A Strategic Management analysis of Weight watchers international using tools like PEST, 5 Forces, Core competencies, Value Chain Analysis and recommendations.

1. Weight Watchers International, Inc
Prepared by:
Jack Ng
Updated as at 2 Apr 2015

2. NOTE to Students
• This is my effort to guide you to analyze the
case
• It is by no means a complete analysis
• You MUST put in your own effort to
differentiate from others and achieve
competitive advantage.
~ Jack Ng

3. Video
'I can honestly say I've never been happier!' Jessica
Simpson looks white hot in snug sleeveless dress for
Weight Watchers shoot, 5 March 2014
American singer

4. What WW say about themselves
• Weight Watchers International, Inc. is the world‘s leading provider
of weight management services
• Operating globally through a network of Company-owned and
franchise operations.
• Weight Watchers holds more than 40,000 meetings each week
where members receive group support and learn about healthy
eating patterns, behaviour modification and physical activity.
• Weight Watchers provides innovative, digital weight management
products through its websites, mobile sites and apps. Weight
Watchers is the leading provider of digital weight management
products in the world.
• In addition, Weight Watchers offers a wide range of products,
publications and programs for those interested in weight loss and
weight control.

5. • Providing services for weight
reduction planning, treatment and
supervision; consultation services
and provision of information in the
fields of weight reduction, weight
control, nutrition and fitness.
What WW say about themselves

6. Who?
• Weight Watchers’ sources of revenues are meetings, subscription
based internet tools, product sales and licensing, franchise
royalties and advertising revenues. 2011 was Weight Watcher’s
best year in recent history, however the company has seen a shift
in meeting attendance and internet subscription growth.
• Over 1 million members attend 40,000 Weight Watcher meetings
every week
• Meeting are run by over 10,000 leaders who have lost weight
themselves
• Weight watchers was an innovator in online diet tools in the 1990’s
• Weight Watchers is the #1 online weight loss tool used and had
50% market share!

7. How it works
• Recipes and meal ideas to create
your own Meal Plans (over 5,000
recipes)
• Customised fitness plans for
beginners to advanced
• Live coaching 7 days a week
• Video tutorials

8. How it works
• Weight Watchers ProPoints plan
makes weight loss simple to
understand.
– No counting calories or kilojoules
– Choose the foods you want to eat
• Online tools and mobile tracking
app
• Online Community
• Weekly Support Emails

9. International Sites
These are the external environment PEST should cover

10. Plans and Pricing (Australia)

13. Current Performance
• WTW's sales of $1,530.3 million.
• WTW's current ratio of 1.16, lower than the
preferred 2.0 for financially secure and
defensive companies.
• The long term debt for WTW is $2.34 billion,
while the net current assets are $60.6 million.
Lack the financial stability.

14. Weight Watchers share price is down 60% year to date
“Management and the board at Weight Watchers International, Inc.
(NYSE:WTW) need to go. I'm recommending a strong sell and/or an
immediate short of WTW until this takes place.”

15. Contribute to company cannibalization of revenues
by selling the FitBit among other third party
products
“You have the cash to innovate, copy, or buy a FitBit-esque solution. Why
have you not?”

16. WTW is now generating revenues in line with
those that it did back at year-end 2010. However,
WTW is in double the debt hole with ~$2.33 billion
in debt
“"We also have a term loan credit facility in an aggregate principal amount of
$2.1 billion that will mature in April 2020. We expect to pay the principal and
interest due in April 2020 from a combination of our cash flows provided by
operating activities and by opportunistically using other means to repay or
refinance our obligations as we determine appropriate (SOURCE: WTW 10-
K)"

17. Cost Cutting
With top-line pressures refusing to abate, the company has
also announced a $100M cost-cutting initiative. It "intends to
finalize plans to resize its organization" in Q1.

