Scope of International Operations of Bally's Total Fitness and Wal-Mart

Scope of International Operations of Bally's Total Fitness and Wal-Mart

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Scope of International Operations of Bally's Total Fitness and Wal-Mart

International operations for Bally's Total Fitness and Wal-Mart are responsible for a significant amount of growth as well as profitability. Bally's is the largest, and only nationwide, commercial operator of fitness centers, with approximately four million members and nearly 430 facilities located in 29 states, Canada, Asia, Europe and the Caribbean. As of June 30, 2005, Bally's opened fitness centers in over 45 major metropolitan areas representing 63 percent of the United States population and over 16 percent of the Canadian population. The Company introduced its first international Bally's facility in Nassau, Bahamas through a franchise agreement with Doctor's Hospital, the leading for-profit medical institution in the Caribbean region. Bally's also has a joint venture agreement with China Sports Industry Co. (CSI), the largest publicly traded company related to sports and fitness in China. The joint venture includes opening Bally's in major cities such as: Beijing, Shanghai, Taiwan, Thailand, Singapore, Malaysia and the Philippines. This joint venture with CSI took place in June 2002 estimating 50 to100 Bally's to be opened in Asia over the next five years. Along with CSI, Bally's has a joint venture with Holmes Place, the leading operator of premium health and fitness clubs in Europe. This will help to expand the Bally Total Fitness name brand in Western Europe and bring the Holmes Place brand name to the United States. Korea is one of Bally's strong franchising successes. "Growing the brand through international franchising efforts is a strategy that ensures we maximize our growth while incurring no capital costs for the company," said Paul Toback, president and chief executive officer, Bally Total Fitness. "By offering high-quality, affordable fitness solutions to the ever growing health and fitness needs of the South East Asia population, Bally's can continue to solidify its position as a true global leader in fitness products and services." Bally's has international operations setup in Asia, Canada, Europe and the Caribbean. These are four major countries as far as population and economy goes. While rapid growth is a key part of the company's strategy, Bally's was intent on preserving value during the expansion process. When it comes to value, Bally's makes sure that any new store to open will contain state-of-the-art fitness equipment, as well as more than 120 group exercise classes, personal training, retail stores, rehabilitation centers, massage services and childcare centers. A problem Bally's runs into when opening up overseas is the international currency rates.

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The value of a dollar in some of the countries they have facilities in, is less than it is in the United States. This is never a fixed value either so it becomes much more difficult for financial forecasting to be accurate. Another problem the company may face when it comes to overseas facilities is brand piracy. Some countries may administer different rules and regulations, or use different equipment that may not be considered state-of-the-art. This hurts the credibility of the company, so it is important to make sure that value is highly administered when opening facilities internationally. Overall, Bally Total Fitness has been successful in expanding their company internationally and will continue to do so as long as they remain making a profit.
Wal-Mart Stores, Inc. operates retail stores in various formats in the United States and internationally. It has two segments: The Wal-Mart Stores and The Sam's Club. As of July 31, 2005, Wal-Mart operated 1,276 Wal-Mart stores, 1,838 Super centers, 92 Neighborhood Markets (food and produce), and 556 Sam's Clubs in 50 states in the United States. The company operates various retail formats in Argentina, Brazil, Canada, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom. It operates 261 Canadian Wal-Mart stores and Sam's Clubs, 11 units in Argentina, 150 units in Brazil, 88 units in Germany, 16 units in South Korea, 697 units in Mexico, 54 units in Puerto Rico, and 292 units in the United Kingdom, as well as 48 units in China under joint venture agreements. As you can see, Wal-Mart is a much larger company than Bally Total Fitness. Wal-Mart's stores in Mexico alone exceed Bally Total Fitness' total amount of facilities in both the U.S. and overseas. Their growth strategy is much more rapid than that of Bally's. This is because Wal-Mart stores are built in a warehouse format and are much easier and quicker to have up and running, making money much faster. They also sell tons of commodities, which attract business no matter what. If the economy is very poor, people may think twice about that membership to Bally's but will still go and buy groceries and toilet paper. Though Wal-Mart has locations in several countries, it still has plenty of places that need to be occupied. Despite its successes so far, further expansion overseas will be a challenge for Wal-Mart. This is because the early success of the company has been concentrated in only a few countries where it was able to make profitable purchases. Expanding on those successes starts in other countries and will be difficult. To take advantage of global opportunities, Wal-Mart's international division will need to take action on several different fronts, ranging from enhancing its global purchasing capabilities to entering new countries. If these things are administered correctly, Wal-Mart will emerge as truly global retailer. This means leading the market positions in Europe, Japan, and emerging markets (places where Wal-Mart's presence is limited today). Analysts predict that the international division's 2005 sales will grow 4.6%, operating profits will increase at a slightly higher rate of nearly 17% and operating margins will tick up to 5.5%. In the long run, Wal-Mart's international operations, including rapid expansion in Asian markets, may grow larger than its domestic operations in terms of store count and revenues. The actual international sales reached $56.3 billion in fiscal year ending 2005, an 18.3% increase over the previous year, and operating profits rose to nearly $3.0 billion, an increase of 26.1%. These increases exceed the analyst's predictions in both the areas of sales and operating profits. In 2006, Wal-Mart plans to open 220 to 230 units in existing markets. Relocations or expansion of existing stores will account for approximately 35 of these units, while the rest will represent new operating units for the company. As with any company opening up locations overseas, comes the problem of piracy. Some Wal-Mart's overseas may carry aftermarket products or imitation products that will eventually hurt the credibility of Wal-Mart. The international currency rates are something that should not be overlooked as well. Wal-Mart is opening stores in several different countries with several different exchange rates. This, in turn, makes financial forecasting much more difficult, do to the fact that the currency rates are constantly changing. Overall, the scope of international operations for Bally Total Fitness and Wal-Mart are successful for both companies and aid in their growth and profitability.

References

1. Wal-Mart Facts: International Operations. December 2005. Wal-Mart Facts.com. 1 Dec 2005.

2. Wal-Mart Stores: International History. December 2005. Wal-Mart Stores.com. 17 Nov 2005.

3. Bally Total Fitness Builds on Global Expansion Efforts with New Franchised Clubs in Southeast Asia. December 2005. Bizjournals.com. < http://bizjournals.bison.com/press/pr1-17-03bally.html.>

4. Fitness Chains are Growing Global. December 2005. Fitness Business Pro.com. 18 Nov 2005. < http://fitnessbusiness-pro.com/mag/fitness_fitness_chains_growing/.>
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