INTERNATIONALISATION IN THE BOUTIQUE FITNESS INDUSTRY

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INTERNATIONALISATION

IN THE BOUTIQUE

FITNESS INDUSTRY

A comparative case study of Xponential Fitness and Life Fit Group

University of Groningen

Newcastle University Business School

Double Degree MSc Advanced International Business Management

and Marketing

December 2020

Luc van Krimpen S3216500 200365837 Heinelaan 77 3931WZ 0621212624 l.j.van.krimpen@student.rug.nl

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Preface

To finish my Double Degree Master Advanced International Business Management and Marketing, I’ve written this thesis. I have to say that writing it was challenging and took a lot of energy. I chose the topic ‘boutique fitness’ because it relates to the boxing gym I was setting up while studying in Newcastle at the beginning of 2020. I enjoyed setting it up and running the business which made going back because of COVID-19 a great disappointment. This summer, after the corona measures relaxed and right at the beginning of writing this thesis, I opened a new boxing gym in Utrecht. This took a lot of my time which made it difficult for me to write my thesis.

Therefore, and for many other reasons, I want to start off by thanking Rian Drogendijk, my supervisor from the University of Groningen, who helped me enormously. From the start, you were very helpful and honest about setting my priorities straight. I got a lot of energy out of our weekly meetings where you gave me valuable advice and some interesting insights into your life as an academic. Besides the meetings being very helpful, they were also very enjoyable and I will miss them. Thank you for your ongoing support and feedback.

I also want to thank Robin Pesch, my supervisor from the University of Newcastle for giving me advice and feedback on my thesis and the interview guidelines.

This has helped me conduct a successful interview with Daniel Schalin who I would also like to thank. I found talking with you very interesting and wish you and Life Fit Group all the best.

I would also like to thank my good friend Bareld Jacobi for taking a look at my English language and the structure of my thesis which makes reading and understanding my thesis a lot easier.

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Abstract

This study explores the internationalisation of firms in the relatively new boutique fitness industry. It focusses on different internationalisation decisions the companies have to make while internationalising and it looks and looks at the contemporary relevance of the firm typologies of Bartlett and Ghoshal made over three decades ago. The study is qualitative and explorative of nature. The case studies are conducted and compared using a comparative case study analysis. This study adds value to the existent body of research in multiple ways. Firstly, it adds value by studying firms in the service industry. Secondly, by studying young firms which both were in the beginning phase of internationalising at the time of writing. Thirdly, value is added because the firms follow a ‘traditional path to internationalisation’, a path followed by a lot of companies but understudied by contemporary researchers who focus more on born globals. This study shows that young companies in the same relatively new industry are able to internationalise successfully using different strategies. This study suggests region of origin and company goals might play a role in choice of strategy. It further suggests that firm typologies made over 30 years ago are still relevant today. Finally, this research suggests that if a company wants to capture more value within one geographical market by targeting more customers, it should diversify its products and when a company wants to expand rapidly into different geographical markets, standardising its products might help its growth.

Keywords: Internationalisation, internationalisation decisions, service firms, boutique fitness, firm

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1. Introduction

Fitness is an important part of a healthy lifestyle for many people. The rise in popularity of fitness really started in the 1970s when a healthy physique started becoming a status symbol with role models such as Arnold Schwarzenegger and Cher (Stern, 2008). Gyms with weights and machines combined with some group classes spread in popularity throughout the Western world (Stern, 2008). Such gyms are still popular among many because of their simplicity; pay your monthly subscription and go whenever you want. This has been a successful formula for decades but as sports are increasingly becoming an important part of people’s everyday life, many ask for something more. This has opened up the market for a new trend in the fitness-world: boutique fitness. Boutique fitness is defined as small, specialised gyms with between 200 and 600m2 floor surface (Valcarce, cordeiro, & Garcia, 2017). They only offer a small variety of workouts under intensive guidance by experienced trainers for a premium price using the latest technologies (Valcarce, cordeiro, & Garcia, 2017). Over the past 10 years, these types of gyms have grown in popularity as fitness-goers look for something more than just a place they can sweat.

As the industry grows, small local businesses have turned into large firms with a large national, sometimes also international, presence. An example is the American Pure Barre with 550 clubs in the United States but only two international clubs, both in Canada. Pure Barre’s parent company is Xponential Fitness, a firm founded in 2017, curating eight firms operating solely in the boutique fitness industry. All brands combined have over 1,300 clubs open of which approximately 25 outside of the United States. The company goal is to grow as fast and as large as possible. As the domestic market becomes saturated, Xponential Fitness is internationalising to different regions in the world. One of these regions is the German speaking market. In this region, they cooperate with another curator of fitness brands called Life Fit Group which was founded in 2018. This firm is smaller in the number of clubs and has not nearly saturated the domestic German market. The internationalisation efforts of this firm concern cooperating with foreign firms to utilise the German market. The company goals are expanding product range, increasing customer satisfaction, boosting market share, and generating operating profits for the benefit of the employees and shareholders.

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and ‘firm’ but only 13 when searching for ‘internationalization’ and ‘service firm’. Nevertheless, the service industry is the largest employer and firms within the industry have been most active internationalising. Furthermore, in 2006, the service industry was good for 62% of world inward FDI stock (Pla-Barber & Ghauri, 2012). Besides the existent body of research being limited to service firms, it is also limited to born globals and long established international firms (Zander, McDouggal-Covin, & Rose, 2015) (Johanson & Vahlne, 1977).

This study adds value to the existent body of literature because of multiple reasons. Firstly, the researched firms are both active in the service industry. Secondly, they are not born globals, instead follow a more traditional route to internationalising. Thirdly, the companies are currently in the beginning phase of internationalising.

This thesis covers the internationalisation of service firms operating in the boutique fitness industry. Because the internationalisation of service firms is an understudied topic and the boutique fitness industry as an until now unexplored topic, this thesis is exploratory. To be open for as much information as possible, the thesis is guided by the following broad research question ‘How do

companies in the boutique fitness industry internationalise?’.

A comparative case study approach is used to accommodate the explorative nature of this thesis. The first company studied is Xponential Fitness. It is the largest player in the boutique fitness industry and is in the beginning phase of internationalising. The second company studied is Life Fit Group, a large European firm operating in the boutique fitness industry and curating different international boutique fitness brands. Both company companies are studied separately with the sub-question ‘How

do Xponential Fitness and Life Fit Group internationalise respectively?’

