...A Case Analysis of Bally Total Fitness’s External Environment Group 2: Meghan Cree, Sarah Medve, Rachel Hamrick, Jacob Rath, James Wallerstedt, Samuel Kube Due: 01/27/15 Word Count: 2039 Case: Bally Total Fitness By 2004, Bally Total Fitness was a major leader in the $14.1 billion health club industry. With over 400 million facilities worldwide, Bally was the “largest publicly traded health club operator in the United States in 2003” (Wells, John R., 1-7). Bally’s success was fueled by many components including membership revenue, various products and programs, and their recognizable, worldwide image; however, in 2004, Bally faced a major shock to its reputation. Fraudulent accounting practices were discovered and examined, resulting in an uproar from shareholders, complaining of financial misrepresentation. As a result, Bally Total Fitness faced a drop in their stock price, lawsuits from current shareholders, and a damaged repute. The following analysis will evaluate how the general external environment affects Bally Total Fitness, examine Bally Total Fitness’s current standing in the health club industry, options on how to rebuild its status in this industry, and solutions to implement for eliminating any skepticism among shareholders and increasing membership numbers. Macro–Environment Analysis Gym and exercise equipment manufacturers are constantly upgrading current models of exercise machines as well as developing innovative designs...
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...Group 1 BALLY TOTAL FITNESS 10/02/2014 1. What is this case about? This case is about Bally Total Fitness, an U.S. health club industry founded in 1962. But more generally this case is about the health club industry in the USA and throughout the world. In a first part, there is a general presentation of the U.S. health club industry characteristics. We have some information about people who go to these clubs, proposed activities, equipment and facilities. It presents the different ways of formats in this industry, how the industry is organized: owner-operated clubs, franchised clubs, Design and management companies and health spas. We have some explanations about pricing, ways of sales, general operations and an analysis about the different trends within this industry. We In a second part, we have a deep presentation of Bally Total Fitness. We have information about its foundation, generated revenues, growing, current CEO (Paul Toback). We have a description of the process to sign in with Bally Total Fitness, how a typical club is organized. This part is about the strategic decisions of Bally Total Fitness about its marketing, accounting policies to attract clients. In a third part, we have a quick presentation of Bally Total Fitness’ competitors (YMCA, Gold’s Gym, 24 Hour Fitness and Curves International). We have crucial information about their histories, main leaders, policies, revenues and differences from Bally Total Fitness. Finally, there are some...
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...1. Situation Bally Total Fitness is a public firm in the U.S. health club industry. Since 1962, the company had developed into a large and nationwide commercial operator of fitness centers in the Unite States. But with the increasingly fierce market competition and the internal management problems such as poor accounting standards, the stock price of the company collapsed. Some shareholders had lost faith in the company. A major shareholder of the company was urging the CEO to sell the company. So the company faced two alternatives, one alternative was to sell the company to meet the demand of shareholders; the other alternative was to strengthen its internal control system to remedy the management fault. In this way to restore the stock price, restore the confidence of shareholders, and enable the company to keep a major player in the health club industry. Exercise gyms had a long history in the Unite States which can be dating back to 150 years ago. By 2004, the revenue of the U.S. health club was about $14.2 billion. There were more than 26,000 health clubs in the U.S. and over 13% of the U.S. populations for about 41 million were the members of these club. About 60 million people used health club in 2002 in the U.S. If coupled with non-members. One key driving point of health club phenomenon was the growing awareness about health and well-being, and concern about obesity and its effects among Americans. In 2004, two-thirds of adult populations were recognized as being...
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...An Analysis of the U.S. Health Club Industry in 2004 and the Role of Bally Total Fitness Executive Summary Introduction The rise of the U.S. health club industry can be traced back to the 1980s and 1990s when the majority of health clubs emerged. By 2004, this $14 billion industry claimed 41 million members. Although the health club industry operated in a perfectly competitive market, several prominent key players gained large market share, including Bally Total Fitness and 24 hour Fitness. This perfect competition encouraged entry of smaller emerging firms into the industry. In 2004, the health club industry consisted of 26,000 clubs in the U.S. Of this growing market, the fifty largest firms were responsible for 33% of industry revenue and 38% of the clubs was not-for-profit. The for-profit industry was divided into the following formats: owner-operated clubs, franchised clubs, design and management companies and health spas. Bally Total Fitness, the largest publicly traded health club operator in the United States in 2004, claimed over 3.6 million members worldwide. This multi-million dollar company had earned a reputation as being the “largest and only nationwide commercial operator of fitness centers” in the United States, a substantial leap from the single modest club that first opened in 1962. Several advantages contributed to Bally’s success over the other health clubs in the industry. CEO...
