Name: Lloyd Alexander-Chard

Student Number: Q12674141

Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Business Strategy
Implementation of a chosen Strategy

PureGym LTD & TheGym Group Merger

Contents
 Introduction 1
 Company background 1
 Proposed strategy 1+2
 Bowman’s Clock analysis 3
 Ansoff’s Matrix 4
 Stakeholders 5
 Resources 7
 Manager Implications 8
 References 9
Page | 1
Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Introduction
A merger is an incorporation of two organisations forming together as a singular entity.
Mergers are extremely beneficial if executed well, as they can benefit both parties in terms of
market positioning and profitability. In 2006 a merger agreement between Pixar and Disney
was undertaken in which Jessica Cohen of Merrill Lynch described the amalgamation as: “A
near perfect strategic fit, as Disney’s brand mashes well with Pixar’s content” (Baid, 2012).
The primary objective of a ‘merger’ is to improve the productivity and financial forecast of
both entities as a combined strength.

Company Background
PureGym is already the market leader within the budget gym sector: “With over 150 clubs
and almost 800,000 members. It has a big advantage over others when it comes to flexibility,
with most gyms open 24 hours a day, 365 days a year” (Groves, 2016). If PureGym was to
combine forces with its main competitor ‘TheGym Group’ they can expect to dominate the
budget gym industry.
As you can see in ‘Figure 1’ the budget gym sector has grown year on year from its starting
point in 2011. An increase in all areas from 2011-2015 including: the number of gyms, sales
revenue, and independent revenue. With the development of the ‘budget gym’ model,
competitors are constantly rivalling each other to sort a preferable package for the consumer
based on value for money. PureGym and TheGym deliver similar advantages over their
competitors, as stated above, this includes 24hr access and a ‘no contract’ payment structure.
As displayed in figure 2, PureGym and the gym are market leaders within the sector.

Figure 1(Riley, 2017)

Growth in the Low-Cost/Budget Gym Market
Year Number of Gyms Sales Revenue £M Sales Revenue Per
Gym (£)
2011 58 27 637.9K
2012 101 72 712.9K
2013 196 150 765.3K
2014 257 203 789.9K
2015 319 290 909.1K
Proposed Strategy
My proposition is for TheGym and PureGym to combine as a singular entity through a
‘Forward merger’ strategy to form ‘YourGym’. This will not only increase both company’s
economic strength, but the merger could see them dominating the low-cost gym sector.
PureGym will look at acquiring TheGym, and as a result will enhance: revenue, profit, and
consumer experience. According to an online source: “In a forward merger, the target merges
with and into the buyer, eliminating the target’s existence” (Romanek, 2011). PureGym and
TheGym both operate within the ‘budget gym’ model throughout the sports and Fitness
industry. They are main competitors, however, if they combine strengths they could
monopolize the sector and pull sales away from competitors.

Page | 2
 Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

The health and fitness industry is continuing to grow as obesity levels reach a new high, in
correlation, the ‘budget gym’ sector can expect revenue growth as a bi-product of the health
and fitness evolution. According to Tim Cook, (Partner at OC&C Strategy Consultants): “The
traditional gym is no longer sustainable. We estimate that emerging ‘value gyms’, including
the likes of Pure Gym, are likely to make up 30% of the private gym market in the next three
to four years” (Smithers, 2015). With growth imminent in the near future, PureGym and
TheGym functioning as a singular entity could dominate the budget gym sector.

Bowman’s Clock Analysis

Bowman’s clock seeks to give a company a strategic

position within their current market. These are based
on two primary principals, price, and the value of the
product/service to the consumer. Currently PureGym
Figure 2, (Darwin, 2015) sits at’2’ on the clock as the price is low and the value
is average, the same goes for TheGymGroup. This
results in both companies being market leaders within
their sector, with their success deriving from cost
minimisation within the health and fitness industry.
This occurs through the gyms operating on a ‘fixed-
price’, with expenditure being spent on overheads and
staffing. Thus, the company’s revenue is spread out
over quantity, ultimately bringing economies of scale.
Through merging both companies together, I hope to
push YourGym up to ‘3’ on the Bowman’s clock, this
is also known as the ‘Hybrid’ position.
Figure 3(Riley, 2017)

