INFS7040 - Sample Individual Assignment I PDF

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Executive Summary In recent years, Australia's fitness industry has gradually saturated, and profit margins have declined. Anytime Fitness as the largest franchise gyms in Australia has faced serious problem brought by the development of cloud exercise. In order to solve this problem, the article analyses the company's external environment and internal situations respectively to identify the problem which needs to be solved. After defining the part of the company's business model that can implement digital transformation, the article proposes three related growth options, which are integrate resources to build digital gyms & Big data analysis, AI personal trainers, and resegment customers through big data analysis. A recommendation has been made in the final part of the article through analysing 3 options based on economic logic, which is the resegmentation of customers through big data analysis.

Content pages 1 Introduction .............................................................................................................................. 3 2 Environment analysis ................................................................................................................ 3 2.1 External analysis ............................................................................................................ 4 2.2 Internal analysis ............................................................................................................. 5 3 Business Model ........................................................................................................................ 6 3.1 Canvas for Anytime Fitness Australia ............................................................................. 6 3.2 Current progresses on Digital transformation (Basic case) .............................................. 6 4 Growth options ......................................................................................................................... 7 4.1 Integrate resources to build digital gyms & Big data analysis .......................................... 7 a) Description ............................................................................................................... 7 b) Value delivered ......................................................................................................... 8 c) Risk & Mitigation..................................................................................................... 9 4.2 AI personal trainers ........................................................................................................ 9 a) Description ............................................................................................................... 9 b) Value delivered....................................................................................................... 10 c) Risk & Mitigation................................................................................................... 10 4.3 Re-segment customers through big data analysis........................................................... 11 a) Description ............................................................................................................. 11 b) Value delivered....................................................................................................... 12 c) Risk & Mitigation................................................................................................... 12 5 Recommendation .................................................................................................................... 12 Reference .................................................................................................................................. 14 Figure 1 Porter's 5 forces model of Anytime Fitness ................................................................................ 4 Figure 2 SWOT analysis .................................................................................................................................. 5 Figure 3 Business model .................................................................................................................................. 6 Figure 4 Digital gym presentation ................................................................................................................. 8 Figure 5 AI coach presentation..................................................................................................................... 10 Table 1 Mark sheet for comparing 3 growth options-----------------------------------------------------13

1 Introduction Anytime fitness (AF) is one of the largest fitness club in the worldwide headquartered in Woodbury, Minnesota, US, which has franchise and 24/7 operation mode as 2 main characteristics (Andrew, 2014). Since its foundation in 2002, Anytime Fitness has a rapid speed of development which has opened more than 4,000 franchises in more than 50 countries. Anytime Fitness officially entered in Australia market in 2012, which has become the largest franchise gyms in Australia after a few years (Twin Cities Business, 2018).

2 Environment analysis In the past five years, the fitness industry has developed rapidly accompanying by industrial upgrading. In addition to the increasing obesity rate in Australia (Freedom food annual report, 2019), this is mainly due to the rise of many 24/7 cheap gyms and the development of advanced functional gyms (Stepz Fitness, n.d.). According to IBS world data (2019), the total revenue of the Australian fitness industry market has exceeded US $ 3 billion. In the Australian fitness market, companies with the largest market share in Australian gyms and fitness centers include Goodlife Health Clubs, Jetts Australia and Fitness First Australia, which are funded by Fitness and Lifestyle Group TopCo Pty Ltd (IBISWorld, 2019). The total sales of these three fitness chain stores have accounted for nearly 30% of the entire industry revenue. Anytime Fitness and Jetts Fitness which operate 24-hours gyms as main business have also grown exponentially in the past 5 years since consumers have become more price sensitive. Anytime Fitness, as the leading driver for 24/7 fitness mode, made its market share reached 11.2% which presents a rapid development rate (Whytcross, 2014). However, many experts believe that Australia's fitness industry is gradually becoming saturated (ABC Radio National, 2018). Consumers are pursuing cheaper membership fees and project options which decrease the industry's profits.

