International (LMI) is a sports and fitness company founded by Phillip Mills in
Auckland, New Zealand. The company’s vision is to create a fitter planet
through health living (Crossley, 2012). This
report analyses the operations of LMI by looking at its strengths and
weaknesses and attempting to find ways of optimizing those strengths and
mitigating the weaknesses. It applies theories unique to operation of small
businesses to help put the analysis in its right context. The report also
fronts recommendation on the way forward for LMI. The final part outlines
limitations of this report due to challenges encountered in its preparation. The
structure of the report aims at establishing a good flow of the ideas; first
performing a diagnosis, then a prognosis, while bearing in mind the limitations
of the whole operation.
2.0 Uniqueness of small businesses and the agency theory
Small and medium sized enterprises have features that set them apart from the conventional forms of business, for example; their management structure is often incomplete and informal. The businesses are by-products of the entrepreneurial acumen of first generation entrepreneurs who pass on the baton to subsequent heirs. This is true of LMI, which is now in the hands of the second generation of the family. Owners of these businesses tend to have undiversified interests in the business, which is likely to be unlisted in the stock exchange since owners feel the need to maintain control (Fama & Jensen, 1985). All these features are evident in LMI.
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This creates a special agency problem that is different from the traditional manager-owner agency relationship. The proprietor/owner in LMI is the manager. This may increase the cost of monitoring the business for outside stakeholders since they have lesser access to information than they would if the company was a public corporation. The business is also likely to suffer lack of managerial depth since top positions are a preserve of family members. Another problem that may arise is the risk of the company running into management problems due to succession hitches especially if the current management fails to put in place a good succession plan. To overcome some of these unique challenges the management have to come up with unique solutions, for example to overcome high cost of credit, LMI should establish long-term relationships with a small number of creditors thereby ensuring a high number of transactions. With time, the creditors will have enough information about the company and the cost of credit will come down (Ang, 1991).
3.1 Internal Strength: Marketing
The company is thoroughly
familiar with the market terrain. LMI is an offshoot of the LMN, which started
operations in 1968. This gives the company several advantages relating to
longevity in the market. Forty-five years of operations is a long period and
the company has accumulated tomes of research data of trends recorded over long
durations. Longevity gives the company credibility, as people seem to trust
institutions that have operated for a long period. For instance when looking
for credit, financial institution are jittery when dealing with a start-up
(Education for Enterprise,
2010). Established firms like LMI do not experience such problems since they
probably have a long history of relationship with a particular bank. Such
relationships may help the firm access credit on more favourable terms than if
the firm was new. According to Gibson (2011), an
investor approached Les
Phillip (The majority shareholder)
in 2011 with an offer to purchase the company for $ 100 million he turned down
the offer. This underlines the credibility that LMI enjoys.
3.2 Internal Strength: Management
The company also enjoys a stable
ownership and management structure. Crossley (2012) acknowledges that this has
played an important role in the success of the company. The company has
maintained a familial look from the beginning except from that brief period
between 1984 and 1990 when the company listed in the NZST. After the stock
market crash, the Phillip
Mills bought back the company
(Education for Enterprise,
EFE, 2010). The company has few shareholders with the bulk of the company
belonging to Phillip and the others
distributed among the company’s staff and a few private investors. This has
provided stability for the company as decision-making is swift since fewer
people need to ratify decisions. Decisions such as profits to plough back and
the projects to pursue can be made quickly thus affording the company
flexibility that is not found in public corporations.
3.3 Technological Strengths
The international market and advances in information communication
technology offers LMI an interesting mix of opportunities that the company has
started exploiting. Communication technology offers new ways of training and
keeping clients interested in exercise. LMI has leveraged on information
technology to create an exercise management application that can be installed
on mobile phones. The website Gladeye (2014) features this application, named
Momentum, and provides further information about the program. The application
helps individual to meet their training needs by enabling them to schedule
their training programs. According to the site, the application also has
customisable timetables, offers training tips, offers rewards for performance,
and gives the user feedback. This represents a creative application of
4.1 Economic and Financial
the stock exchange was a double-edged sword; while it brought stability and
flexibility to the firm, it also limited the firm’s capacity to raise funds for
expansion. According to the EFE (2012), LMI is worth about $ 100 Million. The
company has to expand at a very slow pace due to this financial constraint. The
family is however not willing to loosen their grip on the company. In this
case, the company will continue to expand at a slow pace.
