The SME identified for this business is the The Gym Group plc.

Characteristics of a SME
relate to its staff numbers which cannot be in excess of 250 employees and the business in
question employ 181 staff which was last recorded in the period that ended 30th June 2015.
Annual turnover for an SME must also not be in excess of 50 million euros which the
business in in the year 2013 provided a figure of 35.8 million.,

Methodology
Initial research around literature which looked at defining the characteristics of a SME. Once
this was defined a decision was made to select The Gym Group.
Research around the business was split into primary and secondary research. Primary
research in this sense included the photographing of business practices and the users own
experience at the member of the establishment which was recorded in an observation format.
Analysis of the business was conducted via secondary data sources most notably the groups
prospectus for potential shareholders and the market research group Mintel. News
publications were also used to back up and aid industry data from Mintel.
From this it was hoped that via analysis a suggestion could be made for an area of the
business which could support growth and innovation. This plan would be backed up
academically using secondary research sources and a conclusion would be made discussing
the whole project and final note on the subject matter.

Analysis of Business

Business Name
Business Structure

The Gym Group plc

Gym Group Midco 1 Limited, The Gym Gym Group Midco 2
Limited, The Gym Group operations Limited and The Gym
Limited

Business Address

Woodbridge House
Woodbridge Meadows
Guildford
Surrey GU1 1BA

Directors

Penny Hughes (Independent Non-executive Chairwoman)

John Treharne (Chief Executive Officer)
Jim Graham (Chief Operating Officer)
Richard Darwin (Chief Financial Officer)
Paul Gilbert (Senior Independent Non-executive Director)
David Burns (Non-executive Director)
Philip Newborough (Non-executive Director)

Industry
Financial
Information

Health and Fitness Club Market

Key (000s)
2014*
Revenue
Gross Profit
Operating Profit
Profit Before Tax
Profit for The Year
Total Assets
Total Liabilities

45,480
44,440
2,335
9,442
8,783
128,313
96,728

2013
Revenue
Gross Profit
Operating Profit
Profit Before Tax
Profit for The Year
Total Assets
Total Liabilities

35,734
34,828
193
9,036
9,268
111,445
124.699

2012
Revenue
Gross Profit
Operating Profit
Profit Before Tax
Profit for The Year
Total Assets
Total Liabilities

Business
Description

Company News

22.264
21,869
1,921
1,118
1,232
49,818
53,578

The Gym Group more commonly known as the The Gym is a low
cost gym which was founded by the companys chief executive John
Treharne in 2007. With over 350,000 members and 66 sites the gym
operates on a 24/7 basis with a low monthly membership without a
contract is identified as the second largest operator within the low
cost gym market
Gym Group Celebrates 250m valuation (Telegraph , 2015)
The founder of The Gym Group today cashed in 3
million as he floated the low-cost gym chain he
founded just seven years ago for 250 million.
(Evening Standard 2015)
Two private equity-backed gym chains have cancelled a 300million
merger, blaming competition authorities for flexing their muscles.
(This Is Money 2014)

Competitors
Within The
Industry

Business
Accolades

European Business Awards National public champion 2013/4

The Sunday Times Fast track 100
Sunday Times Top 100 Best Small Companies To Work For 2013
Budget Gym Of The Year 2011