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...Bally Total Fitness Marketing AuditBally Total Fitness is the largest, and only nationwide, commercial operator of fitness centers. Bally's has approximately four million members and 420 facilities across the United States and around the globe. (ballyfitness.com, 2004) A marketing audit was performed on the company in order to assess their total marketing program to see what was and was not working to increase business. The following will summarize key findings of environmental aspects and marketing. Finally, any recommended actions that may be considered for future planning will be discussed. The environmental aspects that were considered for the Bally Total Fitness audit were demographics, markets and competition. Demographic trends have shown that the older segments of the United States (ages 45-65+) are growing the fastest. Bally Total Fitness would be wise to consider marketing towards this age group as their needs change. An estimated 50 million people will be members to a fitness center in just six years, the year 2010. This is due to an increased desire towards healthy living. The general population is becoming more aware of the benefits of exercise to promote health and wellness. The Markets part of the audit shows that there is three major trends that health clubs should be attentive of. These major trends are insurance paid weight-loss, a global battle against obesity and an end to low-carb confusion. Health clubs are part of the solution and should promote...
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...healthy and fit, the fitness industry is maintaining steady growth because of better dietary practices and a resurgence to play and become more active. It is no surprise the demand for gyms and health and fitness clubs will continue to rise. Therefore, my paper will cover the critical concepts as it relates to Bally Total Fitness Case Study. I will highlight Bally’s history, macro environment, SWOT analysis, corporate-level strategy, business-level strategy, and my recommendation for Bally Total Fitness. History, Development, and Growth Dave “Wild man” Wildman is said to be the founder of Bally Fitness, but it was Raymond T. (Ray) Moloney back in the early 1930’s who decided to create an affordable past time of pinball. Anyone could play pinball at the price of seven balls for one cent or 10 balls for a nickel. In January of 1932, Ray founded the popular past time while working under Lion Manufacturing in Chicago. The Ballyhoo pinball game was easy to make and very profitable. With the creation of the “Goofy,” the “Airway,” the “Rocket,” and the “Bumper” pinball machines, Bally Manufacturing, under Moloney’s leadership, took off. Bally Manufacturing headquarters remained in Chicago at the same address for almost 50 years. In 1936, Bally Manufacturing developed the automatic dice machine named “Reliance”. This development was an overnight success and prompted further delving into the three wheeled slots, and the newest addition the “Bally Baby.” The “Bally Baby” was a five...
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...BACKGROUND AND OVERVIEW Bally Total Fitness was created in 1996 with Lee Hillman as its first CEO. Bally traces its existence to the Health and Tennis Corporation, run by Dave Wildman. Wildman had begun to purchase ailing gyms and aggressively expanded and acquired several other brands as well. In the 1990s, as part of a diversification move, Bally Manufacturing, a gambling equipment company, decided to purchase Wildman’s collection of gyms and other brands. This diversification of brands created what was known as Bally Entertainment. Bally Total Fitness was then created in 1996 as the health club portion of Bally Entertainment. Lee Hillman started the company off in an unusual path, Mr. Hillman used a retrenchment strategy by selling off outlets, rationalizing Bally’s brand portfolio, and closing several clubs, which then returned the business to profitability. During Hillman’s course of leadership, Bally developed a very broad range of products and services, which increased revenues out of the company’s existing membership base and added profit to the bottom line. The company faced a triggering event when Bally’s CEO Lee Hillman stepped down suddenly in December of 2002. Bally’s chief operation officer at the time, Paul Toback, replaced Mr. Hillman and moved to the top of the company. Toback’s started as CEO explaining that he expected changes to the company to be “more evolutionary than revolutionary”. Under Hillman’s lead, Bally was operating essentially as two different...