Crossley (2012) provides us with one of the threats inherent in LMI’s
business model, that is, different cultures have different attitudes towards
music and exercise. Culture is an important determinant of success of a product
in the market. The notion that the internationalization process is constrained
by the ability of firms to surmount cultural and institutional barriers across
borders has been around for a while. Researchers have suggested that firms need
to learn about the cultural practices and customs of different markets before
committing their resources abroad (Trompenaar, 1999). Crossley (2012) offers an
example of the cultural challenges facing LMI. Music used in their workout
videos is not universally acceptable. Some of the Jewish and Muslim communities
in the USA
feel offended by pop music used in some of the videos. This may harm the appeal
of the company.
4.3 Technological and legal
LMI’s like all enterprises dealing with intellectual property is
vulnerable to piracy. In an interview with Gibson
Mills admitted that this is a
considerable concern for a business that is easily replicable. The CEO gave the example of a case that happened in North Carolina, USA. A group of people operating as
an organisation were found illegally distributing LMI’s products. The group’s
mastermind was a former fitness club trainer who had worked with LMI’s products
at the club. The group had established an illegal distribution network that had
even started exporting the product to Netherlands
LMI sought the intervention of the authorities and eventually the parties
reached an out of court settlement. Such incidents are likely to increase as
the group widens its global reach.
5.0 7 Ps Marketing Mix and Creating New products
The 7Ps marketing mix is a marketing management tool that LMI can use to ensure their products meet the customers’ expectation. This approach is expedient when developing a wholesome product. The chartered institute of marketing, CIM (2009) in its interpretation outlines the 7Ps as follows. The first P helps us to come up with a product suitable to the tastes of the target group. The price should be competitive and sufficient to generate profit. Promotion is essential in creating awareness and communicating to the potential customers. The place should be convenient and suitable for the product. The people working for you need to possess the right skill set to offer the product efficiently. The process of dispensing the service should be customer friendly to keep your clients happy. Customers need physical evidence of what they are purchasing, that way they feel they have received their money’s worth. The company needs to develop products that respond to customers’ needs. In addition, LMI must anticipate emerging trends to ensure that it does not lose touch with its customer base.
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The 7Ps marketing mix is an important tool in creation
of new products in a market a competitive market environment that is rapidly
changing such as the one that LMI faces. The fusion of technology into fitness
provides special challenges for LMI since technology is dynamic and therefore
the company has respond fast in creating new product. This tool provides
parameters that should guide the company on the nature of products it should
create to remain relevant.
Another emerging area that should capture the
attention of the company is the issue of emerging trends. Such trends provide
opportunities for the business and analysis of the trends can help come up with
new products that conform to the trends.
One emerging trend in physical fitness training
is the trend towards personal training. Most people now want customized
training that is geared towards optimizing specific features of their body.
Traditional physical training espouses group training and generalized training
where all the people use similar equipment and techniques to achieve fitness.
People now do not want to run just to collect points or do a certain number of
push-ups just because it is considered healthy. Individuals now plan with their
trainers specific methods to achieve optimum levels of fitness. They collect
the information from their workouts and analyze it with their personal trainers
to determine whether the plan is achieving any tangible benefits (Green, 2014).
However, this has not eliminated group training, as people still love the sense
of community that a group creates. The only difference is that people gravitate
towards groups that share their training needs. Otherwise, people can take
common activities in groups but do their customized tasks alone or with a small
group of maybe three individuals (Pai, 2014).
6.0 Recommendations and Conclusion
6.1 Marketing: Strategic Marketing and Market Intelligence
To understand trends emerging in the industry in which the business is operating, and the needs of the customer it is important to know what the recent developments in the industry are as well as what the organisation’s competitors are doing to enhance performance and to improve their share of the market (Bose, 2008). Market research is important in understanding the needs of the customers and identifying ways to better position the products so that they satisfy those needs. Additionally, market research plays an important role in monitoring and if necessary modifying the marketing strategy. Market research involves systematic application of scientific methods to study the market, various dynamics, and their interplay (Vessene, 2003).
