Question Tag: Strategic Challenges

You are a Finance Manager who works in the Finance Team of Azugu Gyms (Azugu) and your role includes giving advice on strategic projects and financial matters. Azugu is a family-owned business established in 2009 by two brothers. The two brothers invested an initial sum of GH¢300,000, splitting the share capital 50/50, issuing a total of 100,000 shares in Azugu. Azugu was launched with the aim to make gym-based fitness training highly accessible by removing the obstacles to exercise and making its gyms affordable to most people, opening more gyms for accessibility, and providing optimum flexibility in offering non-contractual membership. Azugu is currently very popular in Ghana, and total membership and new gym openings have grown rapidly since 2009.

Azugu is considering moving away from their organic growth model and has been considering and looking for a potential acquisition. The East Legon Executive Fitness Club is for sale at what seems to be a low price. East Legon Executive Fitness Club has gained a reputation over the past few years for loyal customers and has been rated as ‘outstanding’ by 95% of its members in 2017. Although the East Legon Executive Fitness Club’s annual results are excellent, it doesn’t quite fit with the current operations of Azugu. It is a luxury gym group with highly priced membership and high levels of staff/customer interaction. However, its fitness equipment is out of date by the standards of Azugu. There are concerns that when Azugu acquires the East Legon Executive Fitness Club, most of their staff may leave. The staff have expressed concerns that when it acquires East Legon Executive Fitness Club, it may make it a budget gym and are worried about the security of their jobs.

Required:

a) Discuss THREE (3) strategic advantages and THREE (3) challenges of acquiring East Legon Executive Fitness Club compared with Azugu’s usual organic approach to growth within the country.
(12 marks)

b) Identify FOUR (4) ways to ensure that East Legon Executive Fitness Club staff remain reassured, motivated, and loyal throughout the acquisition process.
(8 marks)