Tools for Market Strategy, Part 1
It is nearing the end of 1998 and Susan Smith, general manager of Sample Fitness Club, worries about her club’s future. She knows that ABC Fitness will open across the street in January. This club will be much newer and larger than hers, and they will have exercise programs targeted toward the senior center clientele. She knows her club provides a wide variety of exercise classes, but not all of her staff can teach, nor do they offer any classes for, seniors. She has always prided herself on being a small, family-oriented club, but that may not be enough to keep her members.
Whether you are a newly promoted fitness manager, or a manager that has been around for 10 years like Smith, it is always a good idea to develop a strategic plan for your facility on a regular basis. Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.1 New managers, eager to make a good impression, often immediately launch a full-scale attack into the “old way of doing things” without following a plan. And sometimes seasoned managers change just for the sake of changing. Regardless of your position, effective managers should utilize a simple SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats), along with other useful strategic planning tools, to give their facility a competitive edge.
External factor evaluation of the SWOT
An external factor evaluation (EFE) considers economic, social, cultural, demographic, environmental, political, legal, technological and competitive trends that could benefit or harm an organization in the future. Opportunities and threats largely beyond the control of an organization are considered external. A basic tenet of strategic management is that businesses must formulate strategies that take advantage of external opportunities to avoid or reduce the impact of external threats.1 First, a manager needs to do an external audit, listing at least eight key external factors. These factors are then assigned weights that range from 0.0 (not important) to 1.0 (very important), but the factors must add up to 1.0. Then, each factor is assigned a 1 to 4 rating that indicates how effectively the firm’s current strategies respond to the factor (4 means superior response and 1 equals a poor response). Multiply each factor’s weight by its rating to obtain a weighted score (Table 1). Add the weighted scores to determine the total score. The range of possible total scores are from 1.0 to 4.0, with an average score of 2.5. In other words, a score of 1.5 would indicate that a business’ current strategies are not capitalizing on opportunities or avoiding threats.
Internal factor evaluation
Internal strengths or weaknesses are controllable activities within an organization performed well or poorly. Management, marketing, finance, operations, research and development, and information systems are areas of a business where internal strengths or weaknesses arise.
Again, a manager needs to do an internal audit, listing at least eight key internal factors. Then following the same steps as the external audit, a total score indicates whether the business is currently pursuing strategies that improve its weaknesses or capitalizing on its strengths. An Internal Factor Evaluation (IFE) example of Smith’s club can be seen in Table 2.