ENTREPRENEURSHIP INNOVATION GROUP ASSIGNMENT BUSINESS PLAN THE ROCK GYM

Executive summaryWhile observing gyms and fitness centers in Ho Chi Minh City HCMC, we can seethat customers have to wait for the equipment they were about to use for some time.. Whatwil

VIETNAM NATIONAL UNIVERSITY HCMC UNIVERSITY OF TECHNOLOGY MASTER OF BUSINESS ADMINISTRATION

ENTREPRENEURSHIP & INNOVATION

GROUP ASSIGNMENT

BUSINESS PLAN THE ROCK GYM

Group members:

Truong Bao Thach – 2170312

Pham Thanh Trung – 2170297

Lecturer: Dr Truong Minh Chuong

TABLE OF CONTENTS

V The economics of the business 10

IX Management team and company structure 16

I Executive summary

While observing gyms and fitness centers in Ho Chi Minh City (HCMC), we can seethat customers have to wait for the equipment they were about to use for some time Inaddition, the current fitness centers in HCMC have become saturated Further, withthe increasing popularity of powerlifting in Vietnam, powerlifting gyms will beneeded

Thus, the main purpose of THE ROCK GYM is to meet the needs of the inhabitantsfor a quality fitness center and a quality powerlifting gym

THE ROCK GYM will include a fitness center with all the latest equipment and apowerlifting gym in one building (one in the ground floor and one in the first floor)which will offer specialized powerlifting equipment and powerlifting course Whatwill make this business competitive on the market is the combination of a fitness- and

a Powerlifting center which is not available in HCMC, and especially not in the center

of HCMC where only fitness centers are available but not powerlifting gyms Byrunning these two centers in a unified way, the purpose is that each center will weigh

up for the cons of the other

We emphasize on the importance of staff members being highly qualified and fullycapable to take care of high demands of the customers In order to run, this project has

to gather 500 million VND as initial investment The fitness center requires 200million VND for equipment and will be able to service around 50 people at a timegiven that each individual spends no more than 1,5 hours at a time in the fitnesscenter The powerlifting gym is relatively less expensive in cost of equipment becausethe demand for a powerlifting gym is less than demand for a fitness center, so lessequipment will be needed (although price per equipment of a similar kind ofpowerlifting is higher) The powerlifting gym’s cost of equipment is estimated atabout 150 million VND and will be able to service around 30 people at each course.The facility needs to be able to meet minimum requirements of a fitness center Start-

up funding for other facilities such as shower- and locker rooms and staff expendituresaccounted for around 150 million VND The funding for rent is not needed since theco-founders of the business already own premises near the center of HCMC (over150m2 in District 10) The financial funding will be mainly acquired throughinvestment from investors and loans from banks THE ROCK GYM will take a 150million VND loan from Techcombank for five years with 10% interest rate and 350million VND will be funded through investors with a required rate of return of 7% ayear In that 350 million VND, the co-founders will fund the project with 100 millionVND themselves

In HCMC, there are a lot of fitness centers, but there is only one powerlifting gym,

brand Oldschool Barbell System is the biggest competitor It has been in the business

of powerlifting gyms for 5 years and is in direct competition with the powerliftinggym of THE ROCK GYM However, because of the high cost of renting, OldschoolBarbell System had to switch their place from District 10 initially (near center ofHCMC) to other further areas from the center (District 4 in 2018, and currently BinhThanh District)

What could give THE ROCK GYM competitive advantage over its competitors is firstand foremost because of three aspects of its business which are:

- Access both to the fitness and- and powerlifting gym;

- Powerlifting instructors at sight for all customers and highly qualified employees

- Spacious facilities specialized for fitness and powerlifting This can help socialdistancing practices be done more easily

- No renting costs

The demand for a fitness- and powerlifting gym is seasonal and is most intense inFebruary, right after the Tet holidays and around summer The worst sought monthsare at the end of a year THE ROCK GYM’s target market which is 18 years old to 35year old male and female living in HCMC

II Industry analysis

First, we use the industry-related issues in Feasibility test to demonstrate the overall industry and thus the feasibility to conduct the project based on the industry analysis.

