Wait Watchers International: Strategic Analysis and Future Directions

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Introduction

This report is a detailed analysis of Weight Watchers international. A macro-environment, industry analysis, and core competencies analysis have been undertaken to assess the company’s strategic capabilities and suggest future directions for the business. This analysis will help the company identify its competencies and overcome the challenges to have a competitive edge in the market.

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Macro environment analysis

This is analyzed in the case study to understand market growth or decline and future directions for the industry in general. This analysis of the macro-environment will also help Weight Watcher company to align its performance positively against the forces of change that affect the business environment.

Economical environment

Increased purchasing power has resulted in people changing their lifestyle and thus more people gaining weight especially in the developed countries like North America (Kerin & Peterson 49). This is a positive trend because it creates a business opportunity for weight loss companies.

Political/legal environment

No barriers are put in place to restrict international trade thus this is a positive point for the company. On the other hand, since competition is not controlled it is hard to penetrate these foreign markets due to competition.

Environmental issues

These weight loss products are known to have side effects after use. This is a negative point because people will result to managing their weight naturally.

Social-cultural issue

The lifestyle of the people worldwide has made the company have a good business in their line of operation. Due to changes in eating habits, obesity was on the rise especially in developed countries like North America. Weight Watcher Company, therefore, positioned itself properly to help the people who were battling with their weight. In Europe, more than half of the population was overweight and thus the company had an opportunity since the market had not been tapped. Weight Watcher company also faced some negative issues because, with the rise of baby boomers in the United States, the business was deemed to slow down. After all, these baby boomers were very careful about their lifestyles and were very conscious of their health.

Technological environment

The company was able to open Weight Watchers.com in 2009 which provided weight watchers eTools and weight watchers online. The company being the leading provider of internet-based weight management made the business grow since it was a market leader. Technology helped the company to advertise and also provide information to the customers thus increasing its market share.

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Industry analysis

Using Porter’s Five Forces model (Porter, p. 66), an analysis is carried out to outline the breadth of competition and how the firm becomes profitable in the industry.

The threat of new entrants

The market has other companies entering in to compete with the Weight Watcher Company. GlaxoSmithKline Company launched a weight loss drug in the market which was meant to compete with the Weight Watcher Company. Jenny Craig, Nutri System as well as Slip Fast were some of the companies that entered the market to compete with the Weight Watcher Company. The company had already established itself which made it hard for the new entrants to succeed. It enjoyed economies of scale, had a strong brand, and was also a market leader in the market. The threat of entrants is relatively low since the competitors would require considerable investments to be made to prosper in this industry.

Bargaining power of suppliers

The suppliers in this industry generally have a low bargaining power due to their concentration relative to the manufacturers and the presence of substitutes (Sarah, Hurd, & Lipsey, p. 61; Rougelot. p. 24). Suppliers pose no major threat to the industry because there are low switching costs and little chance of suppliers integrating forward.

Customer bargaining power

The buyers in this industry have substantially more power than suppliers due to low differentiation of output and switching costs and a high presence of substitutes to choose from. Customers could seek other alternatives (Proctor, p. 6) to cut down their weight which made them have strong bargaining power in the industry.

Power of substitutes

The power of substitute of Weight Watchers is relatively high. The substitutes available are dietary supplements, pharmaceutical, surgical, diet programs and products as well as weight management brands. The customers had a variety of choices to make in their fight against weight. This has made the company differentiate its products and also create a strong brand name to prevent the customers from switching to substitute measures of weight loss.

Industry rivalry

This force is high in this industry due to the high fixed costs and low product differences. Many competitors are all trying to increase sales and market share. Being consistently beaten by a competitor in one industry may impact the brand or performance image in another industry. There are greater opportunities in the weight loss market but it’s very difficult to compete for the market share. Weight Watcher Company is thus trying to reinvent itself while still watching the moves made by the competitors to increase its market share and have a competitive edge in the market.

According to the five forces analysis (Porter 11), the threat of rivalry is the highest external force in the weight loss industry.

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The power of substitutes is also a great force in this industry since with the changing lifestyle of people which is resulting in more people being obese; more companies are coming up with different products to help the customers overcome the weight problems.

Internal analysis

For a more effective strategy evaluation, an internal analysis is performed on Weight Watcher Company to examine its resources and capabilities in the context of value creation opportunities and other external developments.

Resource Analysis

Weight Watcher company has many tangible resources, from a healthy balance sheet to an extensive asset collection. The company has a decent financial status which is evidence of success. One of their core competencies is their organizational abilities in marketing, distribution, and management of suppliers and employees. The intangible resources that have turned into core competencies for the company are brand and reputation as well as their approach to human resources management. Although innovation is encouraged within their current processes, this is an area of improvement for the company. The company had high-profit margins and strong cash flow because it had low variable expenses and low capital expenditure requirements. The company earned revenue from product sales, meeting fees, online revenues, and revenue gained from franchising and licensing.