Two companies are then compared using a comparative case study analysis. Both companies operate in the same young industry and were founded in the past three years. On the other hand, both companies were founded in different regions of the world and have different company goals. The differences and similarities between the companies are researched with the following sub-question ‘How do the internationalisation processes of Xponential Fitness and Life Fit Group compare?’

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2. Literature review

This section provides an overview with the relevant literature for this thesis. It starts with the description of different firm structures in the form of the typologies of Bartlett & Ghoshal (1989). Afterwards, relevant internationalisation decisions are discussed. Finally, inward internationalisation is discussed.

2.1 Company typology

Why companies make certain internationalisation decisions can depend on different variables such as industry characteristics, company culture, and location. Bartlett and Ghoshal (1989) examined internationalising firms in the 20th century and discovered location to be an important factor. They found three different sub-optimal ways of internationalising in their book ‘Managing Across Borders – The Transnational Solution’. The three different sub-optimal ways of internationalising each stemmed from a different leg of the then dominant triad of which two will be described here.

The firms from the American leg of the triad commonly grew into large corporations domestically before moving into another region due to the large domestic market. As the firm grew within one country, communicating to subsidiaries was relatively easy and parent companies usually adapted their expertise to fit the practices of the subsidiaries. This made knowledge transfer an integral part of the typical American firm. On the other hand, due to the lack of international experience, the typical American firm failed to adapt appropriately to foreign markets. This resulted in a sub-optimal situation where the firm could effectively transfer its knowledge and capabilities from the parent company to subsidiaries but failed to adequately adapt to the local market resulting in limited market share. Bartlett and Ghoshal (1989) labelled this type of firm the ‘international firm’.

As described by Bartlett and Ghoshal (1989), the European firm could only achieve minimal growth within one market until it outgrew it and had to look for new country markets to enter. As the European firm entered a new country, it had to adapt its product and business practices to be successful. Therefore, the firm was likely to give its subsidiary freedom in changing their product and firm structure. In this situation, the expertise of the parent company was not transferred to the subsidiary but the subsidiary could create its own expertise using the resources of the parent company. As the company entered another foreign market, the same thing repeated until the company had small independent subsidiaries in a large set of countries all with their own way of doing business and with a differentiated product. In this case, the company strength was the ability to adapt to local markets. Its weakness lied in the limited amount of knowledge and capability transferability, and a low degree of standardisation resulting in inefficiencies. This firm was labelled the ‘multinational firm’.

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enables a company to adapt to local market while at the same time benefits from standardisation and enables knowledges sharing from HQ to its subsidiaries as well as between subsidiaries.

In the same year the book got published, the typologies were empirically tested and support was found for the Bartlett and Ghoshal’s typologies (Ghoshal & Nohria, 1989). However, since ‘Managing Across Borders’ was published, the world has changed a lot. The importance of regions as opposed to countries has gained in popularity. Instead of separate countries within Europe, the European Union can be seen as one with a relative homogenization of demand and protectionist pressures (Rugman & Verbeke, 2004). Nevertheless, the internal EU market still has barriers hindering cross border import and export of services (Kerneis & Prentice, 2011). European managers look at European countries as different markets as opposed to the EU as a single market, supporting the relevance of Bartlett and Ghoshal years later (Pla-Barber, 2002). Furthermore, empirical evidence supported the typologies proposed by Bartlett and Ghoshal more than a decade after publication (Harzin, 2000) (Pla-Barber, 2002).

2.2 Internationalisation decisions

While the above has looked into different typologies of internationalisation at the firm level, it is also relevant to study the individual internationalisation decisions firms make. Cultural Distance and Firm Internationalisation: A Meta-Analytical Review and Theoretical Implications of Beugelsdijk et al. (2017) offers a valuable framework of different steps of the internationalisation process in the pre- and post-investment stage.

The location choice process generally falls into one of two types. The first type is rational decision making where the decision maker carefully weighs the costs and benefits to determine which country is most beneficial to enter (Buckley & Casson, 1976). One of the benefits determining the attractiveness of a location is the availability of local partners. The local partner and its network can be used as a source of competitive advantage (Doh, 2000) (Kim & Kim, 2017). The second type is a behavioural approach to location choice. Using this approach, firms tend to choose markets similar to the current markets in which the firm operates to build on the knowledge from previous expansions (Johanson & Vahlne, 1977). Entering dissimilar markets is likely to negatively influence initial performance but can lead to future positive performance through learning and experience (Barkema & Drogendijk, 2007).

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among social actors and consequently, achieve sustained economic growth (Kim & Aguilera, 2016, p. 143). The importance of institutions is thought to be nuanced (Kim & Aguilera, 2016). Corruption is seen in relation to other institutional factors and the importance on location choice is moderated by companies’ previous experience and investment motivations (Mudambi, Navarra, & Deilos, 2013) (Cuervo-Casurra, 2006) (Petrou & Thanos, 2014). A firm with little international experience is likely to enter a country with a more similar and stable environment. Increased international experience, technological capabilities, and investment motivations tend to make a company more comfortable with institutionally unstable or dissimilar environments. Another factor influencing location choice is the imitative behaviour. By imitating similar firms, a firm can decrease uncertainty and increase legitimacy. When a firm is limited in its international experience, it is more likely to show mimetic behaviour. This can result in a company with little international experience to enter markets where its competitors already have a strong presence.

Entry & establishment mode. The second step in the internationalisation process (Beugelsdijk

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Degree of ownership is the next internationalisation decision discussed by Beugelsdijk et al

(2017). It describes to what degree the subsidiary is owned by the parent company. The degree of ownership affects the ability and motivation of headquarters to influence the subsidiary (Tang & Rowe, 2012). If the degree of ownership is low, the parent company tends to incorporate a more hands-off management style causing the subsidiary to be influenced less by firm specific advantages (FSA) of the parent company and focus more on the specific needs of the local market.

Integration of subsidiaries describes how the subsidiaries are managed. This includes the governance of the subsidiary or brand, its coordination, and control. A higher degree of integration allows for more transfer of practices and more authority over the subsidiary.

According to the I-R framework (Prahalad, 1976), when deciding on the degree of integration of a foreign subsidiary, a firm has to take into account two different pressures. The firm has to consider the need for global integration and the need of local responsiveness. Strong global integration enhances the ability to pass on FSA’s and knowledge transfer while local responsiveness allows the subsidiary to adapt to the local market to provide a more appropriate product. This creates an additional challenge with franchise agreements where the importance of integration is greater as opposed to other company structures. This is because uniformity needs to be preserved in order to preserve the integrity and value of the trademark (Caves & Murphy, 1976)

Besides acting as a ‘geographically dispersed agent of the MNC’, subsidiaries can play different roles within the larger organisation. A subsidiary can contribute to the parent company with its own expertise, e.g. R&D or design (Cantwell & Mudambi, 2005). By allowing the subsidiary to exert influence in the wider organisation, the subsidiary can affect company performance in different ways (Andersson, Forsgren, & Holm, 2007). Furthermore, entrepreneurship in subsidiaries can be supported to add to the overall company performance (Birkinshaw, 1997). To achieve this, multinational companies have to establish systems of coordination, evaluation, and knowledge sharing between the parent company and subsidiaries but also between subsidiaries themselves.

