Benefits of an international expansion strategy for peloton

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Peloton - Global Expansion - Franchising

Peloton Interactive, Inc. is one of the top American exercise equipment and media companies that has made a solid name in the wellness industry, especially during the pandemic, as they brought the gym home. But what now? Now that people are eager to be back in the gym, craving social interactions after year of being forced to stay home, Peloton needs to expand and pivot in order to stay relevant and continue its' growth. Essentially Peloton has become a tech company that meshes the physical and the digital worlds to create an entirely new and immersive fitness experience through streaming.

However, as "Peloton operates in a highly competitive market and may be unable to compete successfully against existing and future competitors. Primary competitors of Peloton are studio fitness classes, fitness clubs, at-home fitness equipment, content, and health and wellness apps."(Goel, 2023) Additionally, another risk that poses challenges to peloton is the fact that in an attempt to prevent a decline, "Peloton is now attempting to reassert its position as a luxury brand, through price increases in the US for its flagship bike and treadmill products."(Felsted, 2023)

In other words, a great strategy for Peloton in order to gain a competitive edge in the market and generate more revenue, brand equity and growth, especially in terms of profits, Peloton could embark on an international expansion strategy - franchising. Currently, Peloton is only available in the US, Canada, Australia, UK and Germany. There's still room for tremendous global growth and expansion, and they currently don't have any boutique gyms available either globally, only showrooms for the equipment.

The benefits of an international expansion strategy for Peloton through franchising, is that international franchising can be a low-risk, high reward strategy. Additionally, franchising can provide your business with fantastic opportunities to scale-up and maximize exposure to new markets with minimal investment. In short, franchising involves "a franchisee - usually an individual or individuals - buying the rights to run a business using the franchisor's successful business model. This will include the rights to use the franchisor's brand and trademark."(Jeewa, 2023)

As Peloton hasn't globally expanded yet, this would be an excellent way for Peloton to branch out without a lot of extra expenses and risks. Franchising "allows the franchisor to expand internationally without having to physically up sticks and operate his/her overseas branches/locations, leaving the hard work to trusted local franchisees instead."(Jeewa, 2023)

With locations around the world on a global scale, Peloton could have boutique studios with Instructor-led boutique classes in person, fostering social and in-person connections as well.

Moreover, the beauty of franchising is that Peloton would receive an initial cash injection from the franchisees paying to take on the rights to operate using the unique peloton business model and branding overseas,. Peloton would essentially be able to enjoy international expansion with minimal effort on their part as day-to-day operations, including things like management, recruitment, dealing with suppliers, accounting and marketing will become the franchisees' responsibility.

Risks that may come with this strategy of global expansion through franchising are:

extreme currency shifts
political instability (Russia & Ukraine)
taxation changes
macro factors: inflation
extreme weather conditions
trade disputes

With global expansion through franchising comes perhaps a loss of power, but the trade-off is that you get to tap into a market that you would perhaps never be able to do without the local knowledge of that market through a franchisee. Franchising is the most economical way to penetrate a new market that will provide the greatest profits and would without a doubt help elevate the brand Peloton as a recognized luxury form of fitness across the globe.

Reference no: EM133409321

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