengths, limitations, pressure, and prospects. The structured planning method evaluates these four elements of a business venture (Srinivasan 47). Zumba Fitness has its strengths and weaknesses, threats, and opportunities as shown in the table below.
Problem Statement
The Zumba Fitness Company is going through a turbulent time where its exercise videotapes are not yielding the expected income. The partners are also battling with the issue of their customers who are turning out to be pirates. The parties need to develop a business plan or model that will enable it to address the above issues, including the way forward in terms of gaining a competitive edge in the fitness-through-exercise business.
Setting Alternative Methods
In any business setting, making the right decisions can lead to success while adopting the wrong choices can result in business failure. The success of the Zumba Fitness business relies on the decisions made by the three parties. To reach to a conclusive and beneficial result, it was necessary for the parties to go through a decision-making process to determine the criteria that can best suit their exercise business. The available decision-making techniques used in today’s business world revolve around the principles of trying to figure out the decision that needs to be made after considering the options available.
One of the several ways of decision-making is identifying alternatives. Developing business alternatives requires the Zumba business owners and leaders to gather enough data, interpret it, and brainstorm to come up with multiple business ideas where they can embark on the most appropriate model (Kimmel, Weygandt, and Kieso 34). Multiple options enable business leaders to identify the model that can work best for them. Zumba business owners are at a predicament. Even though they have many customers, their cash flow is volatile. They feel that their current business model is not working for them. One of them even considers venturing into a new business. It is possible to save Zumba business if the owners consider the following alternatives.
- Considering that the parties already have fitness instructors as their customers, they can hire some of them to set up Zumba Fitness studios in their respective cities and states.
- They may consider collaborating with large music corporates such as Sony to operate under their umbrella.
- They may also quitting the Zumba business and consider venturing into the medicalbilling business they had thought of before.
Evaluating Each Alternative (Pros and Cons)
In the alternative evaluation phase, the business owners deliberate, weigh, and compare risks. Using the scenario-building criterion, the Zumba business owners can predict the advantages and disadvantages of each option. Scenario building is a technique used by to describe a hypothetical situation in a manner that it predicts the results of the decisions and actions (Martelli 65). Zumba business owners should try to figure out the benefits and risks associated with each of the above alternatives.
Hiring and Training New Instructors
Pros
Based on the above option, delegating their workload may leave room for attracting and training more customers. This situation will guarantee more cash flow and sustainability of the company. Opening up new shops will ensure that more people who cannot afford to travel to Miami can get a chance to enjoy Zumba services in their cities.
Cons
However, training and hiring new instructors is costly. An additional expense is something that Zumba business cannot handle currently. Training and recruiting fresh instructors poses a threat of competition in the event that the instructors resign to start their businesses.
Partnering with Large Established Corporation
Pros
From this option, Zumba business will get more customers through its partners. If it collaborates with a music company, its music rights will be protected. It also stands a chance to sue for piracy in case it encounters such scenarios.
Cons
However, under this option, the three business owners will not make any business decision without consulting their partners. All business partners may take long in business deliberations before arriving at a decision. This situation may hurt the growth of Zumba business. If the parties collaborate with a large company, they may be put under pressure of delivering a high amount of cash. Besides, customers may not know the difference between Zumba business and the partner. In most cases, customers only get the names of big established companies. The identity of Zumba business may be lost.
Quitting and Considering other Businesses
Pros
With the academic and business backgrounds of Aghion and Perlman, another business idea may be successful.
Cons
Nevertheless, there is no absolute guarantee that another business idea will be successful. Customers may not have trust in their new business. Jumping from one business idea to another is not a very healthy business trait.
Selection of the Optimal Alternative Method
The vision of business should lead to growth and sustainability. A successful business should register tangible profit margins. After evaluating the pros and cons of every alternative, Zumba business owners should now figure out the alternative, which is worth its risks. From the alternatives listed, collaborating with a big company seems a better choice. The advantages of a partnership outweigh the disadvantages.
This way, Zumba business will attract customers of their business partners. This development reduces the hustle and time used in marketing and trying to attract new clientele. Using the resources provided by their partner, Zumba business shareholders might grow from Miami to other states where they can get enough capital to establish their business in other cities and countries (Lewis 44). The presence of other business partners ensures that several people are involved in the decision-making. Hence, the possibility of making better decisions for the company under partnership is higher. The future of Zumba business will be certain if its business owners consider the suggested partnership.
The Actual Plan
Fitness business has changed in the last decade. Many people today opt for a more relaxed way of keeping fit, as opposed to strenuous activities such as weight lifting. For the last ten years, the Latin-based aerobic dance and fitness sensation has made Zumba gained popularity. It fuses Latin rhythms with contemporary dance moves to make exercise entertaining. Zumba fitness dance is a booming business in many countries today.
The target market includes men and women between the ages of 17 to 65. These clients are conscious about their image and health. Perlman, Perez, and Aghion should approach and present their business idea to an already established music company such as Sony. They should present their vision and mission accompanied by the progress they have made. They should then show Sony’s management the benefits that both companies will reap from the partnership. If Sony agrees to the terms, both parties should hire their lawyers, draft, and sign an agreement in the presence of a legal presentation. This strategy will help to avoid legal ramifications such as the one the parties went through with their previous partners, Crunch gym. This way, both partners will understand the responsibilities they have, including the legal actions either party can take in the event of breach of contract.
Conclusion
Every successful business has witnessed its share of setbacks. Over the years, many big and successful corporations have collapsed, with many never getting back into the business world again. The secret to survival, especially in today’s business world, is to make wise decisions. Business failure is part of an entrepreneur’s life. Business shareholders should conduct a thorough market research to determine the risks that are worth taking. The survival of any business depends on the customers. Considering that Zumba business has adopted the Business to Consumer product type, every decision made should be in a position to benefit its customers.
Works Cited
Aksomitis, Linda. Downloading Music, Detriot: Greenhaven Press, 2007. Print.
Buchanan, Leigh. “Company of the Year.” Business Journal 34.10(2012): 66-74. Print.
Kimmel, Paul, Jerry Weygandt, and Donald Kieso. Financial Accounting: Tools for Business Decision Making. Hoboken, NJ: John Wiley Publishers, 2007. Print.
Kurtz, Rod. Richard Branson on Dealing Withh Setbacks, 2013. Web.
Lewis, Tanya. “Zumba City Tour encourages Fans to dance the Night away.” PR Week 16.9(2013): 44-44. Print.
Martelli, Antonio. Models of Scenario Building and Planning: Facing Uncertainty and Complexity, New York, NY: Palgrave Macmillan, 2014. Print.
Srinivasan, Srini. SWOT Analysis: Wiley International Encyclopedia of Marketing, Hoboken, NJ: John Wiley & Sons, 2010. Print.