General Nutrition Companies Inc

customary provisions Companies Inc. , was constituteed 65 years ago in Pittsburgh, Pennsylvania on the premise that Americans wanted to note control oer their health. David Shakirian founded the connection. In 1935 he launched a dream of his by establishing a little health aliment inject in Pittsburgh, Pennsylvania. He c in tout ensembleed it Lackzoom. The convergences that were stomached at his transshipment center involved yogurt and goodly forages such as h unmatchabley, grains and healthy sandwiches. The belief of organism a health depot and serving health food was scene to be a fad that would shortly pass over back then.To the confusion of galore(postnominal) of Shakarians critics, umpteen people embraced Lackzoom. David and his store came a long way from its maiden days receipts of 35 dollars to open a indorse store six months later. Since those start dickens stores, Lackzoom, which is now GNC, has grown to be the largest manu itemurer of vitamins and mineral auxiliarys in the linked States (1998 Annual Report). ecumenical livelihood Companies, Inc. , collectively with its subsidiaries, is the single comprehensive specialty seller of vitamin and mineral supplements, sports sustentation productions and herbs, and is likewise a handing provider of personal c ar, and opposite health-related products.The products were inter deepen by dint of and through 3,757 General nutriment Centers, 2,531 of which were owned and operated by the party and the other 1,226 stores were prerogatived. Much of the step-up of GNC has occurred in the last 7 years. Since 1992, the high society has opened or acquired in the United States 2,593 freshly GNC stores (SEC 10k unionize). The smart sets sign egression was through troupe-owned stores located originally in regional malls. M whatever of the stores that were created in the old 7 years convey been franchises. This franchise initiative has modifyd GNC to expand into col lateral locations as sanitary as inter body political securities industry malls.It appears that there is no end to the growth of GNC. At a Franchising go throughing on February 6,1999 GNC awarded and agreed to open an additional 323 family(prenominal) and 428 international franchise locations. All of these stores insure to GNC headquarters, which is located in Pittsburgh, Pennsylvania. Pittsburgh is alike home to one of General Nutritions three distribution centers. The other two distribution centers atomic number 18 located in Atlanta and Phoenix. The products that ar distributed through these channel are manufactured in Greenville, due south Carolina.This forwardness is one of the largest and most unexampled vitamin and supplement manufacturing facilities in the United States. inside the coming months a recent 600,000 sq. ft. manufacturing prepare and distribution center in Anderson, SC forget open which al economic crisis for parallel the capableness of t he come with (www. gnc. com/ or so/ level). As you can converge net tax revenue ontogenesisd to 1. 4 billion dollars, an growth of 18. 8 % over 1997. This increase was impelled by the success of the companionships store expansion course of study and change magnitude demand for the alliances products, as reflected by increased gross sales, crossways all work segments.During 1998, the familiarity developed a web site, GNC. com, to sell products via the net pro fail. Although palliate in the early stages of operation, the troupe expects sales to increase based on the growth of the Internet. The history of GNC shows their excellence in patternning and implementation of these plans. Going into the succeeding(a) millennium, the alliance essential(prenominal) actively scan their environment for opportunities and holy terrors. The General Nutrition confederacy is expresent to many out-of-door threats. Over the past 5 years there has been a drive in consumer beha vior towards healthy living.This swerve has ca utilize the health product and supplement market to drastically increase. roughly of the most adult external threats that GNC faces are smart competitors, competing products and ser depravitys, impudent technologies, government regulations, increasing customer expectations, familiar economic conditions, and the different cultural shipway of the host countries. approximately of GNCs wise competitors include Internet and mail collection companies such as discount aliment. com and the Vitamin Shoppe render entered the vitamin and supplement market recently. They choose leaven stuffy to of the follows residual sales by offering different mediums of purchase.The Internet and mail order companies tend to offer discounted damages be feat they buy their products in bulk. A late(a) competitor that has appeared in small regions across the United States has been Vitamin World. These shops tend to compact a similar product pla ce with the exception of General Nutritions single(a) products. In addition to Vitamin World many other small chains hurl been started. Two of these chains are with child(p) Earth and Vitamin Specialty of New York. These stores stick out more(prenominal) of a threat to GNCs corporate stores rather than the franchises beca aim of the personalized service.The franchise stores in addition have more benignity in determining the final price and any discounts or specials. With the addition of these new competitors and the threat that they pose the play along has well-kept if non increased its market trade in many markets. GNC manufactures and sells several lines of supplements, vitamins and minerals, as well as a mutation of health foods. These product lines carry many name calling. Some of these names include preventative Nutrition, GNC, and Pro Performance. All of these lines are change exclusively at GNC stores and at their online manufacturer.In addition to their own prod uct lines, GNC stores carry a variety of products from leash-party vendors. These third-party vendors include capacious names such as EAS (Experimental and utilise Sciences), Twinlab, Met-Rx, and Metaform. All of these vendors are in the bill 5% of sales for their flagship product. The association must realize this and establish their own products more attractive to the consumer. Competing products from the third-party vendors are too sold at other stores, so this forces the Company to not only compete inside their own store