CrossFit (A) Case Study Solution
The threat of Substitute:
The threat of substitutes for CrossFit could be considered as moderate. There is a number of fitness clubs available in the industry but no one provides services similar to cross fit. The customers might prefer fitness clubs who provide advance technology or could choose jogging instead of joining fitness clubs. Therefore, on the basis of the above points, it could be said that the threat of substitutes is moderate.
The threat of New Entrants:
The threat of new entrants could be considered as moderate. Although this industry is growing rapidly, and the potential to grow is high but it requires either huge investment or point of differentiation to be stable in the market. The new business could enter into the market with the same strategies, but they will not be able to capture a huge target market because of other giant fitness clubs.
Rivalry amongst Existing Customers:
Rivalry amongst existing customers is considered as low. There is the number of business who offer fitness programs, but the CrossFit’s point of differentiation differs it from others. It aims to provide high-quality services to its customers and because of its thousands of affiliations; it earns huge revenues in terms of yearly payment and membership fees. Its fitness program is not for a specific field rather it provides fitness training which could be appropriate for any field. Therefore, it could be said that rivalry amongst existing customers is low.
Value Chain Analysis
The activities of the company are investigated or evaluated based on value chain analysis to know that in what areas, the company is doing well and which activities it needs to enhance. CrossFit’s portfolio consists of three main segments including fitness-training seminars, CrossFit Games and CrossFit affiliations. CrossFit affiliation and fitness-training seminars’ activities are appropriate according to the business segment and the company is earning huge profits from these both the segments. Whereas, on the other side, the company should change the chain of activities of its CrossFit games segment. CrossFit Game is incurring loses each year as the expenses are higher than revenues. Therefore, the company must decrease the expenses of this segment by changing its activities in order to generate profit. CrossFit could take benefit of its brand image and ask potential investors to sponsor CrossFit games. In addition to this, in order to cover the cost of CrossFit Games, the company should ask its affiliations to promote this segment.
VRIO Analysis
The VRIO analysis of CrossFit Company is a broad range analysis providing the organization with a chance to acquire a viable competitive advantage against its competitors in the fitness industry. Five resources including business model, market position, management team, brand awareness, and financial resources have been taken to know the company’s competitive advantage in comparison with its competitors. According to the analysis, the business model, market positioning and management team are considered to be sustainable competitive advantages. Financial resources are considered a strong competitive advantage and brand awareness are considered as a temporary competitive advantage.
Note: See Exhibit- 2
BCG Matrix
BCG matrix is a growth-share framework, created by Boston Consulting Group. BCG matrix is used to evaluate the strategic position of the business brand portfolio and it is potential. The portfolio of the business could be classified into four segments including Star, Cash Cows, Question mark and Dogs. All these four quadrants are based on industry attractiveness that is the growth rate on the y-axis and competitive position that is relative market share on the x-axis.
CrossFit affiliations could be considered as stars as its growth rate and market share is high. The company has thousands of affiliations and still has the potential to grow in this segment. Moreover, CrossFit Training Seminars are considered as cash cows. The growth rate of these seminars is not higher than affiliations whereas; its relative market share is high. There are very few fitness programs, working in this segment.Therefore, CrossFit captures a huge market share because of its brand positioning. However, CrossFit Games is considered a question mark, because this business segment is not providing benefits to the company in terms of profit. Although, this segment has a high potential for growth. Therefore, the company is facing a dilemma that whether to continue or stop CrossFit games.
Note: See Exhibit- 3
Financial Summary Analysis:
The financial summary of the business models including traditional and CrossFit has been compared to know, which cost method is simple and which one is complex. The traditional business model seems to be very complex because the franchise has to incur various expenses and invest a huge amount, in order to get the agreement signed with the parent company. Whereas, on the other side, in CrossFit (new business model) is very simple as the affiliation has to pay only membership fees and fixed annual charges. CrossFit does not interfere in any operations of the affiliations because CrossFit believes, the affiliations know best that which action would be more beneficial according to the situation. Moreover, in the traditional model, the franchise has to invest a huge amount in equipment, lease, and other deposits whereas, in the new business model, the affiliations are not bound to invest in equipment, lease and any kind of other deposits. Therefore, on the basis of analysis, it could be said that the traditional business model is far complex than a new business model.
Note: See Exhibit-4
Conclusion
CrossFit’s shareholder has sold its 50% stakes to Anthos Capital, an equity firm and the CEO of CrossFit is curious to know how investors’ presence would affect CrossFit. Although, Anthos Capital claims that they will interfere in the operations of the business as they are satisfied with the business model. However, the company is willing to support the business for further growth. Internal and external evaluation of the company has been performed in order to know the situation of the company and industry. On the basis of evaluation, it is suggested to CrossFit to continue its operations with Anthos Capital as the company has invested in many other businesses and their support would increase the growth of the business. However, CrossFit should make an agreement with Anthos Capital that, the company will not sell its shares to any other investors rather than the CEO of CrossFit. Both companies could work together in order to increase the market share of the company……………
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