Running head: ENVIRONMENTAL SCAN
Environmental scanning involves acquiring and using information extracted from
external sources of the organization. Environmental scanning is very important as an earlywarning radar which lets the organization look into the future of its operations. Through
scanning, an organization is able to understand the external forces facing the organization and
also the opportunities and threats to avoid surprises and improve the planning accuracy. In this
paper, I will discuss how to create value and sustain a competitive advantage using the strategy
of environmental scanning. The paper also evaluates the external environment of 24 Fitness Inc.
which operates over 370 fitness centers in 16 different western states. The paper also assesses the
general environment of 24 Hour Fitness and also the industry operating environment of the
Creation of Value and Sustaining Competitive Advantage Using Environmental Scanning
An environmental scanning strategy is very useful in creating value and sustaining the
competitive advantage of an organization. This is achieved by identifying the trends which are
mostly likely to affect the organization and its members directly so that it can create a strategy
which will help it to take advantage of the inevitable changes in its operations. Through
gathering information regarding the changing conditions and incorporating the observations into
the processes which require changes, the organization is able to create the value and ensure its
competitive advantage. With the right information regarding the environment which surrounds
the organization, an organization is able to make the right adaptations which ensure the future
viability of the organization (Kratzman, 2002). Environmental scanning strategy covers the
industry analysis which comprises the environment’s immediate competitors, customers, and
suppliers. This is achieved by conducting the Michael Porters Five Forces Analysis in order to
determine the value of the organization and maintain the competitive advantage with respect to
the outcomes of the analysis. An environment scanning strategy also creates value and sustain a
competitive advantage through conducting a PESTEL analysis whereby the organization is able
to determine its political, economic, social, and technological environment in order to determine
how the forces influence the performance of the organization.
Evaluation of 24 Hour Fitness External Environment
The external environment of 24 Hour Fitness involves the factors outside the company
which affects its ability to function. Location and accessibility are important factors when
consumers are choosing a fitness center in the industry. Purchasing membership of a fitness
center requires commitment both financially and in terms of time whereby the customers with
limited free time require fitness centers which are easily accessible in terms of distance. Many
companies in this industry are reacting to this by locating fitness centers in highly populated
urban centers and in office buildings. The growth of the fitness industry is heavily influenced by
consumer demand which directly correlates to the overall increase in the awareness of physical
health and fitness and the growing target market (Wells, 2005). The age range target in the
industry is 15-49 whereby offering age-specific services such as teen kickboxing class or yoga
class increases the age range of the consumers.
The cultural trend in the industry includes the increasing awareness nationally about the
benefits of physical exercise. Government promotion of healthy lifestyles through educational
programs and media campaigns have increased the publicity of fitness centers and reduced the
advertising costs. The demand for fitness centers has been increasing over the last five years but
most companies in the industry are yet to realize high profits due to high costs and the low
prices. This has contributed to the high turnover rate in the industry whereby many companies
are exiting and entering the industry each year. However, 24 Hour Fitness has established itself
in the highly competitive industry whereby the company has fiscally grown and it is continuing
to open new fitness centers both locally and abroad.
The General Environment of 24 Hour Fitness
The general environment of 24 Hour Fitness is analyzed by conducting the PESTEL
analysis which comprises of six factors namely political, economic, technological, socio-cultural,
legal, and environmental. The political factors surrounding 24 Hour Fitness include the
government campaigns to promote healthier lifestyles in the community which have contributed
to the improvement of the fitness centers (Hopkins, 2006). These campaigns have promoted the
purchase of gym membership contributing to the growth of the industry. The economic factors
surrounding the 24 Hour Fitness include the rising electrical costs which have increased the
running cost of the fitness center. High unemployment rates and economic recessions are also
affecting the growth of 24 Hour Fitness.
