Chapter 2. Strategy, Objectives, and Project Selection
Added in August 2023.
Case Study: Peak Fitness Gym Expansion
Peak Fitness is a well-established gym, founded in 2010, located in the suburban area of a bustling New England city in the USA. It has earned a reputation for its focus on wellness and its community-oriented approach to fitness. Over the years, Peak Fitness has attracted a dedicated following of fitness enthusiasts, leading to a consistent rise in membership. The increase has been particularly noticeable over the past two years, primarily due to a shift in societal norms towards a greater focus on health and wellness.
However, with the influx of new members, the current 5000-square-foot gym facility has become congested, particularly during peak workout hours. Given the current space restrictions, they cannot accommodate the growing number of members. The management team has noticed that this overcrowding is leading to some member dissatisfaction. This is concerning as Peak Fitness prides itself on providing a comfortable and positive workout environment for its members.
In response to this issue, Peak Fitness has decided to expand its facilities. After careful analysis, the management team has identified an adjacent space that is currently vacant and available for lease. The addition of this space would increase the gym’s floor area by 50%, providing more room for both existing and new members.
In addition to this, the team also wants to capitalize on the latest fitness trends and diversify the workout options available. They have decided to introduce five new fitness classes, including high-intensity interval training (HIIT), yoga, and functional fitness. The gym currently has a team of highly qualified fitness instructors but would need to hire more to cater to these new classes.
With these changes, the management expects to see a significant increase in membership sales. They have set a target of a 30% rise within 18 months after the expansion is complete. They also aim to ensure a high member satisfaction rate. To monitor this, they plan to conduct satisfaction surveys six months after the expansion and introduction of new classes. The goal is to achieve a 90% satisfaction rate.
To make all of this happen, the management team has earmarked a portion of the company’s profits for the gym expansion. They have also started discussing potential loans with their bank for additional funding if necessary. The entire project is being spearheaded by the gym’s General Manager, who has considerable experience managing similar projects in the past.
SMART objectives mentioned above are listed below:
- Increase gym floor space by 50% within 12 months to cater to the growing membership.
- Introduce five new fitness classes within six months to diversify the workout options available for members.
- Increase membership sales by 30% within 18 months after the expansion is complete.
- Ensure a 90% member satisfaction rate through surveys conducted six months after the expansion and introduction of new classes.
- Evaluate the specificity of the objectives set by Peak Fitness management. Do they clearly define what the management intends to achieve?
- Analyze the measures used in the SMART objectives. How will these help the management track progress toward achieving the objectives?
- Assess the achievability of these objectives considering the given timeframe and the available resources. Do you see any potential challenges?
- How do these objectives align with the overall mission of Peak Fitness? Discuss their relevance in the context of the gym’s expansion strategy.
- Given the timeline specified in the objectives, evaluate the reasonableness and feasibility. Are the deadlines set by the management realistic?
Case Study: Project Selection at XYZ Tech
XYZ Tech is a rapidly growing technology company with a diverse product portfolio. The company has consistently outperformed its competitors through innovation and customer satisfaction. However, it also faces a significant challenge in determining which projects to pursue in the future.
Currently, XYZ Tech has four potential projects, each with distinct characteristics:
- Project Alpha: A next-generation AI solution for healthcare. This project could potentially revolutionize the medical industry but requires significant R&D investment and has a high-risk profile.
- Project Beta: An incremental improvement to an existing software product. This project has a low-risk profile and a reliable revenue stream but offers less potential for exponential growth.
- Project Gamma: A cutting-edge blockchain technology for supply chain management. This project is positioned in a high-growth market but is subject to regulatory uncertainties.
- Project Delta: A digital transformation service for small and medium enterprises. This project promises a steady income stream but is facing stiff competition in the market.
XYZ Tech uses a weighted scoring model for project selection. The selection criteria include Market Potential, Strategic Fit, Financial Return, and Risk Level. The weights assigned to these criteria are 0.30, 0.25, 0.30, and 0.15, respectively.
Below are the scores given by the project evaluation team (on a scale of 1-10, with 10 being the best) for each project based on these criteria:
- Calculate the weighted scores for each project and interpret the results. Which project should XYZ Tech choose based on the calculated scores? Are there any caveats or limitations in using these scores for the final decision? How could these limitations be mitigated?
- Discuss the advantages and disadvantages of using a weighted scoring model for project selection. How might this model be beneficial or detrimental for XYZ Tech?
- Explain how the assigned weights for each criterion reflect XYZ Tech’s strategy and priorities. Would you suggest any changes to the weights assigned? If so, why?
- Assess the potential impact of each project on XYZ Tech’s business. Consider factors beyond the given selection criteria, such as potential benefits, risks, and long-term strategic implications.