1 Number of competitors: Few = 0: There is only one competitor that dedicates a

powerlifting gym, and no competitor combines a powerlifting gym and a fitness gym

as one brand

2 Stage of industry life cycle: Growth phase = 0: While fitness industry as a whole is

at maturity phase, the niche market of powerlifting gym in Vietnam is at emergencephase Thus, we determine that the stage of industry life cycle is the growth stage

3 Growth rate of industry: Moderate growth = 0: The industry is growing at a

moderate rate with higher demand and increasing number of small-sized sellers

4 Importance of industry’s products and/or services to customers: Must have = 1:

The targeted customers (powerlifting amateur and professional athlete) need to use theservices of a powerlifting gym that has competitive-standard equipment

5 Industry operating margins: Moderate = 0: With few competitors, price is usually

set high and service providers can get high revenue However, with the high cost ofinitial investment, operating margins can be partially affected

With this Industry-related issues analysis, we can see that the potential of successfullyconducting this business is relatively high (overall score = 1)

Second, we apply Porter’s Five Force Model to analyze the industry.

First Application of the Five Forces Model

Competitive

Force

Industry Profitability Low

Threat to Industry Profitability

Medium

Threat to Industry Profitability High

Threat of substitutes: Health services is not just based on fitness centers and

powerlifting centers There are many substitutes for what offers

- Many substitute activities available in football, basketball etc

- Relatively cheap and easy to substitute

- If price increases rapidly at THE ROCK GYM it is more likely that the buyerssubstitute the membership cards for other activities

Threat of new entrants: Everyone can follow our idea, however, not everyone can

enter the market because we have the competitive advantage of having no renting cost(which is one of the major expenses in fitness industry business)

- Economies of Scale: small scale

- Service differentiation: moderate to high

- Capital requirements: high initial capital required, we can cut cost of renting, whileother businesses want to enter will have to have high fund

- Cost advantages independent of size: none

- Government and legal barriers: little to none

- Nontraditional barriers: apart from the first-mover advantage (no one else hascombined the fitness and powerlifting gym as one), there aren't any nontraditionalbarriers to entry

Rivalry among existing firms: Competitive rivalry in HCMC right now is quite low,

although fitness industry is quite intense, the service that differentiate us to otherfitness industry competitors is the powerlifting gym In this niche industry, there isonly one market leader in HCMC, Oldschool Barbell System, which has its pricesrelatively higher than the fitness industry, and is probably unable to meet increasedcompetition on the market with price reductions because of its high cost

- One true competitor

- One clear market leader

- The market leader unlikely to expand

Bargaining power of suppliers:

The power of suppliers in the fitness industry is relatively low There are manysuppliers that offer comparable products and thus hard for one supplier to drive up theprices and also relatively easy for the buyer to switch brand name The fitness industry

is not so much dependent on their suppliers Other factors that THE ROCK GYMshould be aware of are:

- There are many suppliers of fitness equipment around the world

- Easy to substitute one product with another

- Similar quality products

- Switching to another product is easy and cheap

- End-user can become accustomed to the suppliers’ equipment

Bargaining power of buyers:

-Buyer group concentration: Low, there are large number of buyers with few sellers inthe market

-Degree of standardization of supplier’s services: High, services are only moderatelydifferentiated, thus buyers can suppress the set price

-Threat of backward integration: Low, buyers are not likely to enter the industry,because our main targeted buyers are individual end-users

Then, second application of the Five Forces Model is used.

Is this industry a realistic place for a new venture?

→ Yes: because the powerlifting gym niche industry is still new in HCMC and thereare still few competitors

Are there areas in which we can avoid or diminish the factors that suppress industry profitability?

→ No: bargaining power of buyers is moderate and threat of substitutes is high whichsuppressing industry profitability

Is there a unique position in the industry that avoids or diminishes the factors that suppress industry profitability?

→ Yes: if we choose to focus on powerlifting aspect and decide that the main revenuestream is from powerlifting gym, because this niche industry is still new, bargainingpower is lower than the fitness industry as a whole, and we can get a higherprofitability

Is there a superior business model that industry incumbents would find hard to duplicate?