The theory on knowledge transfer complements the argument which evolved from knowledge diffusion to knowledge diffusion and -creation (Richman & Copen, 1973) (Williams & Lee, 2009). By enhancing knowledge creation among subsidiaries and innovation centres, the subsidiaries can add more value to the company. ‘Reversed knowledge diffusion’ where knowledge transfers from the subsidiary back to the parent company improves the status and access to resources of the subsidiary and enhances the competitiveness of the entire organisation (Edwards & Tempel, 2010).

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expatriates in their assignments, the parent company can help them with a clear job description, personnel screening, cross-cultural training and fair compensation (Vivian, 1968). It is further important that expatriates do not only have technical capabilities but are also capable to adapt to a new culture (Richman & Copen, 1973).

2.3 Inward internationalisation

Inward internationalisation is a different way to be internationally active next to the described

steps of outward internationalisation in the above paragraphs. Inward internationalisation is the process of developing foreign sourcing activities (Welch & Luostarinen, 1993). The traditional form of inwards internationalisation is the use of foreign suppliers, where a domestic firm has its products or parts produced in a foreign country by a foreign firm. In the past decades, inward internationalization through strategic alliances and other types of interfirm cooperation structures have become increasingly important. Master franchising is one of those cooperation structures bringing a successful foreign brand to the domestic market. One benefit is that the foreign service can be unique to the domestic market which provides it with an advantage over competitors. The local firm can also benefit from the knowledge it gains on franchising which otherwise would not be available, and from acquired contacts and increased international knowledge (Welch L. S., 1990). Finally, with the experience and knowledge gained, the local franchisee often moves the franchise system to a third country in cooperation with the franchisor (Luostarinen & Welch, 1990). In the latter case of franchising, initial inward internationalisation leads to outward internationalisation.

2.4 Framework

This thesis looks at the internationalisation of two firms. It does this in the framework of the internationalisation decisions and the firm typologies for both outward and inward

internationalisation. The internationalisation decisions relate to location choice, entry & establishment mode, degree of ownership, integration of subsidiaries. The relevant firm typologies are the

multinational firm, the international firm and the transnational firm.

3. Methodology

This section describes how the research was conducted. It describes the research design, the case study selection, data collection and the data analysis.

3.1 Research design

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A case study approach is used to look at the until now unexplored topic in-depth while ‘retaining the holistic and meaningful characteristics or real-life events’ (Phelan, 2011) (Yin, 2009, p. 4).

Furthermore, a comparative case study is used to investigate the possible differences and similarities between two firms in the boutique fitness industry (Knight, 2001). Similarities can be expected because of unique characteristics of the boutique fitness industry. The industry has only become relevant in size in the last ten years which means that the companies operating in the industry are all young and do not have a company culture strongly influenced by internationalisation principles of the past. Furthermore, the industry is very specific in the service it offers. Its service is by definition intensive, customers have strong relations with the instructors/employees of the firms and the customers are strongly involved. The service delivered can best be described as a location-bound service as opposed to foreign-tradable services. ‘A location bound service is tied to the service’s production location because its production’s time and space constraints are shared by producer and consumer, as in hotel accommodations’ (Boddewyn, Bladwin Halbrich, & Perry, 1986, p. 42). Because all firms in the industry are very young and offer the same service, it seemed likely that the internationalisation strategies overlap. On the other side, differences were expected when looking at the theory of Bartlett & Ghoshal (1989) where the typical European and American firm uses distinctly different internationalisation strategies.

Retroductive reasoning is used to test both the already existing theory and be open for new discovery. This combines deductive and inductive reasoning and is described as ‘the spontaneous conjectures of instinctive reasoning’ (Krishnamoorthi & Mathew, 2018) (Ayim, 1974). Inductive reasoning is used because the data collection and analysis is informed by the existing literature on internationalisation strategy outlined above. When theory is insufficient for describing the observed phenomena, deductive reasoning has been used. Here, the observations were used to make generalisations that complement existing theory. During the research, there has been a constant interplay between the two types of reasoning.

3.2 Case study selection

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3.3 Data collection

The two main types of data are primary and secondary data. Primary data is first hand data. Secondary data is indirect data which can include published and unpublished work (Rabianski, 2003). In this study, primary data in the form of semi-structured interviews with executives was most desirable because it would offer valuable insights into the reasoning behind certain strategies and decisions. Because the researched companies are enormous the chance of getting to speak to a manager was very low. Nevertheless, after 20+ emails and numerous phone calls, a semi-structured interview with an executive of Life Fit Group is realised. Before interviewing him, a protocol was set up with a set of questions. The questions were revised multiple times. While revising, three categories of questions were made. Firstly, the most valuable questions were highlighted green and it was determined that these had to be asked. Secondly, the questions that added value but were not of the up most necessity were highlighted yellow. Thirdly, the questions that did not add value were deleted. In the interview itself, all questions marked green or yellow were either asked or discussed when answering other questions. A second type of primary data that is used is an annual report of Life Fit Group and other relevant company documents which were found on their home page. This data provided financial information and company goals among other relevant information. A third type of primary data used home pages. These home pages were used to conduct a website analysis. Secondary data consists of press releases. One press release is found on the home page of Life Fit Group. The other press releases were found using the database LexisUni (formerly known as LexisNexis Academic). Keywords used when searching the database included ‘Xponential Fitness’ in combination with ‘Expansion’, ‘studios’, ‘revenue’, ‘profit’, ‘Japan’, ‘Australia’ and others. The same words were also used in combination with different brands of ‘Xponential Fitness’ (a list of these brands is provided in the results findings). The database was also searched with ‘Life Fit Group’ and its brands (a list of these brands is provided in the result findings) in combination with the previously mentioned word but no articles containing valuable information were found. Press releases of Xponential Fitness that were found provided valuable information, especially on the expansion of Xponential Fitness and the reasoning behind its expansions. By using different types of data from different sources triangulation is used. This helps to overcome biases which might arise from the use of a singular type of data from a singular source. It also give a more complete picture of the described situation from different perspectives. Overall, it increases the credibility and validity of the research findings. Credibility concerns the trustworthiness of the study. Validity concerns the accuracy of the study (Noble & Heale, 2019).

