A Coventry based gym is facing multiple issues from the doubling of customer numbers for the 2nd year running, negatively affecting the quality of service being offered. This report aims to provide proposals on how to address the problems so that they don’t harm the ongoing viability of the business.
Assuming the business already has the funds needed for investments at about £70″,000, the report will not go into depth about the
This report aims to highlight the issues that John is facing and suggest solutions to grow his business in the long term. The report will explain each of the changes John Roots will need to undergo within each of the five business functions. In addition, the interdependencies between the business functions will also be explained.
John Root originally opened a gym more than a year ago using a leased premise in Coventry becoming successful in the 1st year running. Now a fast-growing gym John Roots Gym now employees 2 full time qualified trainers and 1-part time. However due to the higher volume in customers John will have to expand the business as there is not enough space.
John Roots gym focuses on delivering top end weight lifting equipment for the customers. Since the gym only consists of John and three trainers, their organisational structure would be classed as a flat organization structure. A benefit of functioning as a flat structure would be that it lowers operational costs due to not having to hire any mid or low-level managers which could be used to market or advertise (Quain, 2018).
John Roots gym is situated in Coventry and is rapidly gaining customers due to a flexible contract, this is the cause of many problems within his gym. With the business environment constantly changing, the PESTLE analysis model will allow John to differentiate the key factors when making managerial decisions.
Operations management is the responsibility of handling the resources of a company with the aim of creating, improving and delivering the goods and services by changing inputs into outputs (Slack et al., 2011). It is one of the four core functions of many business with the other three being human resources, marketing and finance. John must ensure his operations work proficiently with the other parts of the business as it could impact the efficiency negatively.
When business create goods and services by changing input into output it is modelled as an ‘input-transformation-output’ process. Essentially this is when input resources are processed into output resources. Figure 1 below is a model explaining this process, the 3 main inputs being customers, materials and information. Known as the Process hierarchy, the operations belong to a supply network aiming to satisfy end-customer obligations (Slack et al., 2011). Aiming to provide the best quality, businesses may factor in lean production (just-in-time) which is “the complete elimination of all waste” (Toyota, n.a). JIT is when a company produces a product only once there is an order (Schonberger, 1986). John can use this method to provide just enough equipment to maximise capacity utilisation as currently there is a shortage of machines leading to wasted efficiency.
John must ensure that his operations improve their services for their customers. The leased premise is now proving too small leading to increased waiting times for equipment, thus unhappy customers. Leasing a larger premise or adding more equipment would eliminate the waiting time problem. This could also increase customer loyalty and reduce the chance of competitors taking customers. This relates to the idea of corporate social responsibility (CSR) which are factors the economic, social and environmental effects when operating. This would encourage sustainable growth within the business and maintain healthy relations within the company’s stakeholders (Slack et al., 2011).
FIGURE 1 :
TRANSFORMATIONAL SYSTEM – WORTHINGTON & BRITTON (2006: 5)
Customers now have higher demands for better service and expect less waiting times. Technology is rapidly developing meaning his data card system has become out of date and is slow. This prompts operations to use information-based technologies and maintain good customer relations and healthy work patterns for the unhappy staff.
All businesses haves its own strengths and weakness and John Roots Gym is no different. In the 1st year running the business Is doing well due to the flexible contract given to customers. Due to the popularity, John has had to employ 2 full-time qualified trainers and 1 part-time, ultimately leading to the 2nd year running where the customer base has doubled resulting in the leased premise becoming too small affecting both customers and staff.
Marketing is one of the key functions of a business working to maintain and grow their current customers by delivering satisfaction, this can be achieved by promising superior value compared to their competitors (Kotler, 2015). Each firm in a market will need to differentiate their product from rivals. McCarthy’s 4Ps of marketing strategy with emphasis on Product, Price, Place and Promotion is used by most firms to gain a competitive advantage over competitors.
If we apply McCarthy’s tool to John’s gym, we can distinguish the decisions he should make in his business. John does not have enough product (equipment) in his gym which can easily be solved by buying more or leasing a bigger premise. The pricing for his contract has no problems which is good as we can concur from this that the customers find his product to be of quality and value.
Currently, technology changes rapidly which hugely change the way markets and consumers interact. The three fundamental forces are computers and mobiles, network connection and open source (Rosales, 2010). Companies that do not constantly update their technology to suit the nature of the market will often lead to failure as seen with companies such as Polaroid. Technology advancements in the spread of the internet via mobile devices has given rise the importance of Social Media to allow any company via the internet to interact with customers almost immediately. Social media was recognised as “an indispensable communication tool for companies, as a way of advertising, to educate or to communication as way of interact and support relations (Garcia, 2011) and (Peri, 2009).