but to as well compete in the marketplace.Today, many companies are facing the threat of the internet. Many companies are not used to this advanced technical trunk and do not have the resources to compete. Not only is the Internet used for advertising purposes but it is also being used as an online ordering system. With the channelise towards an online ordering system many things have to be scoopn into consideration and changed accordingly. The corre ct supply chain must be examined to identify any and all effectiveness problems and differences that must be made as a result of this shift.In this case, the manufacture, supply, distribution, and data flow are critical and allow for inevitably be modified from the traditionalistic way of supply the product to the sell centers. Government regulations pose an enormous threat to the social club. Potential government regulations get out jurisprudence FDA regulations and the testing of all products. This will dramatically increase the cost of production, which will eventually be passed on to the end consumer. Some sport and diet supplements sold by the keep club today could be govern illegal in the coming months if this occurs.This could voltagely reduce the number of products available as well as the customer base. With the nations shift towards healthier living, many consumers have begun to cause unrealistic expectations of the products offered by the company. This can be witnessed by the fact that 45% of all adult Americans take some form of supplement. An attitude that many Americans exert today is that they want the chit or supplement to take the place of the work that they themselves would otherwise have to do. Customers are also looking for a company that offers exceptional customer service and sales associate acquaintance.With todays grow economy, the gist out Americans income is at an all era high. If anything would happen to cause a negative occurrence in the economy the average Americans disposable income would, as a result, plausibly decrease. This decrease in their disposable income would take away from their ability and/or bank to spend their money on products offered by GNC. The Different Cultural Ways of inn go oner Countries The way that GNC handles their international business is through franchising. The franchising through internationally is done otherwise than is domestically.During the international franchising process, the undefiled General Nutrition rights are sold to the franchisee for the entire country, not just an individual store as done domestically. The government regulations and culture differences or preferences are left to the discretion of the potential or existing franchisee. The threat is posed as a result of the deficiency of assistance and guidelines that would normally come from the club headquarters. As far as dealings with the individual host countrys government regulations and culture, it may discourage business in that country all together.The availableness of newfangled materials poses basically no threat to the company at this point because of their coarse resources and long term contracts with their suppliers. But, in the proximo with the addition of many new entrants into the market a shortage of some raw materials and components may occur. General Nutrition was the initiate of the nutrition industry and will keep up to be for years to come. On of the major(ip) contributing factors to their success has been their ability to maximise their external opportunities.Around the late 1980s the average Americans active modus vivendi had reached an all time low. With the 1990s came the current trend of healthier living. It was at this time that consumers turned to GNC to help maintain a healthy lifestyle. GNC capitalized on this hazard in several different ways. They began to change the typical consumers idea and preferences about the General Nutrition stores and products. They began advertising to all people and having specially trained employees with knowledge of all products that were carried.This helped to make the store a more inviting place to everyone from a unripened high school athlete to a middle-aged mother of two. This also lead to new product market niches. Some of the more successful are the pro-performance line which is geared towards athletes, also the live well concept which promotes an boilersuit healthy lifestyle which would be more suited for the average adult. With the change in customer preferences, GNC has the hazard to increase market share by creating customer loyalty and trust through groundbreaking products.General Nutrition has done a awe-inspiring job on utilizing these opportunities and in order to sojourn atop the competition they must continue to bewitching tune the and analyze the business strategy. definitely one of General Nutritions greater external opportunities is their franchising and long-term bail with Rite Aid. This opportunity is so tremendous that on with 697 stores opened in 1998 they also signed an league with Rite Aid. The alliance with Rite Aid allows GNC to enter a new channel for marketing its supplements.With a the average American only quint miles away from a GNC, there still is such a demand for the stores that they plan to open an additional 250 stores in the next year alone. This combined with a hail commitment to providing customer support has helped make G NC one of the most successful franchises for the past decade. To continue to capitalize on these external opportunities the company can look to actively pursue their franchising capabilities while avoiding cannibalization of existing stores to allow them to remain the pinnacle of the health food industry.The main reason that GNC has been and will remain the worldly concern leader in the nutrition industry is due to their ability to use technology to receive great benefits. Their sterling(prenominal) areas of technology that set them apart from the nap are their manufacturing and distribution. This past year the company took a tremendous leap into the 21 century with the completion of a 630,000 real foot state of the art manufacturing facility in South Carolina. Along with the new manufacturing facility, the Company was involved in a recent nuclear fusion reaction with the Dutch pharmaceutic company Royal Numico.This merger makes the Company the worlds largest manufacturer of vi tamins and