This position can often lead to high profits, through giving consumers even more ‘added-
value’ for their money. YourGym will differentiate from the market through the
amalgamation of a low price and higher value for money than rivalling competitors such as
‘VirginACTIVE’. This will be done through offering consumers added benefits such as
swimming pools, and saunas for an added fee per month. This will differentiate both
companies from others within the budget gym model, as the positioning strategy has been
unused, however could be highly successful, as it gives consumers more ‘value for money’.
According to an online source: “This can be a very effective positioning strategy, particularly
if the added value involved is offered consistently” (Riley, 2017)

Page | 3
 Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Ansoff’s Matrix
Ansoff’s matrix is a market growth system that determines whether or not a business should
integrate new or existing products into new or existing markets. The ultimate proposition for
Ansoff’s matrix is to penetrate the market in order to attract new consumers into your line of
business from rivalling organisations within your sector. This can be done though several
mediums, such as dominating market share within your sector and driving out competitor
forces. Consumer based strategies can include channels such as loyalty schemes, a new range
of products, or simply integrating supplementary products/services within your organisation
to make you ‘stand out’ from adversary businesses.
YourGym’s primary objective is to expand its geographical field via entering new markets
such as local towns, fundamentally driving revenue and increase sales. Creating various
pricing strategies can attract new consumers, and target new markets. In order to drive the
‘forward merge’ of PureGym and TheGymGroup the matrix also covers product
development. The principal strategy would be to sell existing products within the gym itself,
including fitness focused supplementation, nutritional goods, and also a clothing brand
devoted to the newly formed ‘YourGym’.
The last part of Ansoff’s matrix covers Product Diversification, this may include the entry of
a new product into a new market, such as new substance goods into the gym such as: De-tox
drinks, healthy foods, and a wide range of protein focused supplements to diversify
YourGym from rivalling competitors. Below, I have devised an Ansoff’s Matrix focused
solely on the merger between PureGym and TheGymGroup.

Ansoff’s Matrix PureGym & TheGym (Market Options)

Product Existing New
Exist Market Development
 Extend online presence
 Develop consumer identity
 Win consumers over from competitors
such as: Virgin ACTIVE
 Maintain price-Base rate gym access
 Create 24 HR Access
 Create a flexible contract system
 Extensive range of machines
 Technology integrated system, online
sign-up, and electrical ‘clock-in’
system
New Market Penetration
 Develop technology integration within
locations
 Extend geographical region of sites
within cities
 Possibilities to go global when all
sites have been achieved within the
UK
 Expand into new market such as
packaged meals/drinks (health
focused)
Diversification
 Integrate more technology within the gym
 Develop marketing channels
 Incorporate celebrities when marketing the
apparatus on offer
 Total rebranding needed of both gyms forming
‘YourGym’
 Reposition both gyms within the market making
 Extract more revenue from existing customers
(Additional classes, extra benefits, such as
health check-ups)
 Expand locate radius i.e. towns and rural areas
 Extend supplementary product range
(supplements, clothing, and accessories)
Product Development-Diversification
 Will be feasible after financial stability has
been achieved
 Differentiate themselves from competitors
 Develop a clothing line
 Offer new distributor sales such as:
nutrition/supplementation
 Purchase other business’s when the merger has
been formed and stabilised
 Create a self-branded sustenance range solely
focused on health and fitness

