“True enjoyment comes from activity of the mind and exercise of the body; the two are ever united.” (von Humboldt, n.d.). As the public becomes more health-conscious and the aging population places greater emphasis on remaining 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 by seven inch, eight pound slot machine which drove Moloney deeper into the gaming arena. Prompted by the attack on Pearl Harbor in 1941, Moloney stopped all gaming and amusement endeavors and switched his company’s focus to manufacturing products to aid in World War II. Incidentally, Bally Manufacturing was credited with creating the shooting sights for the bombers, oxygen regulators and many others. This spirited patriotism, tireless work ethic and commitment earned him several citation awards from both the Army and Navy.
After the war, it was back to business as usual with the development of a couple of new machines in 1947, putting Bally Manufacturing back on top in the gaming and amusement world. Ray Moloney died on February of 1958. After Moloney’s passing, the company began a slow downward spiral as the sons Ray Jr. and Donald tried to save the company. They were forced to sell off the coffee vending division, a highly profitable asset, to ease the mounting debt and tax assessments.
In June of 1963, Lion Manufacturing and its subsidiary Bally Manufacturing were sold for $2.85 million and purchased by William T (Bill) O’Donnell, a close associate of Moloney. Bill bought Bally’s with the assistance of some investors and breathed new life in the Lion Manufacturing Corporation as its President.
In November of 1963, the introduction of the “Money Honey” slot was introduced and it changed the game forever. The “Money Honey” was now the flagship of Bally Manufacturing. In 1968, ninety-four percent of all machines in Nevada were Bally machines. With a foothold this strong, expansion began. They proceeded to acquiring wall-mounted amusement devices from a German company called Wulff-Apparatebau and a coin-operated arcade game company called Midway.
In August of 1975, BLY made its debut was on the New York Stock Exchange (NYSE). This marked the first time a gaming company had joined the ranks of corporate world. Bally’s had taken off and did not looked back. The expansion continued to include Slot Data Systems (SDS). The SDS, a new division of Bally was started in 1976, the first fully computerized data-collection system for casinos. This made the premier supplier of slots, coin-op and slot accounting systems.
That same year, New Jersey state legislature voted to allow casino gaming in Atlantic City. Bill seized the opportunity to get in on the ground floor; thus, in October of 1978, construction began for the Bally’s Park Place Hotel and Casino. They opened the doors in December 29, 1979 with only a temporary gaming license.
Fast forward to 1983, and the Bally group acquired Health & Tennis Corporation. They went on to purchase the Lifecycle the following year and continued to develop cutting edge fitness equipment. Bally’s made a name for itself and became the largest owned and operated fitness center in the world.
Macro environment
Bally Total Fitness has five major environmental factors in which to be aware. The five major environmental factors are macroeconomics, technology, demographic, social, political and legal factors. As we ponder what factors could possibly affect the decision making of a health club as successful as Bally’s Total Fitness, we need to examine the macro environmental influence such as economics. “Macroeconomic factors affect the general health and well-being of a nation or the regional economy of an organization, which in turn affects companies and industries abilities to earn an adequate rate of return” (Hill & Jones, 2010, p. 64). Macroeconomics factors are commonly known to affect the economy’s growth, interest, and currency exchange and inflation rate.
The macroeconomic forces that affect Bally general health and well-being are growth rate of the economy and interest rates. Economy growth rate can positively affect Bally’s because it allows the organization to expand its operations and earn even higher profits. The health club industry grosses $14.1 billion per year. The members of health clubs tend to be middle and upper class. Almost half of the club members have earnings of $75,000 or more. Furthermore, industry observers tend to predict continued growth among the health-conscious ranks.
Macroeconomics factors also affect Bally Total Fitness by interest rates. The economy’s interest rate is a major factor to Bally’s because it determines the overall consumers demand for their products and services. For example, when interest rates are high, individuals typically spend less. On the contrary, when interest rates are low, consumers spend more because credit-card financing rates are lower, monthly payments are decreased; therefore, consumers have more disposable income. As you see, regardless whether interest rates are high or low, Bally will be impacted. For that reason, if Bally understands how the growth rate of the economy and interest rates impact its business, they will be able to plan for growth and future opportunities.
I have discussed the history and macroeconomic factors affecting Bally Total Fitness, now I will focus on the second environmental analysis. The second environmental factor to discuss is demographics. “Demographic forces are outcomes of changes in the characteristics of a population such as age, gender, ethnic origin, race, sexual orientation, and social class” (Hill & Jones, 2010, p. 66). The demographic picture is one of the traditional target markets between ages 18 – 34 years of age. Thirteen percent of the United States population belongs to a health club. For example, baby boomers memberships have increased by 273% from 1993 to 2003, along with children and teenagers whose memberships have doubled from 1993 to 2003. As the text states, “The next great bonanza market has to be the kids…When exercise, fun and results are tied together the kids will do it; this not only helps bring in them and their parent now, but builds a base for the future” (Hill & Jones, 2010, p. C34).