→ No: This business model is simple and others can duplicate

One positive response in three  the probability of venture’s success is increased

III Company description

Mission statement: With the unified harmony of both fitness and strength training

facilities, our mission is to build better, stronger people by providing the ultimate gymexperience

Services:

- Provide an element of uniqueness through combination of Fitness- and PowerliftingCenter

- Provide spacious facility with quality equipment to meet high customer demand

- Provide qualified training from qualified personal trainers, and create customer valuethrough qualified employees and high-quality service

Current status: The business plan is not fully completed; the current status of the

business is still open for ideas and will need fund in the near future

IV Market analysis

Market demand:

In this industry, the market demand is seasonal Every February there is a boom insales of membership cards at health clubs due to weight gaining over the Tet holiday.Then sales decrease somewhat and then pick back up around summer Then at the end

of the year, sales will decrease until they rise back in February

Market segmentation and target market selection:

In terms of market segmentation, we have defined different segments First, forbehavioral segmentation, people who loves sport and are heavily into sport They mayeven play at a competitive level These people use your fitness center to improve theiragility, strength, and endurance to make them better players in their field Generally,this group of consumers are highly motivated and already have the knowledge needed

to train What they need from a gym is the right fitness equipment, activities, andspace that support the needs of the particular sport they love People who care abouttheir health are also a segment The health needs group is looking to get healthier,increase strength and maybe lower their cholesterol A person looking to get healthiermay need a bit more help, encouragement, and guidance In addition, losing weightmarket segment is a goal-orientated group This group has joined the gym with theintention of losing weight The most effective approach for this group is to be verywelcoming and accepting of all shapes and sizes They can benefit from personaltrainers and expert advice, and will need much more encouragement and specialattention than a regular gym-goer Second, for demographic segmentation, peopleranging from 16 to 40 years old are mainly segmented For geographic segmentation,this center is located in HCMC, so it is capturing the customers of this city

For target market, we select people from 16 to 30 years old that loves intense sportssuch as strength sports like powerlifting, bodybuilding, etc The target market will bepeople in the center of HCMC since the gym is located in this area, thus nearby peoplecan go to the gym with convenience

Competitor analysis:

Since there will also be a powerlifting gym at THE ROCK GYM, the directcompetitor will be Oldschool Barbell System, and we expect it is highly competitivefor THE ROCK GYM Powerlifting section’s client base Below is the SWOT analysis

of Oldschool Barbell System:

Table SWOT analysis of Oldschool Barbell System

First and only on the market

Loyal customer base

Good marketing campaigns

Weaknesses

Very high renting costsPrice charged is relatively highSmall space and only a few equipment

Opportunities

Cooperate with a new business that has

low costs and substantial fund to expand

VPA (Vietnam Powerlifting Association)

is looking for a host for the competition

next summer

Threats

Newcomers on the marketCovid-19 restrictions, with the smallspace so there is probability that theycannot make customers practice socialdistancing  risk of closing whenCovid-19 surges

V The economics of the business

Cost of Equipment: 350 million VND

We expect to spend a total of 350 million VND, including 200 million in the fitnesscenter and 150 million in the powerlifting gym

Operating Cost: 1,150 million VND

Electricity & Water expenses: Total water expense is estimated to be 10 million a year

or roughly 900,000 a month Total Electricity expense is estimated to be 60 million ayear or roughly 5 million a month → Total of 70 million VND

Employees: 11 employees, estimating at a total of 860 million VND a year

Computer system operation: 1 million VND each month for computer system → 12million VND a year + Initial investment of 20 million

Marketing and advertising: On average in a year THE ROCK GYM will spend 10million a month on advertisement or in total 120 million

Other minor expenditures are estimated as around 70 million VND a year

Revenue

Revenue objectives were based on the total occupants the center could have, which areapproximately 80 individuals (50 at fitness center and 30 at powerlifting gym) at atime, for no more than 1.5 hours Given that the business will be open for 15 hours aday (6:00 to 21:00), the maximum customers a day will be 800 people However, weonly expect a maximum of 500 people a day since there are specific hours that only afew people would go to the gym (such as early morning or late evening)

Objective for the first year of operation is to have sales to 20% of its maximumpractitioners, which is 100 people Each sale will be around 6,000,000 millionVND/person/year We want to give free programs and training to customers from ourinstructors

Objective for the second and third year of operation is to increase its sales to 40% ofits maximum practitioners in the second year of operations and 50% in the third year(200 and 250 people respectively) Each sale will be 7,000,000 millionVND/person/year We will charge commission rate of 20% for personal training fromour instructors, predicting at 10,000,000 VND/people/year (20% of the expected saleswill register our personal training pack - 20 people in year 2 and 25 in year 3 - withthe commission of 2,000,000 each person)

Break-Even Analysis

Table Break-even analysis

Year 1 Year 2 Year 3