*data presented for the year 2015 is unaudited and presented in a 6month period

Business Analysis
The business in question will undertake a SWOT analysis amongst other methods. This
technique was employed because of its ability to deliver a significant added value to a
companys strategic development Bohm (2009)
Some of the strengths that relate to the business are as follows
Mintel (2015) identified that the reasons as to why individuals opted out of joining new gyms
were because of reasons relating to the existing gyms high costs location and contract all of
which budget gyms do not possess because of their aggressive pricing location within urban
areas and contracts that range from simply one day or that can be frozen for a period in which
the user can decide.
The Gym operates on a 24/7 basis which meets the needs of the working population
especially those who engage in shift work where their individual hours may fall outside of
traditional gyms opening times. This coupled with the fact that 10 percent of users use the
gym between the hours of 22.00 and 06.00 the following day show the importance of a 24
hour opening period.
The process of also joining the gym is all done online and can be carried out the gyms
terminals or at the comfort of an individuals home. This coupled with the fact that the gym
has no contracts which founder ad CEO John Treharne simply doesnt believe in means
that member s can join, leave or rejoin the gym at any point as they please without any
financial penalty. This can also help when marketing to customers as a huge online database
is formed using this process vs a paper concept which this process would take longer to carry
out.
The group also boasts an experienced management team. John Treharne (CEO) who has a
vast history in sport and owning health clubs but individuals such as Jim Graham who had a
position as a MD at Orange amongst other members of the management team who have
experience within senior positions in established businesses.
Fixed costs within the business are also reduced due to the business model. There are no
receptions or sales facilities which are commonplace within traditional gym structures.
Facilities such as saunas and swimming pools are not a feature in gyms which can also prove
to be costly. All repair works such as cleaning and maintenance are all outsourced which
means that the management team can focus on other matters more important to the business
Weaknesses
The Gym Group hopes through its brand image that it will be identified as a health and fitness
club known for its low cost and value for money membership. The company identifies

that while there is flexibility to alter membership fees it is limited in doing so therefore an
increased revenue is dependent upon new members joining the gym.
There are also a number of external factors outside of the gyms control which could lead to a
decline in the number of members and therefore a decline in the amount of revenue. This
coupled with the fact that there are no membership contracts for joining the gym which CEO
John Treharne highlighted in an interview was simply something he did not believe in
(https://vimeo.com/12094697)
Factors such as increased competition within the area could be a reason as to why there
would be a decrease in membership levels. There are a number of key players within the
health and fitness industry market as illustrated in Fig 1 who are both low cost budget as well.

Another said weakness for the business surrounds its selection criteria for new sites. Founder
and CEO John Treharne argued against the acquisition of existing gyms because of factors
relating to its size and existing consumer base. Highlighted below is the companys selections
strategy for choosing the location for a new gym to open which is dependent upon
size, location, local population density and geo-demographic data, nearby
transportation networks and/or availability of car parks
The companys reliance on information technology is a poses a risk to the business because it
affects so many areas of the business if the system was to go down for a significant period.
These include areas such as membership services and enrolment, the processing of payments,
gym access and most importantly the monitoring of security. This coupled with the threat of
hacking and viruses coupled with confidential information which are dealt with by third a
parties are at risk if a situation like this were to occur.
Legislation regarding competition laws could affect the businesses ability to grown within the
market. It was noted that in the year of 2014 the company made attempts to merge with Pure
Gym however after the UK Competition and Markets Authority referred this to a phase 2
competition review plans to do so were halted.
Factors which could also affect The Gym Groups reputation could be via damage to the
reputation of the business caused by for example relations between employees and customers
of the gym.
Opportunities
The market itself is valued at 4.3 billion and although the budget gym market is a small
percentage within it, it is still a growing market with membership levels increasing from 0.2
million to 1.3 million from the period of March 2011 to March 2015 as illustrated by the
figure below.

Achieving economies of scale could prove beneficial for the business as time goes on. The
Gym Group seeks to reduce gym fit out costs and improve operating efficiency.
Evidence for this can be seen by the costs of fitting out a new gym being reduced from
1.5million to 1.3-4 million as a result with better negotiation strategies with contractors.
This coupled with the addition of new marketing and media agencies directors believe has
improved the effectiveness and efficiency of the Groupss marketing and purchasing scale
Mintel (2015) indicates that the potential customer base for health and fitness clubs is great.
Research into the industry shows that 79% of consumers have a health related or fitness
related goal and 46% show interest in visiting a club.
Threats
However research undertaken by the global market research company Mintel has told us that
in the year of 2014 the NHS quality and outcomes framework which is the annual reward
and incentive programme detailing GP practice achievement results HSIC (2015) that
physical activity had been removed from their framework. This was also followed by findings
from the British Journal of Sports Medicine that physical activity in actuality does not
promote weight loss and this is simply a technique employed by food and drink companies to
combat obesity.
Mintel (2015) also indicates that although budget gyms have seen increases in their
respective membership bases some consumers are still unable to pay membership fees which
rnage from 10 to 20 a month. It is found that the sport retailer Sports Direct could be
cashing in this market because access here starts from 5 a month.
Economic factors such as taxation and inflation all have the ability to affect individuals
disposable income. However Mintel (2013) that these sorts of factors had made life tough
for the mid market clubs
A change in attitude amongst consumers about how they go about their health is also a factor
which comes into play. The emergence of wearable teach such as Apples HealthKit and
Fitbit and working out at home has meant according to Sport England resulted in a fall in the
amount of people who go to the gym to 6.56million (a fall off 153,000) Guardian (2015)
Capacity issues could also become troublesome for low budget operators. Mintel (2015)
indicates that 13% of consumers indicate overcrowding as a reason to not visit a gym. This
could potentially mean turning away potential customers.