The next environmental analysis is social factors. “Social forces refer to the way in which changing social mores and values affect an industry” (Hill & Jones, 2010, p. 66). The social and cultural demands can be beneficial as most people seem to be health conscious. It is a well-known fact that two out of every three American are obese or overweight. Thirty-seven percent of all health club attendees come to lose weight. While 22 percent of new members enrolled in January or February as a result of a New Year’s resolution. The number of obese and overweight children has increased every year (Hill & Jones, 2010, p. C28). Therefore, the choice for customers joining health clubs can be influenced by friend’s recommendations, facilities, the cleanliness of club, friendliness of staff, fees, brand names (Hill & Jones, 2010, p. C28).
The fourth environmental analysis to be discussed is political and legal forces. The text states, “Political and legal forces are outcomes of changes in laws and regulations” (Hill & Jones, 2010, p. 67). Historically, Bally members signed a 36-month, legally binding contract. New members had a couple of options; they could pay the entire 36-month liability upfront or take out a loan from Bally. However, this three-year commitment was an issue with many members because “a number of members complained about cancellations requests that were not honored, the use of harassment or deceptive means to collect fees, and the unauthorized charging of credit credits and debiting from bank accounts” (Hill & Jones, 2010, p. 35). From a legal perspective, the cleanliness of Bally’s is regulated by the health department. The employees are protected from working long hours because the Fair Labor Standard Act (FLSA) dictates the working hours of club employees; for example, minimum wage, overtime, record keeping and child labor. Moreover, the Federal Trade Commission (FCC) monitors the fees collected and proper business practices. Speaking of the FCC, they “…required Bally to pay $120,000 in civil penalties and to refund thousands of membership fees” (Hill & Jones, 2010, p. 35).
The fifth and final environmental analysis to be discussed is Technological forces. Technological forces are one of the most dramatic forces shaping our lives. “New technologies that provide superior value in satisfying needs stimulate investment and economic activity. New technology creates major long-run consequences that are not always foreseeable” (The ManageMentor, n.d.).
Technology is ubiquitous. Presently, most tools and equipment used to exercise contain a computer chip, from the watches to sphygmomanometers (blood pressure monitors). This technology is to measure walking and running distances as well as monitoring heart beat and pulse. Interesting enough, bicycles can simulate going up steep slopes or coming around the bin in a downhill race; while treadmills and stationary bikes are programmable with individuals own personal workout regiment. Information technology (IT) is used for managing many different systems, tracing runners’ routes, and tracking customers’ workout progress. In addition some clubs have proprietary software systems in place to record, store and recommend courses of action for members.
SWOT Analysis
SWOT analysis provides a “series of strategic alternatives or choices of future strategies to pursue, given the company’s internal strengths and weaknesses and its external opportunities and threats” (Hill & Jones, 2010, p. 19). A SWOT analysis should identify ways to build on strengths, eliminate weaknesses, take advantage of opportunities, and counter threats.
Strengths
In 2003, Bally Total Fitness was the largest publically traded health club operator and generated revenue of $954 million. They had 360 clubs in the United States and 50 international locations. Since Bally is advertised as one of the strongest and most recognized fitness brands, they continue to focus on offering the highest value and convenience to their members, employees, and partners. Through their nationally recognized brand/image, Bally provides all of the benefits of a full-service gym at various affordable pricing ranges. For example, pay-as-you-go membership. Consequently, in 2004, Bally’s expanded outlets to 29 states which gave them the broadest graphic distribution of any owner-operated health club chain in the United States (Hill & Jones, 2010, p. C3).
Along with fitness centers and its industry-leading training programs, positive work environment, and competitive compensation package, Bally’s also have their own products. They have an extensive line of exercise equipment ranging from medicine balls to free weights. Furthermore, Bally’s has comprehensive nutritional and exercise programs, a full line of supplements including weight management products, performance supplements, and energy enhancers. They also sale exercise equipment online and supplements can be purchased at health stores and super markets. As the fitness industry is growing, Bally’s sets the standards for fitness and continues to build on its leadership position.
Weaknesses
Although Bally is very well endowed with strengths, they are not excluded from areas of improvements. Bally clubs are typically 30,000 square foot facilities located near regional, urban or suburban shopping areas. Due to the size, Bally experienced high overhead because they only operated large gyms, employing 21,700 people at the fitness clubs, and 1,500 people at central locations. Approximately “50 employees—including managers, instructors, personal trainers, sales personnel, and maintenance personnel—were involved in operating each club” (Hill & Jones, 2010, p. C35). With such a large staff, Bally is challenged with keeping friendly, skilled, and motivated employees due to long inconvenient work hours, cleaning up after customers, and dealing with the moods of customers. In addition, other expenses that contributed to Bally’s high amounts of debt are advertising, sales commissions, utilities, insurance, and training. Another source of contention was Bally’s 36-month required commitment and their unethical and inconsistent sales practices. For example, failure to honor cancellation requests and deceptive collection practices. These deceptive practices lead to accounting and control problems which ultimately resulted in an SEC investigation and cumulative adjustments to financial statements.