Page | 4
 Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy
The three primary objectives which could be viable as a result of Ansoff’s Matrix are: A
driven new marketing campaign as a result of the merger which incorporates ‘sporting’
celebrities as the brand-image for the consumer based project. This will not only drive sales
but will also put a ‘stamp’ on the status of the new market leader within the ‘budget gym’
sector. Other diversifications would include extending its geographical field via entering new
markets nationwide through the development of presence in rural areas/ town’s. This will
allow YourGym to reach optimum sales within the UK. Moreover, incorporating a
supplementary product range such as; Supplements, Focused clothing brand, and fitness
accessories would extend revenue for each new site launched as well as existing city
establishments. I have Also devised a SWOT analysis, analysing the Strengths, Weaknesses,
Opportunities and Targets of YourGym overall:
Strengths Weaknesses
What does The Gym do well? What could the gym improve?
What unique resources can the gym draw on? Where does the gym have fewer resources than others?
What do other see as the gyms strengths? What are others likely to see as weaknesses?
• The gym operates 24/7 • I feel as though the gym could improve its range of supplementation
• A cheap alterative to health and fitness clubs with prices ranging • Other health and fitness centres offer extra services such as
from £10.99-£18.99 P/m swimming facilities and sauna rooms
• A wide range of facilities designed to target multiple muscle • Limited parking facilities
groups • Lack of atmosphere throughout the gym
• A range of personal trainers to help achieve goals • A wide range, however limited equipment
• A range of classes throughout the day and evening • Lack of social interaction
• Onsite refreshments from water to nutrition supplements
• No contract
Opportunities Threats
What opportunities are open to the gym? What threats could harm the gym?
What trends could you take advantage of? What is your competition doing?
How can you turn your strengths into opportunities? What threats do your weaknesses expose you to?

• The gym could expand its range of supplementation
• The gym could look to expand its range into small towns as
opposed to cities
• Create more social interaction
• Keep pricing low to penetrate the market
• Expand its quantities of equipment
• Lack of social interaction
• Fitness first offers multiple sporting facilities
• Multiple quantities of gym equipment
• Expand its online presence through app development
• Competitors such as fitness first have invested in the latest equipment

Stakeholders
If the ‘forward merge’ is to take place, then stakeholders will need to be notified of the operation and
taken into consideration as they are ultimately liable for its success. According to an online source;
“A stakeholder is any person, organization, social group, or society at large that has a stake in the
business. Thus, stakeholders can be internal or external to the business” (Grimsley, 2017). PureGym
and TheGymGroup have a varied range of stakeholders both internally and external to the business’s
governance. The underlining issue of a merger is calculating what extent each stakeholder will hold
on affecting the business’s operational performance, as a result of post-merger integration.
Stakeholders play a key role when a merger takes place, as they can decide the extent of profit
cannibalisation post-merger. Examples of stakeholders include: Shareholders, suppliers, investors, and
consumers. When the merger takes place between PureGym and TheGymGroup certain jobs could be
‘cut’ as a result of forming YourGym. Synergy between companies can cause insecurity to not only
jobs, but also the organisational structure of the business’s combining. Possible conflicts of interests
between the boards of directors across both companies may occur, thus it is vital to consider
stakeholders within a merger integration plan. Below I have devised a Stakeholder analysis table.