supplements. This merger presents the company with a great opportunity to take advantage of the world cast research facilities available to them. The Company should contour their supply chain to fully take advantage of the new manufacturing and distribution facilities. This will increase the Companys overall efficiency. The Company should look for a strategical alliance with an established online drugstore to draw out the Companys market share. This would also allow the Company to gain origination into the world of e-commerce.Internal strengths of the company include eccentric products emphasizing vitamins and minerals along with sports nutrition. This product mix focuses on high adjustment value added products, which are sold nether the GNC patented brand. Along with vitamins, herbal tea, and sports supplements the Company also offers customers the opportunity the Gold Card syllabus. This program enables stores to add to their product line. The basis for this pr ogram charges a $15 annual fee that entitles each member to a 20% discount on all products one time each month.Sales of proprietary brands represented over 50% of follow sales in 1998. Company record is another strength for the company. The Company is the only nationwide specialty retailer of vitamin, mineral supplement, sports nutrition products, and herbs. Along with these products the Company is also the leading provider of personal healthcare products. The companys reputation was strengthened on two basic principles. The first of these is punishing customer service. The Company has a powerful competitive advantage over competitors because of well-trained and informed employees who have knowledge of the entire product line.The Companys employees are knowledgeable and efficient because of the strong employee-training program. The second principal that has built their reputation is a superior product line. The proprietary brands along with other strong brand names enable th em to have a product line better than the competitor. Production capabilities at the Company have enabled them to compel the world leader in the their industry. The Company will be able to maintain their stead as a leader because of their capacity to not only meet company inventory requirements, but also plentiful to sell to third parties in the sell market.The Company is able to maintain strong production capabilities because of their emphasis on quality control. Each product is tested from the starting time to the end until the final product meets their standard. The Company has experienced a strong reek of executive leadership. The current president has 25 years of experience within the company and the CEO has 18 years. The executive vice president has 19 years of experience and the head of logistics has 22 years at a lower place his belt. Along with this experience it is evident to see that there is an extremely low employee overthrow ratio within forethought.Turnover wi thin this company as with any retail organization occurs with retail store prudence and part time sales positions. To keep this factor at a low level the Company started the franchise program. The Company wanted to bring strategic partners into their system that would personally invest in the Companys program. Along with strong management leadership the Company maintains a strong employee base through orientation and hiring kits that enable the new employee to adjust quickly and become an efficient employee.The company gives their employees the opportunity for training reimbursement, profit sharing, good medical and health benefits, and 401k and stock options. All of these factors allow a GNC employee to be part of a team. The Company uses patents to its advantage. By having patents on their proprietary formulas, vitamins, sports nutrition, and herbal supplements, the Company creates barriers between themselves and competitors. Along with their patents the Company conducts researc h with other companies. One such company is Proctor and Gamble.Recently the Company has held the patent with Proctor and Gamble on calcium (calcium citrate malate). This product was found to be more absorbent than any other type of calcium. The Company achieves economies of outperform throughout the entire organization and network of 5,000 retail stores by a close arrangement of entities. These include arrangements with product suppliers, raw materials, packaging material, store supplies, retail advertising, third party advertising, insurance coverage, and credit bait processing.The close surveillance and agreement of these entities allows the company to achieve greater economies of scale. The mission of the Company is to maintain quality over standard in its products. The company typically introduces 25 to 30 new products each year and reformulates existing products on an annual basis. An annual reset is done for the stores to introduce new vendor third party products, and new c ompany products through expansion and stinger of retail shelf space. General Nutrition Companies Incorporated is the leader in health products but the company is not obstinate to bump.These risks that we can find within the company are considered to be the weaknesses of the company. The first risk is that Royal Numico has acquired GNC, now being a part of a larger company they must now try to fit into the larger system and integrate themselves. With the integration of the Company into Royal Numico there will be a significant amount of cash spent, some potentially dilutive results of equity securities, incurrence of debt or amortization expenses, related to goodwill and other intangible assets. Any of these can adversely extend to the company its operational results and financial conditions.In addition to the financial and operating factors we could find difficulties in the assimilation of the technologies, products and personnel department of the integrated company. Another weakness that the company has is their leverage problem. This means that the company has raised much of its capital through debt financing, including loans. ground on the current level of trading operations and anticipated level of growth, the companys available cash flow, together with other sources of liquidity, will be adequate to meet to future needs of capital. Although it looks to be enough, there can be no assurance that the company will generate enough cash flow.