Reference no: EM133249976
Case - GOLD'S GYM: A WESTERN HEALTH CLUB IN MOSCOW
The move toward a free market economy has opened new opportunities for entrepreneurs in Russia. One such entrepreneur is 23 year old Jake Weinstock. After graduating from the University of Pennsylvania, Jake worked as a business consultant for Ernst & Young and moonlighted as marketing manager for Dynamo, the Red Army Hockey team that is now a farm team for the Pittsburg Penguins professional hockey team. Despite being very busy, Jake wanted to start his own business in sports or fitness.
He first developed a partnership with fellow American Paul Kuebler and Russian Vladmir Grumlik. The partners spent winter of 1995 studying the successes and failures of new business in Moscow. This work generated the idea of starting Western-style health club. The concept was to bring a new level of service and management to health clubs in Moscow.
Because there is a limited middle class in Russia, the target market for the health club was determined to be people who had money to spend now. This ihb ncluded about 100,000 expatriates and 400,000 rich Muscovites based on the best available information. The partners calculated they would need 1,000 members paying $1,500 - $2,500 annually to break even and $3,000 to generate profits needed to attract Western capital. Limited availability of capital in Russia led them to seek capital from American firms, such as Commonwealth Property Investors.
Once the capital was obtained, getting the needed fitness equipment to Moscow was addressed. The partners ordered 24 shipments of very expensive, high-tech Cyber fitness equipment and a basketball court supplied by Nike. Since the government levies heavy storage fees for each day that imported goods are not released, it was important to get the equipment through customs as soon as possible. Vladmir Grumlik used his personal connections to facilitate the customs process. Relationships and alliances with other important people were also necessary to get th business established.
Gold Gym opened in Moscow in February 1997. The gym balances Russian and American culture. The staff is entirely Russian, but they all have been trained to deliver high levels of Western service. Other clubs in Russia had the mentality "that they're doing you a favour by letting you use their club.: Gold Gym is much more customer oriented. The partners hope the mix of the best equipment and the best service will lead to success.
Questions -
1. What aspects of the marketing environment in Russia made it difficult to open Gold Gym?
2. What future marketing environment trends do you think represent opportunities or threats of the success of Gold's Gym?