Data Primary/se condary

Source Amount Xponential Fitness of Life Fit Group (X/L)

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13 Company documents Primary https://www.lifefit- group.com/investor-relations/reports-presentations/ 3 L Home pages Primary https://www.stretchlab.com/ https://www.purebarre.com/ https://www.barrys.com/ https://smile-x.de/ 4 X & L Press release Secondary https://www.lexisnexis.nl/research/ nexis-uni 12 X & L

Table 1: Collected data

3.4 Data analysis

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The home pages of two brands of Xponential Fitness were analysed to find the differences and similarities which provided evidence for the integration of brands. Two very similar websites would suggest a high degree of integration while two very dissimilar websites would suggest a low degree of integration. The same was done for two brands of Life Fit Group. Then, a cross-case analysis was conducted where the analysis of both cases were compared and differences and similarities (mostly differences) were discussed. After the cross-analysis, conclusions were drawn (Eisenhardt, 1989).

4. Research findings

4.1 Case study: Xponential Fitness

Xponential Fitness is a curator of 8 brands in the boutique fitness industry. The firm started as a single brand operator with Club Pilates. The management team bought CycleBar in 2017 and created Xponential Fitness to curate both brands. The company acquired 6 more brands from then until 2018. Xponential Fitness feels it covers every part of the boutique fitness industry where they can become number 1, which is why they do not buy additional brands anymore. Instead, they focus on expanding their current brands and staying (or becoming) the biggest player in each of the verticals where they have a presence. Club Pilates is their oldest and largest brand with Pure Barre being a close second. Those are the brands used most in their internationalisation process. In total, the company has over 1,300 clubs open of which approximately 25 are based outside the United States.

The company, being at the beginning of its international expansion, has multiple deals in process which are estimated to bring forth hundreds of locations in the next years. This section offers interesting findings on those deals and the international studios already open. The evidence found provides valuable information on different internationalisation choices and on the company typology. However, the evidence is limited. The primary source of information consists of press releases providing valuable and rich information on the location choice and clear information on the establishment mode. However, it lacks information on the degree of ownership and integration of brands. Despite 20+ emails to different parts of the organisation, an interview with someone within Xponential Fitness was not realised. An interview with the Director Operations New Business Development of Life Fit Group, Daniel Schalin was realised. He personally collaborates with Xponential Fitness to bring their brands to Germany. Despite the interview being focussed on Life Fit Group, the interview gave some information on Xponential Fitness. The information retrieved from this interview is used to give some insights into the integration of brands but is limited as he is not part of Xponential Fitness and Xponential Fitness was not the main topic. The minimal evidence collected enabled a very exploratory analysis of this aspect of internationalisation.

Xponential Fitness brands Ownership Establishment mode

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Pure Barre 100% Master franchisor

Stretch Lab 100% Master franchisor

CycleBar 100% Master franchisor

Row House 100% Master franchisor

YogaSix 100% Master franchisor

AKT 100% Master franchisor

Stride 100% Master franchisor

Table 2: Xponential Fitness brands

Figure 1: Code tree Xponential Fitness (see appendix 1 for a readable tree)

Code Grounded

Market entrance 15

‘Xponential has also signed deals to open studios in Germany, Austria and Singapore in the coming months.'

local partner cooperation 7

‘The expansion of CycleBar in Australia is being driven by a Master Franchise Agreement with husband and wife entrepreneurial team Matt and Candice Gordin, along with Matt's father Bill Gordin from Perth.'

Future growth, international 7

‘The massive development, which will bring 100 Club Pilates studios to the country over the next five years,'

Market description, international 6

‘The EVOX Club for Women was created to serve the growing population of women seeking fitness options, following recent reforms in the country, and features studios for all five Xponential Fitness concepts. The EVOX Club for Men features the CycleBar brand.'

Master Franchise agreement 6

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Growth, international 5

‘The opening of CycleBar in Perth continues an impressive year of international growth for the Irvine, CA- headquartered Xponential Fitness, bringing the company's reach to nine countries.'

Penetrated country markets 4

Digital partner 4

Ownership 4

Company prize 3

Company size 3

Growth, domestic 3

Local partner compliment 3

Franchising system 3

Future expectations 2

Market expectations, international 2

US is the best 2

Experience of CEO Anthony Geisler 2

Market adaption 2

local partner experience and qualifications 2

Market penetration, international 1

Future market penetration 1

Future growth worldwide 1

Growth through franchise experience 1 Growth through strategic development 1 Growth opportunities, international 1

Future growth, global 1

Partnership expansion 1

Company size domestic 1

Market description, global 1

Growth performance 1

Brand description 1

Previous lack of consistency 1

Focus on franchising 1

Experience and qualifications of local partners

1

Digital partner qualifications 1

Brand size 1

Market entrance reasons 1

Company goals 1

Brand acquisition 1

Master franchise strategy 1

Experience executive management 1

Experience of CIDO 1

Local partner qualification demands 1

Revenue 1

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17 Company description 1 Franchise development 1 Brand synergies 1 Brand differences 1 Growth focus 1

Growth through franchising 1

Growth opportunities 1

Table 3: code list Xponential Fitness - quote for codes 5> grounded

4.1.1 Location choice

This section covers the location choices made by Xponential Fitness, the rationale behind those decisions, and the type of decision making used. First, an overview of the location choices and the rationale are presented. Secondly, each foreign market entrance made by Xponential Fitness is examined using the information retrieved from the source documents. Finally, based on the locations choices made by Xponential Fitness, a conclusion is made on the type of decision making used by Xponential Fitness.

Xponential Fitness is mainly driven by market and partner opportunities. In all documents related to location choice, an opportunity unique to a specific market is mentioned. Depending on the country/region, opportunities range from a market being large or rapidly growing to a large potential customer pool being available for the first time. The markets which Xponential Fitness entered are dissimilar in culture and religious believes and are geographically dispersed with Africa being the only inhabited continent on which Xponential Fitness does not have a presence yet. Nevertheless, the company has stated it wants to have a presence in every part of the globe ‘The company is specifically

looking to develop its brands in Europe, Asia, Australia, Africa, and Latin America, but is open to additional countries, depending on the market demand and partner’ (X6:13). The latter part of this

quote further suggests that Xponential Fitness uses rational decision making in their location choice process (Buckley & Casson, 1976) (Doh, 2000).

