Abstract
The Health and Fitness industry in the United Kingdom (UK) is undergoing remarkable changes due to macro-environmental factors like digitalization and inflation, among others. According to a study in 2019 by an industry market research group, IBISWorld revealed that the industry contributed more than 5 billion euros to the economy of the UK. This research paper discusses and critically analyzes the UK health and fitness industry in terms of PESTEL analysis and Porter’s Five Force analysis that has been set up and also ascertains the contributions of Corporate Social Responsibility to companies in this industry, such as Pure Gym Ltd, Nuffield Health, David Lloyd Leisure Ltd, Vielife Health & Wellbeing, Virgin Active Ltd among others.
Introduction
The Health and Fitness industry is one of the major industries that has dramatically boosted the economy of the UK. The sector employs more than 200,000 people and contributes more than 5 billion euros to the economy of the UK. Therefore, any factor that impacts this industry predominantly affects the country’s economy and the life of the netizens. Macro environmental factors such as inflation and the emergence of the COVID-19 pandemic are threats to the future of the Health and Fitness industry. Digitalization and growth in social fitness positively impact the industry as it reduces operating costs. This paper analyzes the current and future of the UK Health and Fitness industry as a result of macroenvironmental factors. Also discussed are the aspects of PESTEL analysis, Porter’s Five Force analysis, and corporate social responsibility, which are some of the methods that determine the future of the Health and Fitness industry in the UK. The PESTEL analysis encompasses the economic, legal, political, social, and technological effects of the macroenvironmental factors on the growth of this industry. Porter’s Five Force analysis entails determining the supplier power, threats of new entrants, buyer power, the threats of substitutes, and rivalry among the existing competitors.
Section 1: PESTEL Analysis
Political
The UK government late 2021 allocated a one billion euros fund to help businesses, including those in the fitness sector, which were affected by the COVID-19 pandemic. Specifically, the government channelled 100 million euros to support the publicly owned leisure centres and gyms when the industry struggled with the effects of lockdowns. Notably, the financial support has helped the health and fitness industry to cover the costs associated with the pandemic. This has led to an increase in the industry’s growth rate in 2023 following a decline during the COVID-19 period. Apart from the financial support, the government has maintained political stability, dealt with corruption, reduced the risk of military invasion of the industry, reduced tax rates, and favoured trading partnerships among the companies in the industry (Tomar, 2020). These measures have greatly helped the companies in the industry to thrive despite the adverse constraints faced during the COVID-19 pandemic.
Economical
There was a notable increase in the cost of living across the UK due to the COVID-19 pandemic. The increase in the cost of living has led to a decline in demand for health and fitness services in an attempt to cut off expenditures. Also, there was a decrease in people’s income, and some lost their jobs, thus a drop in demand for health and fitness services. Additionally, the country faced high inflation rates, reaching 11.1% in October 2022 (Tomar, 2020). This has led to the industry’s massive losses and discouraged the company owners. The industry resorted to dismissing some employees. The increase in inflation rates has led to an increase in the costs of the services in the industry, which has led to a decrease in demand for such services and, subsequently, a drop in profit margin. The government measures to deal with high inflation rates led to a decline in inflation rates to 10.5% in December 2022. A further decline is expected due to the following: a fall in wholesale energy, a fall in prices of imported goods, a rise in bank interest rates, and a decrease in demand for goods and services since people have less money to spend.
Social
The population in the UK and other developed countries such as the USA, Australia, China, and Russia are aging. This has led to the older population’s demand for health and fitness services. Currently, many people the in the UK lead a more health-conscious lifestyle. This is attributable to the increase in people attaining primary education with a literacy rate of 99%. Also, there is a rise in health and fitness awareness among adults and youths. The increased use and accessibility of social media and the internet have also boosted health and fitness awareness across all populations. Furthermore, the increasing obesity rates (at 25.9% in 2021) have increased the demand for fitness services (Tomar, 2020). Health experts in the country are at the forefront in advising people to maintain regular physical activity—all these social factors have led to increased demand for fitness clubs.
Technological
The technological environment is a vital component of the PESTEL analysis of the health and fitness industry. Nowadays, many fitness clubs in the UK have applications that provide the most convenient way of connecting with people. Videos on YouTube have enabled people to appreciate the importance of physical exercise in maintaining a healthy lifestyle (Tomar, 2020). Some fitness clubs provide virtual training and coaching and encourage members to join the online sessions from their vintage. This has led to increased demand for fitness services and, thus, the industry making profits. On the other hand, some clubs in the country are not interested in integrating new technologies due to threats to privacy and security issues.
Environmental
The Health and Fitness industry uses a lot of electricity and water, which can impact the environment. Fitness clubs release waste products into the environment, which are potential causes of environmental pollution. Therefore, the industry has put in place measures such as treating waste products to ensure they are friendly to the environment. Environmental pollution would otherwise cause diseases and impact the quality of life.
Legal
The laws regulating the operation of the Health and Fitness industry in the UK state that fitness club owners require soft skills and at least a Level 2 certificate in fitness instructing. All employees in fitness areas must have adequate safety training. The owner must also purchase employers and public liability insurance (MacFarlane et al., 2019). Acquisition of a license may be necessary depending on the services that the club will offer. For instance, playing background music in gyms and selling foodstuff on the premises require them to purchase a license for the specific activity. All these regulations have ensured people’s (employees and netizens) safety and the industry’s thriving.