18. Compare to NutriSystem (updated on 2 Apr 2015)
In contrast, rival NutriSystem (NASDAQ:NTRI)
Its revenue inch up almost 2% from $396.88 million in 2012
to $403.08 million in 2014
Its net loss of $2.81 million turned into a gain of $19.31
million
Most all of NutriSystem's revenue comes from the sale of
food, so the business is less likely to be negatively impacted
by the emergence of free or cheap online alternatives.
Does this mean WTW should adopt a concentric strategy to
enter Weight Loss Food Market?
NEW Update: Refer to the new article dated 2 Apr 2015 on the financial analysis
Plus the comparison with rival NutriSystem

19. WTW’s Board of Directors
“This Board is completely useless and has zero value to
shareholders.
The ages of the current board members and sector
backgrounds: 61, 56, 49, 67, 42, 58, 56, consulting -
specifically agricultural, healthcare, consulting - specifically
pharmaceutical, law, finance, finance, and engineering.
Have shown nothing worth keeping them around and on the
payroll at WTW. Notably missing from this group of
backgrounds is anybody with a technology expertise.
Technology is the one thing that's going to save this
malfunctioning corporation.”

20. Strategic Problems
• Struggle to adjust to internet generation
• Meeting attendance has gone down
• Net income declined
• High long term debt of $2.33 billion

21. Define Industry
• Define Industry: e.g. weight management
products and services
• Decided on your own definition

22. Values of WW
• To Children and teenagers: Have more friends,
a study discovered kids who played outdoors
were more popular with other kids.
• To Adults: reduce risk of some potentially
serious health problems; attractive outlook.
• To Parents: Savings on food and health care
costs; healthy children.

23. Values of WW
• To Couple: Healthy eaters subconsciously
influence their spouses to lose weight; a
simple 10% loss of body weight skyrockets sex
satisfaction levels, increase testosterone
levels.
• To working adults: It sends a message that you
want to be successful. That you'll take care of
business the same way you take care of
yourself—effectively

24. Values of WW
• To Public Figure e.g. Celebrities: The 33-year-
old reality star, Jessica Simpson, - who lost 50
pounds following her first pregnancy -
admitted her weight affected her confidence.
• 'It reminds me we don't have to do this alone.
It's so much better to have some back up
since we all face similar challenges. I can
honestly say I've never been happier!'

25. Values of WW
• To Government Agencies e.g.
The US Preventive Services Task Force (USPST)
: Use of the WW program yielded significantly
greater weight loss than a self-help approach,
Suggesting it is a viable community based
provider of weight loss treatment, as
recommended by the USPSTF.

26. PEST Analysis
• Here are some pointers, you should check
the accuracy and refine it.

27. PEST - Political
• U.S. Department of Health and Human Services
issued Physical Activity Guidelines for Americans,
provides new guidelines for aerobic physical
activity (i.e., activity that increases breathing and
heart rate) and muscle strengthening physical
activity in 2008
• The US Preventive Services Task Force (USPSTF)
recommends that clinicians refer obese adults for
intensive, Multicomponent behavioural
counselling, yet most obese Americans choose a
self-help approach to lose weight

28. PEST - Political
• The enormity of this economic burden and the huge
toll that excess weight takes on health and well-being
are beginning to raise global political awareness that
individuals, communities, states, nations, and
international organizations must do more to stem the
rising tide of obesity.
• Singapore Health Promotion Board working on rolling
out healthier food choices in schools, only drinks with
the Healthier Choice Symbol are allowed in schools
• Please research on other countries WW is operating in.

29. PEST - Economic
US: MODERATELY POSITIVE
• US is projected to grow at a modest 2.9 % in 2015.
• Profitability may come under increased pressure as the
business cycle matures and cost increases are imminent.
EURO-AREA: CAUTIOUS SHORT-TERM OPTIMISM, BUT
DOWNSIDE RISKS ACCUMULATE
• Despite significant downside risks, the Euro Area is projected
to grow at 1.4% in 2015
• The substantial QE (Europe Quantitative Easing) program
implemented by the European Central Bank can have a
positive effect on sentiment, but whether it will produce
significant effects to boost the growth outlook is debated.

30. PEST - Economic
• Modest recovery in domestic consumption is a likely source of
growth as labor markets improve.
• Disinflation or even deflation could bring growth rates further.
ASIA-PACIFIC: CHALLENGING IN CHINA; MOSTLY POSITIVE
ELSEWHERE
• Despite softening growth rates, the Asia-Pacific region
remains the leader for global growth.
• Growth rates of China and India are converging to 5.5%
growth on average from 2015–2019.
• Despite short-term headwinds from the global economy,
Southeast Asia will continue to strengthen to become a global
production hub.