Xponential Fitness is currently present in four continents and nine countries namely, the United States, Canada, Japan, South Korea, Germany, Austria, Singapore, Saudi Arabia and Australia. Two years ago, the United Kingdom would have been the first foreign country after Canada where Xponential Fitness would open, starting its initial overseas expansion in 2018 with CycleBar. ‘The

global expansion kicks off with the announcement of a master franchise agreement with entrepreneur Oliver Chipp, who expects to open at least 30 CycleBar studios in the United Kingdom over the next five years’ (X6:2). This is in line with the behavioural decision making process where a company

chooses markets similar to the current markets. However, for an unknown reason, the cooperation with Mr. Chipp did not take off and a UK entry was never realised.

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deal to bring 165 Club Pilates studios to Japan, two of which are now open…’. (X3:12). This is an

interesting deviation from behavioural decision making into a rational decision making process (Buckley & Casson, 1976) (Johanson & Vahlne, 1977). The following international expansion was to South Korea in 2019 with a deal to bring 165 studios to Japan. Here, Xponential Fitness found a local partner in Steven Lee, the former CEO of Pizza Hut Korea and owner of XFactor Fitness Limited’. Xponential fitness claims they ‘… couldn’t be more excited to partner with Steven and the XFactor

team…’ (X9:15) highlighting the importance of the local partner. The next cooperation started in the

end of 2019 with Life Fit Group, the second company analysed in this thesis. Xponential Fitness made a deal to bring a not yet specified number of Club Pilates and Pure Barre studios to Germany and Austria. The importance of the local partner is named stating ‘…we are excited to partner with the Life

Fit Group who are poised to become the most relevant fitness and health platform across German-speaking markets’ (L1:9) and their focus on local market opportunities becomes clear with the statement

‘We see significant whitespace in Austria and Germany, the largest fitness market in Europe…’ (L1:10). The importance of the local partner was also apparent when Xponential Fitness entered Singapore in early 2020 where they cooperated with the same local partner as in Japan stating ‘…and

are excited to partner again with Naoki and Akira to introduce Xponential Fitness to another new market and to bring the Club Pilates brand to this burgeoning fitness community’ (X10:5). The latter

part of the quote also shows that Xponential fitness judges markets on their unique qualities which in this case is a burgeoning fitness community. This, again, suggests the use of rational decision making. It becomes even more evident with the entrance of the Saudi Arabian market in 2020 with multiple brands, a market extremely dissimilar from all their current markets. Here, the market attractiveness relates to recently changed legislation of the country which makes it legal for women to work out. ‘The

EVOX Club for Women was created to serve the growing population of women seeking fitness options, following recent reforms in the country’ (X3:5). Xponential Fitness judged the market potential partially

based on the recent change in legislation which created millions of potential customers overnight. The second reason they entered the market is that they found a strong local partner in Ezdihar Sports which is owned by a publicly traded company, is an industry leader and has a lot of experience in different industries. The final country entered by Xponential Fitness is Australia with CycleBar where it opened its first studio in October 2020 and made a deal to open at least 45 studios more in the next years. A main driver for the move into Australia was a local partner duo with experience in cycling, business and franchising.

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first overseas move was to the UK, a country relatively similar to the US. However, Xponential Fitness’ presence in Canada is limited and entering the UK never succeeded. A third example where Xponential Fitness showed the use of behavioural decision making was when it entered Singapore with the same partner as in Japan. Overall, rational decision making is used primarily and behavioural decision making is used occasionally.

4.1.2 Entry & establishment mode

The focus of Xponential Fitness fits its name. The company wants to grow as rapidly as possible. This is the vision of the CEO and something the company received acknowledgement for from multiple institutions. Club Pilates’ website states ‘When CEO Anthony Geisler acquired Club Pilates,

he met with each existing owner to ensure they saw his vision for growth-one that's since helped it hit No. 1 on the Franchise Times Fast & Serious ranking’ (X8:9). To grow as fast as possible

internationally, the company chose a master franchise strategy, also mentioned in the previous quotes. This strategy proved effective domestically and was announced in 2018 to be used globally to enable the company to dominate the boutique fitness industry. PR Newswire described the strategy and vision of Xponential Fitness as, ‘After announcing their vision to dominate the boutique fitness franchise

industry in the United States, Xponential Fitness unveils plans to significantly grow their portfolio of brands internationally, through a master franchise strategy’ (X6:1). Xponential Fitness solely uses

franchises as establishment domestically and master franchise agreements internationally to grow as fast as possible. Xponential Fitness believes it can successfully execute this strategy because it has a strong leadership team and financial capabilities. Although there is no quote directly proving the use of greenfield over acquisition, this is almost always the case for franchise strategies. Therefore, the assumption is that Xponential Fitness solely uses a greenfield strategy.

4.1.3 Degree of ownership

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4.1.4 Integration of subsidiaries

Figure 2 Stretch Lab's home page (Stretch Lab, 2020)

Figure 3 : Pure Barre’s home page (Purre Barre, 2020)

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Number 1 shows an impression photo/video. This gives the visitors an immediate idea of what to expect when they join a training.

Number 2 shows the mantra of the brand. This short sentence shows ‘what the business is about’. The example of Stretch Lab below uses the sentence ‘live long & set your body free’ which is goal oriented suggesting that people should join the club because they have a problem e.g. unhealthy lifestyle, myalgia, or health problems and want to fix it. Pure Barre, another brand of Xponential Fitness has the same layout with the mantra in the same spot but completely different ‘We Pure Barre together’ (Pure Barre, 2020). This mantra does not give any information how the company might affect your life or what you might achieve. It only tells you that you do it together. The differences in mantra and the meaning of the mantra suggest that although Xponential Fitness enforces the same home page layout to its brands, it gives the brands freedom to enforce different norms and values.

Number 3 shows the COVID-19 information link. The link, which is similar on each home page, leads to an information page which describes what the brand is doing to adapt to the current situation and which measures it is taking to ensure everybody’s safety. The text and the ‘corona measures’ on this page are exactly the same for each brand. This shows that Xponential Fitness is able to control all its brands in day-to-day operations when it wants to.

Number 4 shows the information links on the website. All brands share most of the same links, all be it with different names. Each brand has a link to ‘first timers’ for people who have trained with that brand, ‘classes’ which gives a description of what to expect from a class, ‘studios’ which helps you find a studio nearby, ‘sign-in’ for members, ‘go’ to buy a membership and ‘franchise’ with information for investors who want to become a franchisee. Especially the last link is an important one that shows a relatively high degree of integration between brands. The franchise page is similar with most brands, boasting journals and relevant websites which featured their company, growth figures, available locations, and the benefits of becoming a franchisee. These similarities suggest a centralised franchise decision-making.