Page | 5
 Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy
Stakeholder Their interest or
requirement from the project
Matrix  To supply the required apparatus for
Fitness the ‘geographical expansion’ locations
and central development aka. Cities
Employees  To ensure that the employees are
trained with sufficient knowledge on
health and fitness, with possible
legislation requirements when need i.e.
Health and Safety.
‘Partners’  To engage in raising capital for the
investment merger project, with a suitable ROI for
PLC the investors preference.
Operational  To oversee the operation with
Staff sufficient training required for new
locations and operational strategies.
Board of  To formulate an efficient and
Directors knowledge worthy board of directors to
host the transition of new locations.
Consumers  Consumers will need to understand the
new operation/system of working if a
new strategy is enforced.
Marketing  To market the newly merged
Company ‘YourGym’ in rural areas correctly.
Targeting income sufficient consumers
only.
Page | 6
What the project needs from them
 Multiple exercise stations,
including: cardio, fixed weight
stations, and free weights at an
affordable price.
 Commitment and willingness to
learn new skills. Such as
operating new features such as
operating swimming pools.
 Capital for the expansion will
be needed for: apparatus
(Matrix Fitness), location sites,
and initial overhead costs for
‘geographical expansion’.
 Fast learning, and commitment
to the project. Board of
directors will have to agree on a
capable and efficient
operational team.
 Compliance from each other,
and an operational strategy
devised in time for the merge.
 To understand the new system
of operations and how to
conduct themselves throughout
the operation.
 Knowledge on how to target
viable consumers within the
selected locations for
geographical expansion.
Perceived attitudes and/or risks
 The investment capital to fund
the needed apparatus required
for the expansion project of
YourGym, possibilities of
faulty equipment.
 The staff will not be trained to
the standard needed pre-merger,
possibly resulting in a difficult
launch in new locations
 Lack of capital investment
could see the company falling
behind competitors through
post-merger cannibalisation. A
risk that the fixed ROI may not
meet monthly profitability.
 The staff will be untrained, and
unable to supervise the
operation with speed.
 Argumentation from board of
directors, through ‘job-losses’
and disagreement on
operational strategy.
 Consumers will not understand
the new operation, i.e. sign-
process. Risks involve the
consumer not knowing key
factor of the newly functional
operation.
 Risks include: Not targeting the
consumers directly pre-merge
meaning a cannibalisation if
revenue at the beginning of the
project.
Actions to take
 Raise capital for the required apparatus. Actions
include approaching investment companies to
fund project, and ensure that equipment is tested
before functioning in new gyms.
 To ensure that the employees are sufficiently
trained to a high standard pre-merger to enable a
smooth takeover when geographic expansion is
underway.
 Approach the company with finical forecasts
required for the full-merger project, with all costs
considered and calculated for the merger project.
 Sufficient training is put in place for the
operational staff pre-merger, to deliver a smooth
transaction for new locations.
 Ensure the right team is selected for the
operation, and that the team work together
effectively on the project.
 The marketing must be approached correctly so
that the consumers can be directed correctly
throughout the new operation. This may be done
through online platforms such as smartphone etc.
 To ensure that a value for money ‘sign-up’ offer
is enforced to attract consumers to new-site
locations.
Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Resources
Before the ‘Forward Merger’ can commence, the resources required for the operation have to
be considered and details outlined of what’s required from them. This includes human
resources, project management, financial investment, administration, IT resources, employee
training and marketing operational management. These assets are critically important to make
this business model function, as merging two companies into one, isn’t an easy task. Below I
have outlined the key Roles needed to make the ‘Forward-Merger’ between PureGym and
TheGymGroup a success.
Human Resources- The initial requirement is for YourGym to construct a Human resources
team to make sure that the employees understand the tasks in hand, and that legislation is met
regarding health and Safety. Moreover, Human resources will need to recruit
new/experienced staff regarding personal trainers, cleaners and managers of the new ‘on-site
premises’. According to an online source: “A human resources manager must be well-versed
in each of the human resources disciplines – compensation and benefits, training and
development, employee relations, and recruitment and selection” (Henderson, 2017). In
correlation to this research, the HR Manager will have to work closely with the project
manager to ensure that all staff are trained to high standard.
Project/Finance Management-A project manager will be required to oversee the operation
and devise a strategy for the new ‘geographical expansion’ project for YourGym. In addition,
the project manager will be in charge of sourcing capital for the project and constructing
efficient teams to run the new establishments. The project manager will also be working
closely with all other roles optimizing profit margins and making sure the operation runs
fluently.
Administration-To assist the project manager/project management team, administration
would be required, this may feature a legal team, to provide assistance to overlook the
operation. The project manager will be liable for staff training, and making sure that staff are
trained to the expected standard for the merger. This is vital, as if staff aren’t trained to the
expected standard then the legislation may be problematic.
Marketing Manager-Marketing is a primary factor within the ‘Forward-Merge’. An
important section of the operation is to launch YourGym with ‘health and fitness’ based role
models to put a stamp on the dominant market share YourGym will possess. According to an
online source; “A marketing manager performs many duties aimed at developing and
implementing the long- and short-term marketing strategies of his employer. Depending on
the size of his organization, a marketing manager may also oversee a team of junior
marketing professionals” (Henderson, 2017). Marketing in the short-term will have to be a
strong campaign, due to the launch of ‘YourGym’ the company needs to secure its place as
the market leader within the health and fitness industry.
IT Management -With YourGym implementing technology focused sign-ups, marketing,
and ‘clock-in’, the IT Manager of YourGym will have to ensure that the IT operations are
overlooked and run smoothly upon the opening of YourGym. According to an online source:
“An Information Technology Manager is responsible for implementing and maintaining an
organization's technology infrastructure” (Beal, 2017). Organisations count on central IT
processors to support data management and communications systems within the day to day
running of operations.