31. PEST - Economic
• Excess weight harms health in many ways. It increases the risk
of developing conditions such as diabetes, heart disease,
osteoarthritis, and some cancers, to name just a few, and
reduces the life span. Treating obesity and obesity-related
conditions costs billions of dollars a year. In 2008 obesity-
related medical spending cost America $147 billion
• The Bottom Line: Prevention Is Key to Trimming Obesity’s High
Costs

32. PEST - Social
• Worldwide obesity has more than doubled since
1980.
• In 2014, more than 1.9 billion adults (39%), 18
years and older, were overweight. Of these over
600 million (13%)were obese.
• Most of the world's population live in countries
where overweight and obesity kills more people
than underweight.
• 42 million children under the age of 5 were
overweight or obese in 2013.
• Obesity is preventable.

33. PEST - Social
• Over the past three decades, obesity in the United
States has escalated such that nearly 70 % of American
adults are either overweight or obese and;
• Over 30% of children are now classified as overweight
or obese.
• These findings are striking, particularly since childhood
obesity predicts adult obesity; 50 percent of obese
children are likely to become obese adults.
• Such children and young adults are also more likely to
be carrying risk factors like elevated cholesterol,
diabetes, and high blood pressure that predict heart
disease.

34. PEST - Social
• Obesity in one or both parents influences the risk
of obesity in a child as a consequence of both
shared genetics and environmental factors.
• And children of overweight parents are likely to
be reared in environments promoting accelerated
weight gain, the so called “obesogenic
household,” and such children are likely to
become overweight or obese adults, with the
prospect of heart disease, which is the leading
cause of death among American men and
women.

35. PEST - Social
• More than 1/3 of all adults do not meet the
major recommendations for aerobic physical
activity based on the 2008 Physical Activity
Guidelines for Americans.

36. PEST - Technology
• The smartphone penetration is over 40% for
any of the developed countries.
• Singapore is top at 85%, Korea (80%), Sweden
(75%), HK (74%), USA (57%), Australia (66%).
• More than 100,000 apps on the iOS and
Android app stores
• The mobile health app market will have
produced $26 billion in revenue by the end of
2017 (Research2Guidance)

37. PEST - Technology
• .

38. PEST - Technology
• Most mobile apps are still fitness or wellness
oriented (Research2Guidance)
• 30.9% are Fitness apps; Wellness apps (15.5 %).
• The health apps that connected to the most
device APIs were MyFitnessPal, MapMyFitness,
and EveryMove, around 30 integrations each.
• The devices that connected with the most apps
were Withings, connected to 90 apps, and
Wahoo, connected to 70 apps.

39. PEST - Technology
Withings Pulse
Withings Smart Body Analyzer Withings Blood Pressure Monitor

40. PEST - Technology
• What is the impact?
• WW’s in-person, face-to-face business model
is being threatened by both digital or online
weight loss communities (for lack of a better
term) and by the new fad of fitness trackers.

41. PEST - Technology
• .

42. Five forces Analysis
• Here is a guide
• You should develop / refine it further

43. Bargaining Power of Suppliers (low)
• Being an industry leader, Weight Watchers has
the option to turn to other suppliers, which
decreases supplier power.
• Over 1 million members attend 40,000 Weight
Watcher meetings every week
• 43.2% U.S. market share

44. Threats of new entrants (High)
• Entry barriers are low due to low capital
needed to start up
• With the rising rate of obesity, weight loss is a
huge industry where new competitors will
constantly be emerging
• The increase in technology use including the
internet has opened up marketing channels
for many new competitors.

45. Bargaining Power of Customers (Low to
Moderate)
• For end consumers, switching costs may be ,
but individual still have no bargaining power
over WW (updated on 30 Mar 2015). Power is
Low
• For corporate healthcare customers, these
customers has higher power.