4.1.5 Company typology

The issues in this section concern the early expansion of the company and two parts of the company structure. The American firm typically grows to a relatively large firm domestically before internationalising. While the firm grew within one country, communicating to subsidiaries was relatively easy and parent companies usually adapted their expertise to fit the practices of the subsidiaries. On the other hand, the lack of international experience early on can lead to a low ability of local adaptation (Bartlett & Ghoshal, 1989).

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same area. Both types of expansions enabled the company to build a strong domestic network between the HQ and the subsidiaries. Firstly, they adapted their expertise to fit the practice of a subsidiary in another region. Secondly, they adapted their expertise to fit a subsidiary with a different product.

The first part of the company structure is the influence of HQ on the subsidiaries which is mostly consistent of the knowledge and capability transferability. The second part is the independence of the subsidiaries which is mostly consistent of decentralised decision making and the ability to adapt to local markets. If the former is high and the latter low, the company can be characterised as an international firm, which is typical for an American firm. Although Xponential Fitness does not have a large enough international presence to be labelled an international firm, it has most of the qualities of one (Bartlett & Ghoshal, 1989). Firstly, the company uses the same strategies with different brands in different locations. This suggests that Xponential Fitness is an international firm. Internationally, the company cooperates with its different brands with different partners in different regions of the world, both in geographical and cultural terms. Although the differences are numerous, the cooperation type is the same everywhere, a master franchise agreement with a local partner. The master franchise agreement strategy further adds to the international firm typology as this establishment mode demands the preservation of integrity and value of the company products (Caves & Murphy, 1976). In other words, the expertise of the company is used to help the subsidiary succeed. The second part of the company, the independence of the subsidiaries, is low. The company replicates the proven US system abroad, not leaving much room to change the product. In the German speaking markets for example, the product is kept identical except for a change in marketing. Furthermore, the website analysis shows a high degree of integration of the brands with all brands having similar websites adapted to their brand with changes in mantra, colours and impression photo.

To conclude, Xponential Fitness has not yet enough international locations to be described in terms of Bartlett and Ghoshal’s typologies (Bartlett & Ghoshal, 1989). However, the company is internationally very active in most regions of the world. This, and the early domestic expansion of the company gives good insights into the structure of the company. Beside the company’s massive domestic expansions before going abroad, the large amount of influence HQ has on the subsidiaries and the low degree of decentralised decision are typical for an international firm.

4.2 Case study: Life Fit Group

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(Welch & Luostarinen, 1993). They started with Barry’s Bootcamp, a premium high intensity boutique fitness brand described by Mr. Schalin as the Ferrari of the boutique brands. Then, they partnered with Xponential Fitness to bring Club Pilates and Pure Barre to the German speaking markets. These are brands with a lower intensity and more accessible to the wider public. Thirdly, they partnered with the Dutch Gym Society which targets people who hate going to the gym broadening the potential customers of Life Fit Group.

The company is at the beginning of its international expansion which until now has been limited to inward internationalisation (Welch & Luostarinen, 1993). This section offers interesting findings on the cooperation with foreign firms and how it influences the operations of Life Fit Group. Because an interview with someone within Life Fit Group could initially not be realised, the primary source of information is the annual report of fiscal year 2019 complemented by a press release on the cooperation with Life Fit Group. After writing the findings, an interview with the Director Operations New Business Development was unexpectedly realised. The interview gave valuable information on the reasoning behind the internationalisation decisions made by the company and was used to enrich the already documented findings. Finally, a website analysis was made of the home pages of two of the brands to find evidence on the integration of their brands. The variety of sources gives a broad overview of the internationalisation of the firm. However, with each type of source being limited, the analysis of the firm is very exploratory.

Life Fit Group brands Ownership Establishment mode

Fitness First (Germany) 100% WOS

Smile X 100% WOS

Elbgym 100% WOS

Barry’s Bootcamp (Germany) 60% Master franchisee

Club Pilates (Germany) 60% Master franchisee

Pure Barre (Germany) 60% Master franchisee

The Gym Society (Germany) 60% JV

Table 4: Life Fit Group brands

Figure 4: Code tree Life Fit Group (see appendix 2 for a readable tree)

Code Grounded

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‘Well, the good thing is we don't have to tweak too much, what the look and feel of the product itself is fine.'

Market description 18

‘And so, we saw that it's a big opportunity in Germany and we get these boutique brands coming up, but they're all single operators small unit units in Germany.'

Brand acquisition 16

‘So, we look for the best original most popular boutique brand, the Ferrari of the boutique brands and we found Barry's boot camp, so we got to deal with them to bring Barry's to Germany'

Franchise concept 15

‘Franchise concepts have started to roll out and will increase revenues and profitability of the group long-term'

Brand synergies 15

‘company optimisation will be more focused on best practice sharing among the group and will result in higher club profitability'

Cooperation Life Fit Group Xponential Fitness

14

‘we were looking for other boutique

opportunities and then we found Xponential Fitness and they had eight brands and we decided to bring two or three to Germany'

Company Structure 11

‘The Gym Society Germany GmbH (“Gym Society”) is a joint venture and is included in the consolidated financial statement in accordance with the equity method.'

Future growth, International 9

‘we have a strategy and M&A team. We are... the ongoing working on you know,

acquisitions and partnerships and all this kind of stuff international as well as domestic.'

Cooperation Life Fit Group Xponential Fitness reasons

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‘Xponential Fitness for example, we found out that it's a good match in in the franchise business because they are the franchise powerhouse of the United States.'

Future growth, domestic 8

‘But for the next couple of years our focus will be mainly on Germany, because the German market has still many potentials.'

Joint Venture 7

‘the difference is clear, you have a joint venture, the advantages are that you're pretty much aligned. You both have responsibility, you both put in money, you you're going to have to share resources you have to work together. You're both responsible.'

Master franchise agreement 7

‘MidCo has an exclusive master franchise agreement with US-based boutique chain Barry’s Bootcamp to run clubs in Germany and Austria; 5 clubs are to be opened during the next two years, with a total potential of up to 12 clubs.'

Company description 6

‘LifeFit Group, a leading fitness and health platform in Germany and operator of the Fitness First, Elbgym, smile X, Barry’s Bootcamp and The Gym Society brands, continues to pursue its expansion goals. '

Increased financial performance 5

‘Total revenues in core business increased by 3.2% vs. previous year to EUR 127.9m, driven by continued growth in all segments'

Growth through expansion 5

‘We continue to analyze potential locations to open new studios'

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‘we already know they will have really big problems and they will be more willing to talk about partnerships and acquisitions in a few months, then they will be ready for that and we are in a good position for this kind of process.'