2.1 External analysis

Figure 1 Porter's 5 forces model of Anytime Fitness

According to the analysis of porter's 5 forces model, the biggest threat faced by Anytime Fitness is that customers' bargaining power continues to rise with the decrease of the company's attractiveness to customers, which means the fitness centers can only squeeze their own profits and costs to cater to customers. The increasing competition of existing competitors also puts pressure on the development of Anytime Fitness. In addition to the price wars used among physical gyms, the popularity of social media has also caused increased competition in the industry. Many professional fitness coaches choose to post their teaching videos on the media platform for free, so that the audience can learn without the restrictions of time and place. Consumers become more inclined to follow these online celebrities to exercise by using their videos which causes the customer base of the physical gym is gradually losing. In addition, the constantly launched cloud fitness products have also hit the physical fitness industry, such as switch fitness rings. Consumers can exercise at any time by using it which is cost-effective. In addition, comparing with the "delayed satisfaction" that needs to persist for a

period of time in the physical gym to see results, the "instant satisfaction" provided by cloud fitness products is more in line with consumers' psychological needs. 2.2 Internal analysis

Figure 2 SWOT analysis

With the development of Internet, consumers are not limited in the physical gyms for getting fitness service. Although Anytime Fitness has the most coverage of physical gyms in Australia, it still cannot be compared with the Internet that can be used without time and place limitation. Moreover, the single device service provided by Anytime for obtaining the advantage of price also makes the brand become less attractive to consumers. In order to change this, Anytime needs to use digital strategy to integrate its business model for creating new products and services to satisfy rising consumer demands.

3 Business Model 3.1 Canvas for Anytime Fitness Australia

Figure 3 Business model

The figure is the canvas for analyzing the business model of Anytime Fitness. According to the analysis, Anytime Fitness needs to carry out digital transformation in the three parts which are channel, value proposition, and customer relationship maintenance to form their own advantages. By providing more digital channels to interact with consumers, the relationship between consumers and the gym can be maintained. Besides, the development of digital products can bring more value to consumers to attract consumers. 3.2 Current progresses on Digital transformation (Basic case) As the largest franchise gym in Australia, Anytime fitness has suffered a great deal of digital impact in recent years. Therefore, it has begun to carry out some digital reforms, but it is still at initial stage with low effects. According to the official website of AF, except providing channels for registering as a member, AF also provides additional services such as healthy recipes and personal trainers booking on it. Besides, Anytime Fitness has also launched its own fitness app, workouts, which provides various professionally designed courses on it in line with the current popular trend of cloud fitness. Moreover, customers also can scan the code provided

on each equipment in gym to log in for getting real-time recording of their sports data. Efforts made by AF in terms of digital transformation are not enough to create its competitive advantages in the Internet era. At present, the digitization process of Anytime Fitness is still focused providing basic online service to customers.

4 Growth options 4.1 Integrate resources to build digital gyms & Big data analysis a) Description The opinion of integrating resources to build digital gyms is about that collecting key resources to upgrade the physical store's infrastructures, which makes all franchises change to be automatic management. The point of this advice is to collect more comprehensive exercise data from customers and provide further fitness guidance to improve the service quality. The digital system covering the whole stadium can automatically identify the members when they enter the stadium and collect and analyze the movement data of members in the stadium in real time. Digital gym can track members' exercise time, speed, intensity, course content and other data without interference under different fitness situation like aerobic, gravity, free stretching, group classes and other fitness scenarios. The big data analysis will also give scientific fitness suggestions and programs based on the customers’ exercise data. The traditional fitness model requires customers to judge fitness by their personal feelings, while the digital gym turns fitness behavior into quantifiable data, which makes customers can exercise more scientifically and effectively (World wide web, 2019).

Figure 4 Digital gym presentation

b) Value delivered Firstly, physical gyms have become more attractive to customers because of the added value of data analysis. Customers may be unable to understand their own sports data in the traditional gym, but in the digital gym, their data will be fully collected and analyzed using big data analysis. Customers can view their quantitative results of each exercise in real time, which helps them adjust and improve fitness plans based on the results. Compared with cloud fitness and traditional gyms, digital gyms will provide customers with more professional services. Secondly, the digital gym has expanded the sale of additional services. In the past, the main source of income for physical gyms was membership fees. Although the official website provides recipe ordering and personal trainer services, it did not achieve the desired results. By updating sports data in real time and using big data analysis, the company can provide customers with analysis reports including recommend appropriate training programs and supporting recipes, which can increase the probability of successful promotion of these additional services. Finally, a digital gym can help increase the efficiency of using physical equipment. Although a variety of equipment are provided in the traditional gym, most customers still choose the popular ones, so that the efficiency of other equipment is low. If the customer chooses which devices to use based on the real-time data update and the recommendations provided in the

