Reference no: EM133382164

CASE 2-THE FIT STOP LTD.

The Fit Stop Ltd. is a new firm that will open its doors exactly four months from today. Its business objective is to sell all types of training, fitness, conditioning, and exercise equipment to the general public. The Fit Stop plans to specialize in this equipment and to provide customers with personalized advice geared to a customer's specific training or conditioning needs

(e.g., training for a particular sport, injury rehabilitation, strengthening of muscles to deal with back pain, general conditioning, and fitness), whether the customer is eight or 80 years of age.

In order to provide high-quality advice, each store will employ a physiotherapist (to provide advice on problems such as injuries or chronic back pain) and a person with a bachelor's degree in kinesiology (to provide advice on training for various sports or other physical activities). A staff member will even sit down with customers and develop a personalized training or conditioning program that meets their own specific objectives and needs, at no cost to the customer.

The remainder of the staff in the store will consist of a manager, with a Bachelor of Commerce degree, and sales staff, who will have at least high school diplomas. Due to the long opening hours, it is expected that between 8-12 salespeople will be needed for each store. Because the stores are located in shopping malls, they will operate on a seven-day-a-week basis, open 9:00-9:00 weekdays, 9:00-6:00 Saturdays, and noon to 6:00 on Sundays.

Aside from personally helping customers, the roles of the physiotherapist and kinesiologist will be to train other employees in how each type of equipment can be used for various conditioning and rehabilitation purposes. Initially, sales staff will be given general training, but as time goes by, each salesperson will be expected to learn in depth about all the different pieces of equipment, to help customers diagnose their needs accurately, and to be able to explain proper use of the equipment. Because of the high level of training required, all employees will be full-time.

The founder of the business is Susan Superfit, who has undergraduate degrees in kinesiology and commerce from the University of Saskatchewan. While at university, she participated in many sports (and suffered many injuries due to her all-out style of play). She came up with the idea for this business while laid up with one of her injuries. While there were businesses that sold fitness and conditioning equipment, she often found that the people selling it had very limited knowledge and often gave poor advice on what to buy and how to use it.

She has secured funding from private investors and from Growthworks, a large Canadian labour-sponsored investment fund. In order to get volume discounts on the equipment she will be purchasing and to beat competitors into the market, she wants to start off quite large, with stores in major cities in Ontario and the four western provinces, before expanding to Quebec and the Atlantic provinces. She knows that this is a risky strategy, and that cost control will be essential to keep the business going long enough to become well known and develop a stable clientele. She does not expect the business to make a profit for at least one year, or maybe even two.

Her main competitors will be sporting goods megastores and department and discount stores, each of which sells some of the same equipment. Some of these outlets will be able to price their equipment lower than The Fit Stop will be able to, but none have the range of equipment that The Fit Stop will have, and none provide the personalized services that The Fit Stop will.

Susan believes that the key to her business success will be highly motivated and knowledgeable employees who have a strong concern for their customers and who are able to work as a team with the other employees to provide the best possible customer service. Because no two customers are exactly alike, employees will have to be innovative in developing solutions that fit their needs. It will also be crucial to keep up with the latest fitness and training trends, as knowledge about fitness is continually increasing, along with new and different types of specialized equipment. A key aspect of company strategy is to be the most up-to-date and advanced supplier of new products and techniques.

Although Susan has given a lot of thought to her business, one thing she hasn't really given much thought to is how to compensate her employees. Because she doesn't really know much about compensation, she tends to feel that the safest thing would be to just do what her competitors are doing.

1. Determine which managerial strategy would be most effective for this firm and explain why.

2. Examine the case and determine whether base pay should be an important component of compensation for the sales staff. If so, identify the most appropriate method for determining base pay for sales staff. What factors did you consider in making these decisions?

3. Do you think that Fit Stop would be a suitable organization in which to implement an organization performance pay plan? Explain why or why not. If the Fit Stop is suitable, what type of organization performance plan would be most appropriate? Describe the key elements of this plan as applied to the Fit Stop.

4. Susan Superfit, CEO of Fit Stop, has hired you to formulate a compensation strategy for her firm.
Explain:

what would be the required behaviour at Fit Stop,
the role of compensation, and
appropriate compensation mix. Please include percentages for each component of compensation mix.