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...Bally Total Fitness Health Club Industry Bally Total Fitness was a leading firm in the health club industry. Since market competition had intensified, Bally’s stock price dropped leading to an investigation by the Security and Exchange Commission. To improve Bally’s current position, we apply the Porter’s Five Forces Model to analyze its external environment. The competitive rivalry in health club industry is intense as there are many small or equally sized competitors. In addition, exit barriers are high because of higher capital costs and operation costs, indicating that the health club industry is hard to exit. Equipment makers are the industry’s major suppliers. Suppliers have high bargaining power because there are only a small number of well-known suppliers. Consumers are the buyers and have moderate bargaining power when choosing a health club, because there are numerous clubs in the industry. But once they are committed to memberships, they have a lower bargaining power. The threat of substitute products is high. Consumers can workout at home, outdoors, or at gyms within their workplaces. Besides, they can go to health spas designed for workouts. Nutritional and athletic products are complimentary to the health club industry. The threat of new entrants is rather low because it is difficult to acquire decent real estate or a good location; also, exercise equipments are highly valued. Consumers who have had a good experience with their health clubs tend to be quite...
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...Body Needs Something (TM) Survey released in January 2004 by Bally Total Fitness more than 97% of Americans are aware that the United States is the world’s most obese nation and more than 64% stated that this is embarrassing to them personally. More than 97% of survey respondents who felt they were unfit or overweight want to lose weight, yet only 25% are currently following a diet program. The response to this survey demonstrates that with effective marketing Bally has the potential market available to improve its new membership revenues, as such demographics will only improve with improvements in both diet and exercise. Additional products and services Significant opportunities exist to increase revenues beyond those generated by the sale of membership plans and receipt of monthly dues. By integrating personal training, private label nutritional products, and most recently the Weight Management Program into its core fitness center operations, the Bally Total Fitness brand has been positioned as the total source for all of the company’s members wellness and fitness needs. Additionally, these incremental revenues do not require significant capital investment as they leverage the growing distribution platform that the company’s fitness centers have become. Major Threat: Lately major concerns about the company’s ability to deliver results against a backdrop of increasing competition for fitness club operators have arisen. In a trend that is expected to become...
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...Bally Total Fitness Case 1 2011 Fall Comm 400 Health Club Industry Bally Total Fitness was a leading firm in the health club industry. Since market competition had intensified, Bally’s stock price dropped leading to an investigation by the Security and Exchange Commission. To improve Bally’s current position, we apply the Porter’s Five Forces Model to analyze its external environment. The competitive rivalry in health club industry is intense as there are many small or equally sized competitors. In addition, exit barriers are high because of higher capital costs and operation costs, indicating that the health club industry is hard to exit. Equipment makers are the industry’s major suppliers. Suppliers have high bargaining power because there are only a small number of well-known suppliers. Consumers are the buyers and have moderate bargaining power when choosing a health club, because there are numerous clubs in the industry. But once they are committed to memberships, they have a lower bargaining power. The threat of substitute products is high. Consumers can workout at home, outdoors, or at gyms within their workplaces. Besides, they can go to health spas designed for workouts. Nutritional and athletic products are complimentary to the health club industry. The threat of new entrants is rather low because it is difficult to acquire decent real estate or a good location; also, exercise equipments are highly valued. Consumers who have had a good experience with their...
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...Strategic Analysis Masters in Management, Spring 2016 Final Exam (due no later than Tuesday 8th March 2016 at 23:59 UK time) Case: Bally Total Fitness Questions: Question 1: Did Bally have a competitive advantage in the U.S. health club industry (around 2004)? Use the tools and frameworks covered during the course to address this question. [70 points] Question 2: How serious are the competitive threats faced by Bally Total Fitness in 2004? Feel free to consider broader elements in the firm’s environment (i.e. consumer trends) and actions of competitors. [10 points] Question 3: What would have been your recommendations to Paul Toback, Bally’s CEO, as he pondered about the future of the firm in 2004? Justify your answer using case facts but make sure you develop logically concrete arguments. [10 points] Additional 10 points will be granted for clarity, structure of argument, completeness of the analysis and logical consistency. Administration: If you think a question requires more details you may incorporate any assumptions you think are required to answer it. Clearly state your assumptions in your answers. If they are reasonable you will be given credit. Use a maximum of 4 pages (sensible margins, Times New Roman size 12 font or similar). Be sensible- if you think the font may be too small or the margins too narrow then they probably are. Where needed, external material from the web is allowed with referencing to the original source...