analysis report, it can reduce the pressure on usage of popular equipment during peak time and improve the efficiency of other equipment. c) Risk & Mitigation Data security issues may bring risks to Anytime Fitness if the option 1 is applied. Consumers becomes more and more concerned about their privacy. Once a data leak occurs, it may have a negative impact on the brand's reputation. Secondly, the cost of digital reform is too high, which means not every franchise gym can afford it. In order to mitigate these risks, the company should first pay more attention to data security issues and provide more relevant technical support. At the same time, the company headquarters should negotiate with the franchise stores and allocate funds to help them complete the digital upgrades. 4.2 AI personal trainers a) Description The development of the AI coach is mainly about a new function designed for the app currently launched by AF. By reducing the time and space restrictions brought by personal trainers in the gym, customers as gym members can receive professional guidance anytime and anywhere through following AI trainings, which can increase the attractiveness of the Anytime Fitness. The specific content of AI coach is to develop a training plan with the member based on the member's own health situation and desired goals. During the training process, the image recording function is used to capture the members 'movements and exercising times in real time, and to monitor the user's movement completion and standard degree combining voice reminders to supervise users (BBC, 2020). The AI coach can update the training plan that is more in line with the situation in real time according to the user's fitness data, which makes the exercise plan more scientific.

Figure 5 AI coach presentation

b) Value delivered Using AI coaches can reduce labor costs and increase profit margins. In the past, the profits collected from private fitness courses purchased by customers had to be distributed proportionally to the coaches, and the number of customers that each coach could be responsible for simultaneously was limited. By using AI coaches to replace human, Anytime Fitness can reduce the cost of hiring and training coaches and gain more profits. Besides, the use of AI coaches can expand the reachable customer base. In the past, customers generally bought personal training courses at a nearby gym so that they could go there easily. However, after using AI coaches, customers will not be limited by location and time, which means they can have training classes more freely. Therefore, this feature may break the geographical restrictions of the physical gym and attract more customers to purchase. Finally, compared with human coaches, artificial intelligence coaches can cultivate customer loyalty. Artificial intelligence is more accurate than human coaches in judging human movement amplitude data and can correct customers' incorrect behaviors in time. And customers can more easily personalize customized solutions to meet their fitness expectations. When customers can achieve the desired results through the training plan, they are more likely to re-purchase the training course. c) Risk & Mitigation

Although AI has become a popular topic in various fields in recent years, it is still at an early stage of development in the fitness industry. Current technical limitations may not provide the comprehensive service required by customers in a timely manner. In addition, when the customer is in danger during the exercise, the AI coach cannot prevent and help the customer in time. In order to solve these risks, AF needs to increase investment in technology and reduce risks through continuous technological advancement. In addition, AI coaches need to explain the potentially dangerous parts before each training course. In addition, a hospital contact function can also be embedded in AI function. When the customer presents an abnormal performance captured the camera, the AI needs to use the function of contacting the hospital. 4.3 Re-segment customers through big data analysis a) Description This decision is to use big data analysis to re-classify customer groups according to their performance level and needs which can help the gym targeting different levels of customers for marketing and retention. Big data is mainly analyzed and stratified based on the user's weekly usage time and fitness data recorded when the fitness equipment is used. It is mainly divided into three types of customers. The first type is ordinary customers who are interested in fitness but have less understanding of the content with not fixed fitness time in each weak. For such customers, the gym can promote more experience projects at initial level. The second type of client is who already has a certain understanding of fitness and can establish a part of own training plan. For such customers, the gym can recommend more professional courses to help customers with advanced training, and to market and plan additional products that match them, such as healthy recipes and other tools to assist fitness. The third type of customer is a senior customer. Such customers are very familiar with fitness and pursue professionalism. Therefore, for these customers, AF needs to recommend more professional courses and services.

b) Value delivered Providing different products and services to customer groups can help the gym to make more profits. This is because the specific product and service design according to the characteristics of users can make these products become more accepted, thereby bringing more profits to the gym. At the same time, it can also increase users’ loyalty. This is because recommending the same product to all customers does not satisfy their needs, which cannot retain most customers. Consumers will not purchase again after have an unsatisfactory experience; however, the appropriate product can satisfy their needs to help them achieve the expected results in fitness, which can increase their recognition and loyalty to the company's products, and thus promote their continuous consumption in Anytime Fitness. c) Risk & Mitigation The risk of this option comes from AF's franchise system. Different franchisees may have various degree of data analysis capabilities. If they cannot reach a unified analysis and service customization standard, there will be a negative impact brought by the gap. After comparison, customers may choose to register members in the gym with better performance, which will cause conflicts within the Anytime Fitness. In response to this problem, AF can cooperate with professional big data analysis companies to unify the data analysis capabilities of each franchise. Moreover, the headquarter can formulate customer classification standards with corresponding services and products to reduce internal profit conflicts caused by gaps.

5 Recommendation In order to compare 3 growth options for making the decision, a score board is used to quantity the impact brought by eac...