HUMAN RESOURCE MANAGEMENT
Development of theories and research on the relations between human resource management and performance first emerged in the 1980s. Books and articles were published by novelists such as Fombrun et al. (1984) and Miles and Snow (1984) focusing on theories combining HRM to business strategies. As the years progressed, firms who applied the ‘high commitment’ HRM practises generated better performance than competitors who did not apply practises (Peters and Waterman 1982).
Motivated employees are very important as they are more likely to be more productive and willing to reach objectives for the company which is a benefit. Maslow and Herzberg both believed in fulfilling the individual needs of each workers. Maslow’s hierarchy of needs explains that all people start at the bottom of the pyramid where they seek physiological needs such as food and shelter where they can progress up the pyramid as they satisfy each of the needs for the stages. There are 5 total levels to the pyramid as shown in figure 2. In the order, the five stages are physiological, safety, social, self-esteem and self-actualization (Mcleod, 2007).
FIGURE 2: MASLOW’S HIERARCHY OF NEEDS
One issue in Johns gym is his staff are being overworked while still on the same pay rate. This has a negative impact on the morale of the employees making his workforce less effective. These are some of the needs that are usually classed as the starting point for motivational theory, known as the physiological drives (Maslow, 1943). A possibility of low worker morale could lead to dissatisfaction, absenteeism and turnover. This will likely affect the development of John Roots Gym because his business might struggle with improving profits which could be used to improve and invest in his business.
Maslow hierarchy of needs
Physiological needs- The problems are unreasonable work hours and not enough necessary breaks as the staff are being overworked and are still getting the same pay. Best solution is to employ new staff to cope with the extra demand.
Safety needs- well-being. Personal security, financial security, good health and protection from accidents secure compensation (such as a salary) and job security
Social needs- refer to the need to feel a sense of belonging and acceptance. Encouraging cooperative teamwork, being an accessible and kind supervisor and promoting a good work-life balance.
Esteem needs- Needs to provide employees by offering praise and recognition when the employee does well, and offering promotions and additional responsibility to reflect your belief that they are a valued employee.
Self-actualization needs describe a person’s need to reach his or her full potential. The need to become what one is capable of is something that is highly personal. Providing challenging work, inviting employees to participate in decision-making and giving them flexibility and autonomy in their jobs
ACCOUNTING AND FINANCE
Accounting and finance essentially both aim to use financial data of the business to help improve the quality of their decisions. Both are similar in a way, however there is a slight difference in the way both functions manage the information. Accounting is the collecting, analysing and communicating of using financial information to help when it comes to making decisions. Financial management is similar, also aiming to help decision making but focuses on how the businesses finances and invests. Assuming John has all the funds which can be invested, John must ensure that both finance and accounting evaluate the risks and returns on both leasing a bigger premise and leasing more equipment.
Financial information will be used to make decisions with acknowledgement of a business’s main stakeholders. Some of the important stakeholders for a business are customers and employees. For example, if John might have to create an assessment to make sure the decision would meet customer’s needs. Accounting can be used as an information system for businesses, requiring financial accounting when making decisions often containing certain features such as analysing the correct information efficiently (Antrill and Mclaney).
Due to the rapid development of technology Johns data card which keeps all the records is now obsolete making it inefficient and harder to manage as more and more clients are being added. In this gym industry is it also highly competitive meaning John will have to have to create a competitive advantage catering to more advanced level gym goers by advertising via social media instead of pamphlets.
Finance is the function that supports many departments and projects that are necessary for a functioning business model. Some examples are accounting, planning and record planning and maintain capital and recourses for expansion. John needs to expand due to his premise being too small
The IT systems of a business is crucial in all businesses today. Founded in by Sergrey Brin and Larry Page, Google has become the world’s largest search engine in 2016 (Boddy, ). Google aimed ‘to organise the world’s information and make it universally accessible and useful’ (Google”,). Due to the rapid development of technology businesses needs to invest to compete. Johns data card which keeps all the records is now obsolete making it inefficient and harder to manage as more and more clients are being added. In this gym industry is it also highly competitive meaning John will have to have to create a competitive advantage catering to more advanced level gym goers by advertising via social media instead of pamphlets. Doing this would attract more customers increasing sales and could increase profits.
The open systems model describes the role of information systems within businesses.
The business environment in which John’s gym is operating has changed from one year ago. Customers now have higher demands for better service and expect less waiting times. Technology is rapidly developing meaning his data card system has become out of date and is slow. This prompts operations to use information-based technologies and maintain good customer relations and healthy work patterns for the unhappy staff.
Efficiency of the gym is very bad due to bad capacity utilisation. Premise is too small, also overworked staff. The data card is inefficient which makes it difficult to manage. They need to create a spreadsheet which is modern quicker and more efficient.
After analysing the issues John is facing and the factors that will affect him when trying to expand his business, I can conclude that leasing another larger premise is an option with great benefits to help John sustain and grow his business.