Capability analysis

Capabilities such as knowledge management, innovation, and learning seem to be enabled within the weight watcher company’s processes, however with so little technological advancement or business diversification, there appears to be an opportunity for improvement in this area.

Measuring capability performance

Weight Watcher company has targeted all people with the weight loss products but competitors and the power of substitute is making the company not to have a big market share. Weight Watcher Company needs to focus on global growth and innovation to come up with products to suit different people. It has several capabilities that it can use to assist in entering markets that are relatively difficult to penetrate due to the high rate of competition.

The company should focus on “benchmarking in areas such as business segments, product offerings & their USPs (unique selling points), geographical coverage, financial performance, Research and marketing developments, and business strategies” (Klein, p. 71; Hoffmann, p. 14). Competitor information should be used to help the company in future direction and strategy.

Competitive advantages

  • Unique operation – Weight Watcher Company has established itself as the market leader in weight management products and the entire culture around its product. It has established a strong brand name to create customer loyalty. This is an advantage the company has over competitors. The company is facing threats from the competitors and thus cannot rely on this forever for sustainable business.
  • Strong and valuable capabilities – The Company has several strategic operational policies that encourage its innovation. These are the capabilities that the company should harness to diversify into other business areas.
  • Difficult to imitate – Wait Watcher Company has a real competitive advantage with its brand strength and customer loyalty. It has great marketing capabilities that should be used to assist in different business strategies and provide products and services that are difficult to imitate (Hitt, Ireland & Hoskisson, p. 149).
  • Difficult to trade – The company’s competencies are difficult to trade, increasing its lead over competitors in this area.

While Weight Watcher Company has several areas of advantage over competitors, there are still areas they could focus on to reinforce their position in the market. The analysis of Weight Watcher’s internal capabilities suggests that it is valuable, rare, costly to imitate, and organized to exploit opportunities. The results of this analysis reveal that the company’s success is sustainable as long as it preserves and develops these competitive advantages in the industry and also be continuously innovative.

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Gap analysis

Macro-environment

The major trends in the microenvironment area revolve around producing weight battling products, selling these products worldwide, and the opportunity to create new product choices to satisfy different segments. These trends are only going to strengthen when more innovation is done.

For weight Watcher Company, there is a large gap between product strategy and the above-mentioned trends. There has been no major effort to research and develop alternative weight products to compete with those bought over the counter.

Lagging in innovation leaves the company open to losing business and being outmaneuvered by new and existing competition (Peters, p. 211; Percival, p. 89; Marr, p. 188).

Industry Environment

The industry is reasonably profitable that is driven by power over suppliers and reduced threat of new entrants. Aspects such as rivalry and buyer power are high which indicates that participants should be proactive about strategy and product placement amongst competitors.

The company suffers an additional blow of providing expensive products compared to those of competitors which have affected their strategy in increasing their market share. The company could improve by increasing production levels and increasing the economies of scale to sell its products at competitive prices or a relatively cheaper price compared to that of the competitors.

How strategy matches performance

Weight Watcher’s strategy has three related objectives which are; to increase sales, achieve a stronger international presence, attract more male buyers, continuous innovation, and create value. An increase in sales, continuous innovation initiatives, and the creation of value were the most successful. It cannot be argued that the company didn’t achieve an international presence because it was operating in nearly thirty countries but the market share in those countries was not big due to competition and availability of substitutes.

How strategies match capabilities and those of competitors

Weight Watcher’s strategy as stated above matches their capabilities very well. Their objectives were mostly able to be fulfilled due to strong organizational and human resources competencies. The company’s competitors may also have similar competencies and this combined with large corporate backing means that the company must use what competitive advantage that it has to build a sustainable business.

Recommendation

On doing the macro environment analysis, industry analysis and internal analysis recommendations should be given to give the company a direction to achieving success.

Globalization

Weight Watcher company provides its services to nearly thirty countries. Since weight gain is on the rise especially in developed countries, the company should work towards meeting these countries’ needs. Sixty-five percent of the population in America is overweight and so the company should penetrate these countries to provide people with weight loss services. Weight is also becoming an epidemic in Asia and so the company should use its competitive advantages to penetrate these markets.

Business diversification

Even with their current operations in other activities, Weight Watcher company needs to consider further diversification to ensure the future success of the business.

There is such a strong brand presence and this could be capitalized upon for other products such as weight-loss drugs which can be sold over the counter. The company should produce products to suit all market segments in the market. This can be achieved through product differentiation (Cravens, p. 16; Foulke, p. 71). The company can also come up with new products altogether to attract more customers and have an edge in the market. Through diversification, the company should penetrate new markets. With its competing advantages and capabilities, it is possible to enter the untapped market especially in the developed countries where the rate of weight gain is alarming and this will help the company increase its sales and also have a competitive advantage in the market. The company had an idea of introducing other products in the market to meet the customer’s needs.