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Marketing strategy is a philosophy that provides a mechanism to focus resources of the firm in such a way as to ensure that needs of the customer are the firm’s priorities. This customer-focused approach is the basis of the strategy that makes up the entire marketing process. A proactive, and focused marketing plan should provide guidance for pursuing the right customers at the right place and at the right time, this in turn optimizes the return on investment and increases profitability. As Trim (2003) observes, building a strong and profitable organization requires one to develop a strategy. Marketing is a process for creating value for the customer (Vessene, 2003). A marketing strategy is a plan that allows the management of the organization to direct the resources and the activities of the business in such a way that money is spent wisely guaranteeing maximum revenues for the business. As a firm that has existed for a long period and has a good understanding of the market terrain, LMI can solidify its position by adopting strategic marketing techniques.
The company should adopt two strategies to strengthen management. The
first is to put in place a succession plan. In this regard, the family has made
some progress. In an interview with The New Zealand Herald, Phillips
admitted to Gibson (2011) that the business will stay in the family. The
entrepreneur also added that the business is putting in place a succession plan
for his son, Les who works in the USA division and daughter Diana, who works as
creative director at LMI headquarters to take over the business once the father
gets out of the picture. That implies that the company may continue to enjoy
stability and flexibility well into the foreseeable future. The second strategy is to make it possible for
outsiders to rise to the highest level of management. The family can achieve
this by taking the role of oversight and allowing non-family executives to run
the business. This will widen the talent available to run the business.
analysis in the preceding sections, it is clear that the trends in the fitness industry point towards
using more technology and using lesser time. The company therefore needs to
re-align its business models towards this direction in order to respond to the
demands of the younger generation who are using the gyms more (Dale et al.,
2014). One emerging trend is the accelerated fitness concept. This entails
achieving fitness using techniques that require less time than conventional
exercises. One of these techniques is vibration training. The individual lies
on a vibrating platform that exerts vibration pressure on joints or the whole
body at intervals causing the individual to feel like they are exerting
pressure on their body. As an advantage, this method offers efficiency in terms
of time taken to achieve fitness. According to some advocates, a vibration
regime involving a 15–minute work out three times a week can have equal
effectiveness to a 30 –minute workout plan five days a week of conventional
exercise (Edward & Laskowski, 2014). LMI needs to conduct research into
this method and find out ways of exploiting the trend.
that the company must aim to exploit is use of computer and mobile applications
in fitness training. The company has done well in developing its fitness
management application, Momentum, but it must do more to develop applications
that actually integrate training techniques in the applications. For example,
the company should consider designing an application that has actual training
techniques and one that can collect users’ data to customize the training
methods to the specific user’s needs. That way, the company will cut on
distribution costs since the users will only require to update the application
regularly to get new methods and workout plans (Green, 2014). Users can pay
annual or monthly subscription costs to ensure the company makes money from the
venture. This will also solve the problem of piracy since duplicating an
application and updating it regularly is almost impossible.
6.4 Overcoming Economic and financial constraints
Due to the limited financial muscle, the company should continue forming symbiotic relationships with other companies to help widen its reach. For instance, LMI has collaborated with the international food manufacturer, Nestle to promote its products. According to Nestle (2014), LMI and the company have an agreement to promote LMI products through its breakfast cereal in a product named Nestle Fitness. The cereal is packaged together with a free workout DVD to help Nestle customers exercise. In addition, LMI also has an important partnership with BeachBody, a multi-level marketing company that distributes fitness products in the USA. As part of this agreement, BeachBody distributes some L MI products to customers in USA (BeachBody, 2014). This will serve to diversify the company’s revenue base and increase brand recognition.
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6.5 Overcoming Cross-cultural Barriers
When developing a cross-cultural marketing and management policy the first step is to internationalize the headquarters HR team. With every new country that the firm touches down, there is an added dynamic to the existing cultural balance since the new culture always carries with it certain biases that will challenge the effectiveness of the already existing human resource and management policy (Jackson, 2002). Even if the stated policy is to be culturally neutral, there will still be silent cultural biases and nuances which if not recognized will render the entire policy ineffective or totally impotent. By engaging new international expats, or redeploying current local personnel from international divisions to headquarters and letting them take part in the designing LMI’s strategies and policies, the firm will acquire an outsider’s view and mitigate the likelihood of cultural bias quietly compromising the firms agenda (Hofstede, 2001).
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Getting information for a small enterprise like LMI is difficult. This is because most media outlets, analysts, and scholars prefer to analyse public entities that attract greater interest from the public. In addition, it is impossible to access financial information from about the company due to its ownership model. The analysis is therefore based on limited information from scattered sources about the company. The company website provides a significant source of information, which limits its usefulness since such information, is likely to be biased in favour on the company.
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