There are also psychological barriers which prevent users from joining a gym. Mintel (2015)
found that 19% of people who want to lose weight are worried about other peoples
perception of their appearance and interestingly 38% of this group feel that budget gyms are
intimidating a figure of 30% is also seen within traditional gyms however.
Customer Segments
Customer segments within the health and fitness industry are described as follows and have
been adapted from Sport England (2010)
Competitive Male Urbanites
These are categorized as males from the ages of 18-25 who have no relationship
commitments and are typically students or graduates. They represent 5% of adults and 10%
of all males. Some of the barriers which prevent this group from engaging in physical activity
are work commitments and health issues.
Sports Team Lads
Similar in age to their competitive male urbanite companions in age and relationship status
and barriers as to why they do not take part in physical activity these individuals tend to be
more vocational students. This group represents 5% of all adults and 11% of all males.
Fitness Class Friends
Essentially the female version of competitive male urbanites this group represents 5% of all
adults and 9% of women. Barriers to engaging in physical activity for this group surround
family and economic and work reasons.
Supportive Singles
These are females aged between 18-25 who are likely to be students or study a vocational
subject. This group represents 4% of all adults and 8% of all adult women. Work
commitments, health and children are all deciding factors why this group do not engage in
physical activity.
Career-Focused Women
These are women aged mainly between 26-45 who are single and in full time employment.
This group represents 5% of adults and 9% of women. Work commitments, health and
economic reasons are reasons as to why this group doesnt partake in physical activity.
Settling Down Males
Characteristics of this group are males aged between 26-45 who possibly may have children
and have a professional job. This group represents 9% of all adults and 18 of all men. Work
commitments, health and economic reasons are reasons as to why this group doesnt partake
in physical activity.
Stay At Home Mums

Mainly aged between 36-45 and tend to be married. This group represents 4% of all adults
and 9% of adult women. Work commitments, health and economic reasons are reasons as to
why this group doesnt partake in physical activity.
Middle England Mums
Mainly aged between 36-45 these women tend to be married with children and either tend to
work part time or stay at home with their children. Work commitments, health and economic
reasons are reasons as to why this group doesnt partake in physical activity. This group
represents 5% of all adults and 10% of adult women.
Pub League Team Mates
This group are males aged between 35-45 who are either married or single who have a
vocational job. Work commitments, health and economic reasons are reasons as to why this
group doesnt partake in physical activity. This group represents 6% of all males and 12% of
adult men.
Stretched Single Mums
Categorized as single mothers aged between 26-45 who tend to be on job seekers allowance
and are low skilled. Family and health and economic reasons are reasons as to why this group
doesnt partake in physical activity. This group represents 4% of all adults and 7%of adult
women.
Comfortable Mid Life Males
This group represents 9% of all adults and 18% of adult men. This group are mainly aged
between 46-55 and are married with children and engage in full time employment. Work
commitments and health reasons as to why this group doesnt partake in physical activity.
Empty Nest Career Ladies
This group are the female equivalent of comfortable mid life males however health reasons
and economic reasons factor in as to why this group may not partake in physical activity. This
group represents 6% of all adults and 12% of adult women.
Early Retirement Couples
Represent 7% of all adults and 6% of adult women and 8% of adult men who are married to
each other and are either retired or full time employed. Health reasons and economic reasons
factor in as to why this group may not partake in physical activity
Older Working Women
This group represents 5% of all adults and 10% of adult women. Typically aged between 4665 this group also tends to be married. Health reasons and economic reasons factor in as to
why this group may not partake in physical activity.