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...Bally Total Fitness Review * Accounting issues and effects: * Overstatement of revenue * $997.8 million - recognized initiation fee revenue over the initial period of membership * $35 million – recognized prepaid dues in the month the payment was received * $105.5 million – prematurely recognized revenue for multiple element arrangements by treating them as separate elements * Understatement of expenses * $114 million – capitalized and deferred membership acquisition costs including salaries, bank charges, NSF charges, and credit card charges * $4.3 million – improperly understated “Holiday Bonds” expense (and did not disclose the bonds on the financial statements) * $60.9 million – overstatement of goodwill * Auditor: Ernst & Young * Time period: 1997-2003 * Accounting principles not followed: * Overstatement of revenue * GAAP prohibits the recognition of revenue from initiation fees immediately, they should have been recognized over the entire membership life * GAAP requires that the prepaid dues be deferred and recognized as it is earned * GAAP requires that revenue from multiple elements be treated as a single element * Understatement of expenses * GAAP requires that costs related to the acquisition of the contract can be capitalized and amortized, all other costs should be expensed as incurred * GAAP requires that...
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...athletics To have Ph.D. degrees NSCA Certification Computers 3. The most important consideration in Human Resource management is: Budget Facilities Reporting Planning Hiring 4. General Mills has an excellent fitness program for its employees in: Minneapolis, Minnesota Dallas, Texas New York, New York Los Angeles, California Chicago, Illinois 5. Qualifications for physical educators and sport personnel in the public and private sector should include: A degree in physical education/kinesiology Certification from an allied professional organization An internship to gain supervised work experience All of the above 6. Certification in areas of health and fitness are offered by: ACSM NSCA ISSA All of the above None of the above 7. The physical fitness level of adults in the United States: Is excellent Is poor Needs improving Is the best in the world None of the above 8. Industrial fitness programs are looking for: Biomechanics specialists Athletic trainers Exercise science/physiology experts Coaches Female physical educators 9. A mind-body-spirit approach to health and fitness is a distinctive aspect of programs offered by: Rex Wellness YMCAs Bally Total Fitness IBM All...
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...Turnaround at Bally Total Fitness? 1. Evaluate BFT’s business strategy, identifying the key success factors and risks. The key success factors include: BFT offers various memberships according to members in different age and income levels; a few membership fee payment plans are available to choose; strong brand identity by nationwide using its service mark; and convenience of multiple locations. The key risks are the competitions with commercial fitness centers, government supported physical fitness and recreational facilities, and competitors with substantial great financial resources. Another risk is the decrease of public’s enthusiasm for fitness and low cost entry to the market because of easier financing. 2. BFT’s revenue recognition policy can be highlighted as: * Revenues from initial membership fees are deferred and recognized ratably over the weighted average expected life of the memberships. Costs of origination of memberships are deferred and amortized in the same way. * Dues revenue is when monthly services are provided. When prepayment is received, the prepaid portion is deferred and recognized over the applicable term. * Unearned finance charges are amortized over the term of the contracts on the sum-of-the-months-digits method, which approximates the interest method. All of the recognition policy sounds right in accordance with GAAP, and is consistent with the underlying economics of the business. 4. The account “Initial membership...
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...Ernst & Young EXECUTIVE SUMMARY Ernst & Young commonly referred as EY, is one of the Big Four professional services firms along with Deloitte, PricewaterhouseCoopers and KPMG Ernst & Young is a multinational professional services firm headquartered in London, United Kingdom and was the third largest professional services firm in the world by aggregated revenue in 2012. The firm has employed 167,000 people and has more than 700 offices across more than 140 countries, providing assurance (including financial audit), tax, consulting and advisory services. In FY 2012, EY earned a record of $24.4 billion USD in revenue, ranking the third among the Big Four, after PricewaterhouseCoopers and Deloitte, ahead of KPMG. Ernst & Young offers its services to companies in a vast range of industries, including asset management, life sciences, mining, media and entertainment, retail, technology, and hotel and leisure. The company's financial reporting segment offers an IFRS/GAAP comparison so companies can compare and contrast the international and US accounting standards. The group's members firms are organized in four geographic areas: Europe, the Middle East, India, and Africa; the Americas (including Ernst & Young LLP); Japan; and the Asia/Pacific region. Ernst & Young is increasingly focused on the emerging markets, which have seen more rapid economic recovery than the developed nations. The company sees the trend of growth in the emerging markets as one that...
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