Market penetration, international 5

‘Barry´s Bootcamp: two studios under construction (planned opening in 2020: Frankfurt early summer, Berlin latest by fall)'

Franchise agreement 4

Company goals 4

Brand size 4

Performance, revenue 3

Company size 3

Growth goals, worldwide 3

Growth through increased performance 3

Financial KPIs 3

Financial information brands 3

Growth through franchising 3

Subsidiary ownership 2

Growth, international 2

Brand revenue 2

Growth performance, worldwide 2

Growth through acquisition 2

Performance, growth, worldwide 2

Financial information company 2

Growth, sustainable 2

Performance, cost reduction 2

Joint venture definition 1

Performance, EBITDA 1

Performance, loss 1

Growth goals, international 1

Performance, comprehensive income 1

Market penetration, domestic 1

Growth through talent 1

Growth through retention 1

Growth through joiner yield 1

Market growth, domestic 1

Brand value 1

Growth goals 1

Ownership 1

Investments 1

Growth through expanding current brands 1

Growth of profit 1

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Conversion of studios 1

Performance, cash flow 1

Achieved financial performance 1

COVID-19 1

Growth through M&A 1

Acquisition finances 1

Table 5 code list Life Fit Group - quote for codes 5> grounded

4.2.1 Location choice

Life Fit Group operates mostly in its domestic market, Germany. The location choices until now can therefore not be related to the internationalisation theory discussed in the literature review. Within Germany, Life Fit Group has a presence throughout the country in different types of regions. With the relatively cheap Smile X, the company has a presence mostly in the smaller cities and more rural where the cheaper fitness brands are more successful than the premium brands. The more premium brand Elbgym is located in denser cities like Hamburg and Munich where there are more people one area who want to spend money on fitness. Furthermore, Life Fit Group wants to add more brands to its portfolio in the next years to further utilise the opportunities of the German market. By growing more domestically, Life Fit Group wants to develop its company structure, its resources and the franchise part of the business.

Although Mr. Schalin has stated the primary focus is Germany for the next five years, he also stated Life Fit Group is open for an expansion into Austria when the right opportunity arises with either Barry’s Bootcamp or one of the Xponential Fitness brands. Moving into Austria is also mentioned as being part of the plan in one of the press releases of Xponential Fitness. This will be the first time Life Fit Group internationalises outwards (Luostarinen & Welch, 1990). The Austrian market was chosen because of geographical and social proximity. The same language is being spoken in both countries and their cultural background is similar. The Life Fit Group expansion decisions appear to be in line with the behavioural approach (Johanson & Vahlne, 1977). This is also in line with the role it has in both alliances. With Barry’s Bootcamp and Xponential Fitness it acts as the local partner in a master franchise agreement. This entails that it has to supervise the franchisees, provide them with services and other things for which it needs a good understanding of the local market (Reilly, 2007). This is comparable to the situation of the master franchise agreement between Xponential Fitness and the Japanese Naoki and Akira mentioned in the previous sub-chapter where the local partner also initiated an expansion into a similar market.

4.2.2 Entry & establishment mode

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rapid growth (Reilly, 2007). Something they want to do with the estimation of opening 150 Xponential Fitness studios in the upcoming 5 years according to a press release. Mr. Schalin added to this saying

‘And with Xponential Fitness, we knew that [we wanted to open] hundreds of studios’ (L6:48). This is

ambitious considering the company now has 82 gyms open with all its brands combined. The studios now open are almost exclusively from brands of which the company has full ownership. Opening more franchise studios fits with the current company strategy to move from only fully owned gyms (corporate gyms) to operating both franchise- and corporate gyms. ‘And this is just, I would say, two legs, you

know, this, there's one leg with our own corporate studios and [one leg with] franchises and other opportunities which is a totally different business. So that's why we choose to go both ways’ (L5:21).

The leg with corporate gyms is beneficial for Life Fit Group because it is very profitable. On the other hand, the investment is higher making it riskier. The leg with franchise gyms is beneficial for Life Fit Group because the investments are made by the local partner, reducing the risk. On the other hand, Life Fit Group only collects royalties, reducing the profitability. Operating with both entry modes, Life Fit Group is able to adapt better to the environment. The company can choose which entry mode to use depending on uncertainty. If Life Fit Group opens a gym in a city where it already has other gyms and an established network, they enter with a fully owned gym. If the company moves to a new region, they find a franchisee to reduce the risk.

Another entry mode used is a JV, used in the cooperation with the firm Gym Society to open Gym Society gyms in Germany. The cooperation between these firms is interesting because the Gym Society is a small organisation with only one location, in the Netherlands. The use of a JV as entry mode is often explained from the learning possibilities through collaborating with a partner (Hennart, 1982). In this case, it is unlikely that Life Fit Group benefits from learning possibilities related to management and organisation. Instead, they cooperate with the Gym Society because of two reasons. Firstly, its unique high-end boutique concept ‘The concept of GymSociety is personalized consultancy

for healthy life with a luxurious boutique environment with experienced trainers’ (L4:12). Secondly,

the Gyms Society concept targets a different group of potential customers than the current brands which fits the strategy of Life Fit Group. Explained by Mr. Schalin as ‘So, the idea from the gym society, it

was not to, to fish, you know, in the one ocean where you find all the other people who want to do fitness but to fish in the ocean where, where the couch potatoes are located. So, overall, it was... we went to different segments and we want to grow as a multi brand company’ (L5:14).

The choice of a JV over a WOS might make it more difficult to integrate the Gym Society into the company. However, the advantage is that the concept and integrity of the product is less affected by the company values of Life Fit Group. The importance of this is emphasised by Mr. Schalin saying ‘You

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‘if you have a joint venture, the advantages are that you're pretty much aligned. You both have responsibilities, you both put in money, you're going to have to share resources you have to work together. You're both responsible’ (L6:44).

To conclude, Life Fit Group uses WOS, master franchise agreements, and JV. The advantage of a WOS is the high profitability but the disadvantage is the increased risk and is only used in low-uncertainty environments. The advantage of a master franchise agreements with third party franchisees is the reduced risk by not being responsible for the investments. However, the disadvantage is reduced profitability due to only being able to collect royalties. This is used in medium- and high-uncertainty environments. Finally, the JV is used maximise the benefits from the human capital from the other firm and to be aligned with the partner, share responsibilities, investments, resources, and collaborate.