The social factors surrounding the environment of 24 Hour Fitness include the influence
of the socio-media which has created more awareness on health in the society which has
increased the demand of gyms in the society. The rising rates of obesity are also contributing to
the growth of the industry due to the growing needs to reduce health problems which are related
to obesity. The technological factors include the need to keep the exercise machines and
equipment up to date and the advancement in the fitness equipment which have enabled the
customers to use their personal data to make their workout personal and tailored. Use of mobile
devices to promote the latest deals and also the online free trials are technically effective in the
industry. The legal factors surrounding the 24 Hour Fitness include the rules and regulations
which have been set by the fitness industry, the government, insurance companies, and the health
safety regulations whereby the company has to adhere to them. The environmental factors
surrounding the company include the high consumption of energy because most machines
require electricity to operate whereby the company has the responsibility to regulate its
consumption of electricity for the care of the environment.
The Industry Operating Environment of 24 Hour Fitness
Analyzing the trends in the operating environment of 24 Hour Fitness requires
performing the Michael Porter’s Industry Analysis. This analysis determines the bargaining
power of suppliers and buyers, the threats of substitutes, new entrants, and the level of rivalry
among the competitors. The threat of new entrants is high in the fitness industry is high because
the industry is still young and growing fast and also there are no dominant firms in addition to
the low barriers to entry in the industry (Kratzman, 2002). According to consumer trends, the
choice of fitness centers is based on location but not the brand name which implies that the
switching costs are also low. Homogeneousness of services and the lack of government
regulation also contribute to the low entry barriers. The bargaining power of the suppliers in the
fitness industry is relatively low because there are few required suppliers in the industry. The
suppliers are primarily useful in the purchase or leasing the equipment. Companies in the fitness
industry differentiate themselves from competitors by offering new equipment with increased
technology. This is a key driver to the cost of equipment which gives the suppliers some
influence in the industry. However, there are multiple suppliers in the fitness industry to choose
from keeping the prices of equipment relatively low.
The bargaining power of the buyers in the fitness industry is high. This industry mostly
relies on membership revenue as the major source of income whereby membership retention is
low as a result of low switching costs (Kratzman, 2002). This low switching cost increases the
influence of consumers over price. The fitness industry also faces stiff competition from
substitutes from outside the operating industry especially from the outdoor recreational facilities
and the organized sports. Although the organized sports are expensive, they remain popular
while the outdoor activities are cheaper in comparison to the gym membership. The fitness
industry is also highly competitive due to the low entry barriers and the low switching costs
which increase competitive rivalry. The major competitors of 24 Hour Fitness include the Bally
International Holding, Town Sports International, and also other upcoming smaller companies
such as the Curves International.
In conclusion, the environmental scan of the 24 Hour Fitness reveals that the fitness
centers industry is not very appealing. The industry is price-driven which makes the company
use low prices as a way of increasing their market share. There is high competition making it
difficult for 24 Hour Fitness to enjoy high margins which are requiring the company to continue
with differentiation of its services in order to survive in the competitive industry.
Hopkins, J. (2006). “CEO Bulked Up 24 Hour Fitness with Ideal Timing.” USA Today.
Kratzman, V. A. (2002). US fitness industry: Market overview and entry strategies. Helsinki:
Wells, J. R. (2005). 24 Hour Fitness. Cambridge, Mass: Harvard Business School Pub.
The paper uses the organization selected in
The paper includes an assessment of the
organization’s internal environment.
The paper includes the identification of the
most important strengths and weaknesses of
your organization including an assessment of
the organization’s resources.
The paper includes the identification of the
most important internal environmental factors
in the general, industry, and external analysis
in relation to the internal analysis.
The paper includes a competitor analysis.
The paper includes an assessment of the
structure of the organization and the influence
this has on its performance.
The paper includes a determination of the
organization’s competitive position and the
possibilities this provides.
The paper is a minimum of 1,400 words in
The paper and presentation—including tables
and graphs, headings, title page, citations,
and reference page—are consistent with APA
formatting guidelines and meets course-level
The paper and presentation include properly
cited intellectual property using APA style intext citations and a reference slide or page.
The paper and presentation include major
points that are stated clearly, organized
logically, and supported by specific details,
Strategic Plan, Part 2: Internal Environmental
Analysis Grading Guide
STR/581 Version 10
examples, or analysis.
The paper and presentation include
sentences that are complete, clear, and
The paper and presentation follow proper
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