Local Old Boys

Aged 56 to 65 this group tend to be either single or married but unemployed. 4% of all adults
and 8% of adult men fall under this category. Health reasons and economic reasons factor in
as to why this group may not partake in physical activity.
Later Life Ladies
Similar to local old boys these female demographic tends to be ether unemployed or retired
and represents 2% of all adults and 4% of adult women.
Comfortable Retired Couples
Aged 66 and above this group represents 4% of all adults and women and 5% of men. Health
reasons and economic reasons factor in as to why this group may not partake in physical
activity.
Twilight Year Gents
Similar to comfortable retired couples this male group represents 45 of all adults and 8% of
adult men
Retirement Home Singles
Similar to twilight year gents this group also tend to be widowed.

Competition within the market

The Uk Health and Fitness Industry is split into public and private clubs defined by their
nature. Public which is a health club composed of people who voluntarily meet in this sense
for health and fitness which is open to anyone. In contrast private clubs are the same in terms
of definition however these have the right to immunity from public interference.
Private clubs in this instance are broken further in to traditional operators and budget gyms of
which The Gym Group is a part of. Shown below are the leading health and fitness club

operators in terms of clubs and members. However this does not represent all players within
the industry only representing 18% of the market (The Gym Group, 2015)

Competition in this sense is down to consumer choice and the Gym Group recognizes that
they have to compete with all
local health fitness operators, gyms, sports and leisure centers both by private and
public sectors
Further to this The Gym Group operates within the budget gym private sector which there are
a number of key players and are illustrated in the table below.

The Gym Group also recognizes a number of key areas in regard to completion specific to
them.
These include the threat of non-profit and local authorities who are able to purchase land at a
cheaper rate and therefore construct gyms at a cheaper rate and may be able to compete on
price either through penetration pricing or competitive pricing.

They also recognize that companies that have greater resources/name recognition may
compete to attract members in its markets
As well as this they recognize that The Gym does not have exclusive rights to parts of its in
gym experience and services which competitors could copy and improve upon.
They also recognize that traditional may offer lower membership fees and still offers the
premium services associated with those sort of gyms and therefore price the company out
of the market.

Marketing at the Gym Group

The Gym Group aims to become a friendly and approachable provider of high quality,
value-for-money gyms. In terms of brand image, the gym aims to be known for its
convenience in monetary terms which is delivered by its value for money membership
pricing structure. They also want to be known for not having a fixed term membership
contract which according to Mintel (2015) was one of two top barriers which discouraged
users from joining a gym. Its unique opening hours structure which operates on a 24/7 basis
and access to high quality fitness equipment.
This brand image should be reinforced by the agencies and staff that they employ which is
delivered via their tone of voice and consistent messaging. If these are relayed it is hoped
in turn that members of the gym will recommend their own individual gym to their respective
families and friends which directors of the company believe is one of the most powerful
marketing tools.
Actual marketing carried out is split into two areas; the pre-opening marketing strategy and
the post opening marketing strategy. Pre-opening marketing strategy takes place 3 months
before a gym opens and each individual gym is allocated a marketing budget in which the
marketing agency and management teams design a marketing plan for. This can take place in
the form of traditional digital, print and billboard marketing as well as direct to public
marketing via street teams and local outreach activities
Post opening of the gym marketing continues via a variety of methods with a focus on the
most seasonally affected months. These methods include mail shots street leafleting
organic and paid search engine optimisation. Emails and text messages are also sent out to
previous and current members of the gym. This is also extended to social media platforms on
Facebook and Twitter which is used to raise brand awareness and to develop an online

community. Other methods that take place to market The Gym Group include press
announcements and online advertising.