Innovation

Innovation will help the company improve in its efficiency, quality, market share, and also the competitive position (Day & Reibstein, p. 144; Spechler, p. 9). The company should rejuvenate its existing brand to attract more customers to buy the products. Through proper marketing, the existing brand can be repositioned to the customer thus attracting them to buy more. This rejuvenation can also strengthen the brand name thus making the customer loyal to the brand and avoiding switching of brands. Through innovation, the company can provide value to the customers by introducing new products. This will help the company meet all the needs of the different customers satisfactorily. Broadening the customer mix is also an innovative initiative that will result in the company’s success (Drummond, Ensor & Ashford, p. 167). The company should target other segments like the men and thus should produce products to help them cut down their weight. This will increase the customers, increase the company’s market share and also give it a competitive edge in the market over its competitors (Parry, p. 242; Stevens, Sherwood & Dunn, p. 89).

Technology

Weight Watcher company needs to use its capability of being a market leader in technology to achieve a competitive edge in the market. The company can advertise its products and services online to create awareness of its existence to the customers and also to explain the products and services they offer (Wilson & Gilligan, p. 311). This will give the company an advantage over its competitors and also will increase the market share for its products and services (Wustenhagen, p. 30).

Brand extension

For Weight Watcher Company to ensure brand growth, it should carry out brand extension activities. The brand extension will help to maintain a brand as a single and long-lasting promise but at the same time can be used in different products or different categories (Robertson, p. 112). The brand extension also will help the company to exemplify the values from a single product-based promise to a larger brand benefit and thus making the brand cover a wider range of products.

Appendix 1: Macro-environment analysis

Trends Facts Consequences Assessment/ Rank
Economic Increased purchasing power of the people – changing lifestyle which cause people to be over weight +
Technological – Designing of a Weight Watchers.com
  • TV advertising online
  • Designing online site

– Increasing use of information technology

– Consequences on the price of services but attract new customers.
– Reduce the production time and cost
Create awareness to the customers
Give the company a competitive edge in the market
+/-

+

+

+

Political / Legal – No trading barriers and thus the company is operating in thirty countries
No law to restrict competition
– This increase the market share of the company

– Difficult to penetrate the untapped market in the foreign countries due to stiff competition and availability of substitutes

+

Social/cultural
  • Weight gaining rate in developing countries is alarming
  • Changing lifestyle
  • Rising number of baby boomers
– Need for weight management services and products
– Growing numbers of people with obesity
– New segments to satisfy
– high consciousness on health
+

+

Environmental – Side effects of these weight losing products – More people moving to the natural way of losing weight

Appendix 2: Industry analysis

Power of suppliers – RELATIVELY LOW

  • Switching costs of suppliers increasing power of suppliers
  • Lack of industry standardization  large power of suppliers.
  • Large buying power of manufacturers
  • Key competitive advantage of manufacturers

Threat of new entrants – Relatively low

  • Need for large scale production in order to be cost efficient
  • Capital requirements are very high important but can be shared
  • Importance of brand identity – Switching costs are high

Power of buyers – AVERAGE

  • Issue of availability of substitute: a buyer can find weight loss drugs over the counter
  • Lots of substitute in the market
  • Large number of competitors: buyers have the power to choose
  • Cost relative to total buyers purchase is important; the industry can not play with prices without expecting retaliation or boycott of its products.
  • Impact of outputs such as the brand on buyer differentiation: even if there are a lot of similar products, if the customer is attracted by a particular brand, he will be ready to pay more for having this brand
  • Buyer information about the industry output

Threat of substitutes- HIGH

  • There are many types of drug sold over the counter which the customer can buy.
  • Surgical method of weight loss is also one of the choices that the customer has.
  • dietary supplements are also available
  • diet programs also act as substitutes because they result to weight loss
  • Customers can get weight management brands

Rivalry among existing competitors – AVERAGE

  • Industry growing fast; more people are suffering from weight gain and thus want to manage it.
  • Saturated market Need for change and renewal
  • Emergence of imitation  decrease of product substitutes  increase in the intensity of competition
  • Importance of brand identity
  • Low switching costs
  • No exit barriers

Appendix 3: Internal environment analysis

Area Resources
Financial resources – The company has a healthy financial status
– Its also has high profit margin
Technological resources – They’ve been leaders in new technology
-have a web site where the customer can access information about the company
Human resources – Creation of a new relationship between management and employees: involvement, self management, open communication, generous health and leave benefits
– Employees believe in their product ‘are impressed by the product they make’
Innovation resources – Its ability to develop other new products and to rejuvenate the existing ones
Reputation resources Brand name : the company has a very strong brand name which creates customer’s loyalty

Works Cited

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