Term Paper on "Capital Budget in Recreation"

Term Paper 5 pages (1338 words) Sources: 3 Style: APA

[EXCERPT] . . . .

Capital Budget in Recreation

In order to compete in the tightening market for almost every industry, each big and even at a greater degree small company must constantly improve the business mix of the company, corporate culture, product mix, prices, promotion strategy, place where it competes and the other essential attributes. In order to fulfill these tasks, the management must constantly have sufficient resources to be able to single out promising innovative investment ideas, implement them and then receive the rewards of the profits. The management must always be at least two steps ahead of the competition and of the tastes and perceptions of the customers in order to be able to satisfy the changed demand of the sophisticated clientele when the tastes shift.

This issue plays even more vital role in the whole success of such business as leisure, which is not a commodity and thus the demand for the services and products of this industry is very volatile and driven by the economic performance of the country. Within the industry, in order to remain competitive, the company must offer very differentiated services to specific customers. From being purely industry servicing the needs of the upper class and thus being less price sensitive, due to tightening competition, the industry more and more has to shift to servicing the needs of the middle class in order to increase the clientele base, and thus has to become more price competitive by organizing optimal services mix at optimal cost for the company. For this reasons, the hospitality, sports and leisure industries have been very mobile recently, with many companies deciding to merge with the competitors, or making strategic acquisitions, expansions and the like. One of such companies is LA Fitness company, whose co-founder Jeremy Taylor has decided to invest heavily into the City Point London health club in order to reposition it and win more market share by doing so.

This strategic investment decision must be studied carefully in order to find the reasons and possible outcomes of this corporate movement. Investment to be made is an example of capital budgeting decision which companies face very often and must carefully select the investment opportunities. Thus, the first step within the capital budget decision process is analysis of the current assets and opportunities available within the company which will drive the ability of the company to adjust them to the new needs and will help to identify the new acquisitions in terms of assets to be made to offer new services. The City Point club is one of the three which were owned by the company Playgate Ltd., all the three clubs located in the central London and trading at very exclusive customers. But as the preferences within the fitness and health fashion are changing, there is a need to update the City Point club. Before the upgrade, the club enjoyed 5,000 sq. foot gym with weights, providing approximately 50 working out stations, also 20 m swimming pool, a mix of different aerobic classes held in special halls, also a cycling hall. In term of human capital, the club has assembles a nice mix of skills and abilities of different trainers team, working at different hours preferred by the clients and offering different work out routines. The working hours of the club were from 6 a.m. until 22 p.m. In the evening for the working days, and from 10 a.m. till 23 p.m. For the weekends. Having studied this mix of the current assets, the management realized that this is already outdated mix.

Currently, the newest trend is the creation of Spa salons offering very exclusive services to the visitors at affordable prices, mixed with nice fitness food advisory and possibility to have this healthy lunch within the spa club, mixed with possible facial treatment and the like. To recapitulate, the concept of 'all in one' in terms of health, relaxation, motivation, eating and beauty treatment for the visitors became a popular and demanded services in the market, which City Point could… READ MORE

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