Section 2: Porter’s Five Force Analysis
Buyer Power
Buyers are often a demanding lot. Buyer power force determines how the customers can drive prices down. The buyer power force depends on the number of customers, the buyer’s lifetime value, and the customer’s acquisition cost. Customers want to buy the best offerings by paying the minimum possible price. The more powerful the customer base is, the higher the bargaining power of the customers and the higher the ability of the customers to chase higher discounts. This puts pressure on the Fitness business’s profitability. The industry can cope with the increasing bargaining power of buyers by building a large customer base and innovating new products which limit their bargaining power.
Supplier Power
The supplier power force determines the ease for suppliers to increase prices. Most of the companies in the Health and Fitness industry in the UK buy their raw material from various suppliers. The supplier power force is usually determined by the number of suppliers who can provide similar products and how expensive it is to change suppliers (De Widt et al.,2022). The general effect of a higher supplier power force is that it lowers the firm’s profit margin. Health and Fitness firms can cope with this by establishing efficient supply chains with multiple suppliers and selecting dedicated suppliers whose operation is dependent on the firm.
Rivalry Among Existing Competitors
This force is primarily driven by the increasing number and capability of competitors dealing in similar products in the market. The existence of robust and numerous competitors with substantial market shares reduces the power of small firms. Intense rivalry among firms in the industry drives down the prices of commodities and reduces the industry’s profitability, especially for small firms (Tomar, 2020). To deal with rivalry, small firms in the Fitness industry are scaling up to compete better, and some are also collaborating with their competitors to raise the market size.
Threats of Substitute Products
A close substitute product in the market raises the buyer’s capability to change to the alternative product even with a small increase in prices. The industry’s profitability suffers when a new product meets a similar buyer’s needs. The substitute product is a threat where it offers prices that are lower than the industry’s prices (Deirmentzoglou & Deirmentzoglou, 2022). For instance, the use of alternating dumbbell benches in gyms is an alternative to barbell bench press for chest exercises. To cope with this threat, the fitness firm should ensure it is services-oriented and not just product oriented, the company should understand the core need of the customer and not just what the customer is purchasing, and also increase the switching cost for the customers by ensuring affordability and accessibility of the products.
Threats of New Entrants
New entrants in the market are a serious threat to the existing firms as they may either provide the products that were initially provided by the existing firms at cheaper prices or provide alternative products that are better than those of the existing firms. This puts pressure o the existing firms to lower their pricing strategies and provide new value propositions to the customers. Therefore, the existing firms are at risk of making losses. To cope with this threat, the existing fitness firms need to innovate new and unique products and services, build large economies of scale so that they can reduce prices, establish capacities, and spend money on research and development. These measures not only discourage new players in the industry but also increases the existing firm’s profitability.
Section 3: Corporate Social Responsibility
Environmental Responsibility
The health and fitness companies such as Pure Gym Ltd, Nuffield Health, David Lloyd Leisure Ltd, and many others are at the forefront of limiting environmental pollution. They do this by reducing greenhouse gas emissions, reusing and recycling liquid and plastic waste, and treating liquid waste before releasing them into the environment. The industry is dependent mostly on renewable energy, sustainable resources, and recycled items like metal rods and plastic water bottles (Shabbir & Wisdom, 2020). Additionally, the companies take part in environmental conservation measures such as planting trees in and outside the firm’s premises and sponsoring studies related to the environment.
Ethical Responsibility
The goal of ethical responsibility is to guarantee that a company operates in a just and moral way. A good firm must adhere to the code of conduct of society and respects the culture of the land. Businesses that uphold ethical responsibility work to treat all parties fairly, including the executive team, vendors, staff, shareholders, and customers. Most companies in the health and fitness industry such as Pure Gym Ltd and Nuffield Health emphasize this in order to keep investors and consumers coming in steadily. There are many ways that businesses might adopt ethical duties. For instance, if the minimum wage set by the state or federal government is not a “livable pay,” the business may maintain its own, higher minimum wage.
Philanthropic Responsibility
The term “philanthropic responsibility” describes an organization’s aim to actively better the world and society. In addition to being as ethically and environmentally responsible as feasible, companies driven by a sense of philanthropic obligation frequently donate a percentage of their profits (Barauskaite & Streimikiene, 2021). While many fitness centers in the UK feature donation bins where clients can give to the needy or to charities and organizations that align with their guiding missions, some fitness centers encourage donors to give to worthwhile causes unrelated to their business. Some people take it a step further and start their own charitable trust or organization to aid others.
Economic Responsibility
The economic role is the practice of a company supporting each and every one of its financial choices in its dedication to acting ethically in the aforementioned areas. The ultimate objective is to have a positive impact on society, the environment, and people rather than maximize profits. Many fitness businesses in the UK have come to understand this.
Due to their moral convictions, most organizations are driven to adopt corporate social responsibility, which has a number of benefits. A corporation can use CSR programs, for instance, as a powerful marketing tool to position itself favorably in the eyes of customers, investors, and regulators (Barauskaite & Streimikiene, 2021). CSR initiatives can also increase employee satisfaction and engagement, two crucial retention drivers. Such advertisements may even draw in candidates for employment who share the company’s strong personal convictions. Lastly, corporate social responsibility initiatives mandate that firm executives evaluate their actions.
In conclusion, the Health and Fitness industry, one of the largest industries in the UK, is largely influenced by various macro-environmental factors as discussed above. The industry is a vital contributor to the country’s economy as it is the source of revenue and employment for many people. The industry has been able to thrive even after being immensely affected by COVID-19 through government subsidies, incentives, grants, and the formulation of favorable policies.
Reference
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Tomar, D. (2020). Porter’s competitive forces model and SWOT analysis to payments. International Journal of Information, 10(2), 45-49.
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