Opportunities
While Bally’s suffered from some severe weaknesses, the opportunities to rebound were tremendous. One such opportunity was becoming more diverse. Instead of catering only to the traditional age group of 18 to 34 year olds, Bally’s “popularity grew strongly among older consumers” (Hill & Jones, 2010, p. C29). They also broaden their Hispanic population. Other opportunities for Bally is to increase the number of small clubs in more convenient locations, offer more pay-as-you-go memberships.
Threats
Since the fitness business is constantly growing, Bally faces with intense competition and capital-market pressures. It leading competitors are the Young Men’s Christian Association (YMCA), Gold’s Gym, 24 Hour Fitness and Curves, International. Although the YMCA is the largest not-for-profit health club in the U.S. with 2,500 locations and 18 million members, it is classified as a community service organization. The YMCA adjusts fees based on income and their clubs have pools, racquetball courts. Gold’s Gym was originally known for “no frills” bodybuilding center, changed it marketing to appeal to families and young people. The 24 Hour Fitness has propriety software to personalize training and nutritional program. This fitness club also has pay-as-you-go membership, month-to-month membership, or longer-term, prepaid ones. Finally, Curves International with 8,000 location world-wide is exclusively for women have 2 million members. This club offers 30-minute circuit training using hydraulic resistance machines.
The review of Bally Total Fitness SWOT Analysis has revealed that Bally’s is a solid competitor in the fitness industry. Bally’s strengths and opportunities far exceed the weaknesses and threats; therefore, its weaknesses can be converted into opportunities as the company continues to move forward in their acquisitions and as they continue to gain new grounds in untapped geographical locations. The threats that Bally faces are no different than that of its competitors. The potential for these threats to be alleviated, are in favor of Bally through its innovative approach to new technology and the company’s ability to continue to offer incentives to its customers (Hill & Jones, 2010).
Corporate-Level Strategy
Bally Total Fitness mission is to provide great service and facilities that give everyone an affordable and fun opportunity to improve the quality of their lives through fitness (Ballyfitness, n.d). Bally’s corporate-level strategy designs and builds world-class fitness clubs, so every health club is designed to give every member an opportunity to achieve his or her personal goals (Ballyfitness, n.d.). That said, corporations are responsible for creating value through their businesses, which is achieved by managing their portfolios of businesses to ensure the businesses are successful over the long-term, develop business units, and sometimes ensure each business is compatible with others in the portfolio (QuickMBA, n.d).
Business-Level Strategy Bally Total Fitness business-level strategy is based on the differentiation strategy, which is based on product differentiation. The text states, “Product differentiation is the process of designing a product or service to satisfy customer’s needs” (Hill & Jones, 2010, p. 145). Bally’s products or services provide all members all benefits of a full-service gym at an affordable price, with industry-leading training and exercise programs, comprehensive nutritional programs, and a full line of supplements including weight management products, performance supplements, and energy enhancers.
Conclusion
In conclusion, Bally Total Fitness gyms have developed an advantage with their size and range of products within their brand, but their own operational practices have hurt them with the subsequent FTC and SEC investigations. They did, however, have an opportunity to make changes in their membership fees and the marketing. The health club industry is competitive and the number of people looking to lose weight and become fit increases daily.
Although Bally Total Fitness had some legal issues regarding it unethical practices, it still remains a leader in the fitness industry in 2004 with 360 clubs in 29 states, 50 international locations. Due to increased health consciousness and Bally’s making membership fee changes, I believe Bally’s will continue to be a leader in the fitness industry. Especially, since they have a “Memberships for Every Budget and Every Lifestyle” (Ballyfitness, n.d.).
The analyses of Bally Total Fitness’ macro environment, SWOT analysis, corporate-level strategy, business-level strategy all provide valuable insight. Therefore, using the tools available through strategic management concepts, Bally can analyze its practices in order to maximize profitability and gain competitive advantage.
Recommendations
My recommendations to Bally Total Fitness would be to continue moving forward with its strengths as a health club giant, capitalizing on the suggested opportunities and continue eliminating the threats. Since a high percentage of Americans have health club memberships, this social phenomenon has already shaped the fitness industry of the future. Especially, since Bally’s is a leader in the U.S. health club industry (Hill & Jones, 2010, p. C27).
Looking back at the conception of Bally Total Fitness and comparing it to Bally’s 2012, with the exception of fraudulent practices, not much has changed. The one constant that Bally Total Fitness has not forgotten in their move to the top is their core values; integrity, respect, performance excellence, and most definitely accountability. More importantly, Bally’s believe in its strategic plan to be the best. The path a company takes towards success or failure will ultimately depend on how well the company is able to analyze and capitalize on their strategic planning.

Worked Cited
Ballyfitness, (n.d.). Retrieved on April 29, 2012 from http://www.ballyfitness.com /company.aspx
Hill, C. W. L. and Jones, G. R. (2010). Strategic management, An integrated approach (9th ed.). Boston: Houghton Mifflin Company.
QuickMBA. (n.d.). Strategic management. Retrieved on April 30, 2012 from http://www. quickmba.com/strategy/levels/ The Manage Mentor. (n.d.). Macro-Environment Forces (DENTPC). Retrieved on April 26,
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von Humboldt, A. (n.d.). Retrieved from http://www.topendsports.com /fitness/quotes.htm