4.2.3 Degree of ownership

Life Fit Group has a master franchise agreement with Barry’s Bootcamp where Life Fit Group fully owns the subsidiary. Deciding on the ownership of the subsidiary depended on different variables but the main reason was the relative simplicity of the deal. The HQ of Barry’s Bootcamp could calculate how many studios they can open in the German speaking markets. This is limited because the brand is an expensive premium boutique brand described by Mr. Schalin as ‘the Ferrari of boutique brands’ (L6:32). Furthermore, they were able to calculate how much it costs to run the studios and they could explain how to run the studios. With this information, the HQ of Barry’s Bootcamp was able to set up a package that Life Fit group could buy ex ante. This is different for the master franchise agreement with Xponential fitness. Here, the degree of ownership is 60% for Life Fit Group which is low compared to the degree of ownership of the German Barry’s Bootcamp. Just like the case of Barry’s Bootcamp, different variables played a role in deciding on the degree of ownership. However, the main reason is the complexity of the agreement. The prediction with the Xponential Fitness brands is that they can open hundreds of gyms in the German speaking markets. Mr. Schalin explained that in order to realise this, they ‘wanted to build a franchise organization with human resource people. And we want to build

the structure as they have it in the United States. And this is not just an invest into the studios, but also into the structure of Germany’ (L6:48). The agreement with Xponential Fitness is more than a license

to open studios, it is a partnership. Life Fit Group works closely together with Xponential Fitness to bring the know-how of franchising to Germany. According to the theory, a lower degree of ownership means the company is less able to influence the subsidiary (Caves & Murphy, 1976). This means it can adapt to the local market which would not be an issue according to Mr. Schalin who explained there are some differences concerning marketing after which he said ‘But the product itself, as I said, is almost

perfect as it is’ (L6:50)

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Xponential Fitness. However, the use of JV makes this case different. The reason for a 60/40 ownership over a 50/50 ownership has not became clear from the interview nor the source documents. However, the following quote suggests the subsidiary will be ran as if there is a 50/50 ownership. ‘Even though

MidCo has 60% of shares of GymSociety, joint control is shared with The Gym Society International B.V. together, since decisions about the relevant activities require the unanimous consent of the parties sharing control’ (L4:26).

4.2.4Integration of subsidiaries

Figure 5 Barry's home page (Barry's, 2020)

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A website analysis has been conducted to assess the degree of integration of brands within the organisation. The analysis compares four important aspects of the home page. The first aspect being the website background which covers most part of the website. The second aspect is the main text which is the text most prominently featured. The third aspect is the upper left corner, commonly used for announcements. The fourth aspect is the menu. The analysis for Life Fit Group includes the home pages of Barry’s Bootcamp and Smile X. The home pages are dissimilar in both style and layout.

The ‘brand websites’ of Life Fit Group differ per brand. To illustrate this, the website of Barry’s is compared to the website of Smile X. The same four features of Stretch Lab’s website are used for these websites.

Number 1 Barry’s website features a photo impression. The sprint machines are prominently featured in the middle with steps on the side, illuminated with the colour red. This gives the website visitors a taste of the atmosphere. The sprint machine suggest that the classes are intense and red adding to this and signalling ‘danger’.

Smile X’s website features a stock photo of a woman in gym clothes gazing into the distance with a white and yellow wall in the background. This standard illustration is in sharp contrast with other gym websites which boast their unique concepts.

Number 2 Barry’s website shows their mantra adapted to COVID-19 ‘safety first, sprints second’. This signals how attentive they are to the virus, prominently placing it before their workout. This is unlike the other brands of Life-Fit Group.

Smile X’s website shows a promotion that offers visitors to work out for free until 2021. This does not reveal anything about the company and what it stands for. Instead, it only functions as a promotion.

Number 3 Barry’s website includes two ‘corona links’. The link at the top leads to a page listing all the locations which are reopening. The one in the middle leads to a page with safety information and regulations.

Smile X’s home page does not provide any information on corona and the measures its taking. Number 4 Both brands offer a similar menu at the top of their websites. Both include links to the studios, how to book now, the workout, and a link for first timers. This is the same for all brands of Life Fit Group which could mean that HQ strongly regulates this. On the other hand, it is more or less the same for all companies within the fitness industry which suggests little to no regulations from HQ.

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the analysis and features a mantra mixing their awareness of COVID with their workout stating, ‘safety

first, sprints second’. Smile X’s website is more practical with a generic stock photo and a promotion

featured most prominently. Secondly, COVID is not mentioned on the home page. These differences suggest the websites are directed at different target groups.

The differences between websites are in line with the strategy of Life Fit Group to target different customers with different brands and adapt their communication to the target group of that specific brand. This is described by Mr. Schalin as, ‘They have different target groups. And so, the

communication, and you know, the offering is always different. And we will keep that up. We don't want to, we don't want to have everything looking the same way’ (L6:43). By differentiating the brands, the

company is able to respond to the different markets and to offer an appropriate product with each brand. On the other hand, Life Fit Group integrates their brands to pass on FSA’s and knowledge to the different brands (Prahalad, 1976). To accomplish this, the management team of the company includes the MD’s of each brand who come together to work on strategy, synergies and standardisation. Together, they look at different aspects of each brand and discuss where brands are succeeding and where they are failing. If for example, brand A is succeeding in X and brand B is failing in X, knowledge from brand A will be transferred to brand B. The company strategy that is developed in these meetings is described as, ‘We agree on a strategy, we set the framework as a group. And everyone is working in

that framework. And in the brands, the operational responsible persons have the freedom to make decisions they need to make to be successful’ (L6:42). By setting a framework for the brands, the

company is able to standardise and transfer FSA’s while at the same time maintaining high local responsiveness (Prahalad, 1976).

4.2.5 Company typology

The issues in this section concern the early expansion of the company and two parts of company structure. The European firm typically internationalises relatively early because a single European country is usually too small for large expansions. As a result, the expanding company learns to adapt to different countries and creates subsidiaries with a high degree of autonomy and decentralises the decision making to the subsidiaries in a high degree (Bartlett & Ghoshal, 1989).

Life Fit Group looked at the UK and US early on to find new companies to cooperate with on its inward internationalisation efforts (Welch & Luostarinen, 1993). They found Barry’s Bootcamp which is a dissimilar brand compared to the other brands Life Fit Group had at the time. The same was true for the cooperation with Xponential Fitness and the Gym Society. Besides the companies all being from foreign countries, they also serve different markets and customers within the fitness industry, creating a greater need to decentralise decision making to the subsidiaries.

INTERNATIONALISATION IN THE BOUTIQUE FITNESS INDUSTRY