Page | 7
Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Conclusions and Manager Implications

In conclusion, PureGym and TheGymGroup would be a great ‘merger’. They both have
similar targets/objectives, and are also both current market leaders within the ‘Budget Gym’
model sector. If the two combined to form ‘YourGym’, they could dominate that market for a
prolonged period of time. Through researching the topic area, their Goals would be as
outlined below.
 To expand to new ‘geographical’ sites such as towns and rural areas (Whilst
developing their city establishments).
 To launch a new marketing scheme, making their mark as Market Monopolisers
within the Health and fitness industry. This would utilize ‘Health and Fitness’
ambassadors, for professionalism and enhanced selling prospects.
 Implementing supplementary products such as ‘fitness focused’ nutrition, clothing
lines and accessories.
If the operation were to be successful, then it would be a matter of getting the correct team in
place to avoid ‘Profitable cannibalisation’. Moreover, PureGym and TheGymGroup would
make a shift from ‘Low-Cost’ on Bowman’s clock to ‘Hybrid’. This will not only generate
more revenue for the companies, but will also deliver ‘Added-Value’ for the consumer,
ultimately driving competitors to reduce costs.

Page | 8
Name: Lloyd Alexander-Chard
Student Number: Q12674141
Unit: Business Strategy: (STR350)
Unit Title: Implementing a Chosen Strategy

Bibliography

Webpage, Article name: Acquisition of Pixar by Disney

Webpage title: In Slide Share
URL: https://www.slideshare.net/pankajbaid17/disney-pixar-14616932
Author: Pankaj Baid, Published 2012 (Baid, 2012)

Webpage, Article name: Forward mergers and triangular mergers, the differences
Webpage title: DealLawyers.com
URL: https://www.deallawyers.com/blog/2011/10/forward-mergers-triangular-mergers-the-
differences.html
Author: Broc Romanek, Published2011 (Romanek, 2011)

Newspaper, Webpage title: The Guardian

Article name: UK Gym membership spending up by 44%
URL: https://www.theguardian.com/lifeandstyle/2015/aug/18/uk-gym-membership-spending-
up-by-44-per-cent
Author: Rebecca Smithers, Published 2015 (Smithers, 2015)

Webpage, Article name: Why budget gyms could be set to take over the sector
Webpage title: Sports Insight
URL: http://www.sports-insight.co.uk/trends-features/why-budget-gyms-could-be-set-to-take-
over-the-market
Author: Tim Groves, Published June 2016 (Groves, 2016)

Online Pdf, Article name: The Gym Group, Annual reports and Accounts 2015
Webpage title: The Gym-Find Your Fit
URL: http://www.tggplc.com/media/66640/24869-Gym-Group-AR15.pdf
Author: Richard Darwin, published 2015 (Darwin, 2015)

Webpage, Article name: The contestable Gym Market

Webpage title: Tutor2U Economics
URL: https://www.tutor2u.net/economics/blog/the-contestable-gym-market
Author: Geoff Riley, published Jan 2017 (Riley, 2017)

Webpage, Article name: Duties of a Marketing Manager

Webpage title: Chron.com
URL: http://smallbusiness.chron.com/duties-marketing-manager-801.html
Author: KJ Henderson, 2017 (Henderson, 2017)

Webpage, Article name: Information Technology (IT) manager

Webpage title: webopedia
URL: http://www.webopedia.com/TERM/I/information_technology_it_manager.html
Author: Vangie Beal, 2017 (Beal, 2017)

Page | 9