46. Threat of Substitutes (High)
• There are many alternatives available in the
weight loss industry, including pill
supplements, meal replacements, surgery,
sports games and exercises e.g. cycling,
swimming

47. Industry Analysis- Rivals (High)
• Jenny Craig, Inc., often known simply as Jenny Craig, is a weight
loss, weight management, and nutrition company founded in 1983
by Jenny Craig and her husband, Sidney Craig. The program was
started in Melbourne, Victoria and later began operations in the
United States in 1985. Today, the company is headquartered in
Carlsbad, California, and has been a part of North Castle Partners
since 2013.
• The company has more than 700 weight management centres in
Australia, the United States, Canada, France, New Zealand, and
Puerto Rico. The program combines individual weight management
counseling with a menu of frozen meals and other foods, which are
distributed through its centers or shipped directly to clients.

48. • Jenny Craig
– PR, TV, Other Media
– Celebrity Representatives
– Online, Print Advertisements
• NutriSystem
– Image Library
- Celebrity representatives
- Individual before and after success stories
- Logos, packaging & food imagery
- Current online, broadcast and print advertisements
• Ediets
– Online Magazines & Newsletters
– Co-branding and Sponsorships
– Video and Content Partnerships
– PR, TV and other Media
– Ecommerce and Subscription
– Affiliate Marketing
Industry Analysis- Rivals (High)

49. • slim fast (slimfast.co.uk)
• Lose weight with simple meal plans,
recipes and motivation from
Slim·Fast dieters.
• Nestle Optifast, A medically
monitored weight loss programme
that is clinically proven to help
people lose weight and keep it off
for the long term.
• It is relatively easy to replicate
Weight Watchers points system
Industry Analysis- Rivals (High)

50. Core Competencies
• WW’s Plan is simple and focused on behavior, food,
exercise and support.
• Forming strong customer bonds by adding social
benefits (organising group meeting to encourage them
for weight loss, sharing of recipes, experiences)
• Adding structural ties by providing food scales,
cookbooks, water bottles, snacks and desserts
available at most of the grocery stores.
• Recipes for self preparation also available instead of
packed food.
• Long term membership with one time cost for advice
and support for maintaining weight.

51. Core Competencies
• Offering special assistance to males by discussing link between
obesity and erectile dysfunction.
• Technology oriented techniques to point values of food at any
place.
• 24*7 connect to registered dietitian.
• Design the food schedule on the basis of cultural, social and
personal factors.
• Give weekly propoints allowance: hello to wine ,food and fun.
• The costs for Weight Watchers were based on individuals attending
weekly sessions for 6 months followed by monthly sessions for a
further 18 months and the effectiveness was based on published
scientific literature i.e.. High perceived benefits.

52. Core Competencies
• 2015 Best Diets rankings released today by U.S
. News & World Report.
• Ranked #1 for "Best Weight Loss Diet" for
the fifth consecutive year
• Ranked #1 for "Best Commercial Diet Plan"
for the fifth consecutive year
• Ranked #1 for "Easiest Diet to Follow" for
the fourth consecutive year since the categ
ory was added

53. Core Competencies
• Research shows that the Weight Watchers progr
am helps people lose eight times more weight t
han when they go at it alone
• Knowledge of weight loss for over 50 years
• The human factor - weight loss Coaches will
keep you motivated every step of the way. You
can choose between online, group, phone or 1
on 1 coaching, and use Live Chat to speak with a
Coach 7 days a week.

54. Core Competencies
• Thousands of success stories.
• Flexible program means you can choose the
support you need for weight loss, and
personalise the plan to suit you.
• Digital tools to keep you on Track -
Smartphone, you can download WTW app
and track your weight loss on the go. You can
also connect your activity device to your
Weight Watchers online account.

55. value chain analysis
Please construct one

56. Technology
• The Mobiquity, Weight Watchers partnership
to date has proved to be successful with key
mobile developments including Weight
Watchers barcode scanner app for iOS and
Android devices with APIs that tie into other
Weight Watchers apps. Mobiquity also played
an important role in strategic updates for the
Weight Watchers tracker app for iOS and
Android, available in the U.S. and
internationally.

57. SWOT - Strengths
• Leading market position
• Loyal customer base
• Internationally recognized
• Strong Brand name
• Strong company culture
• Relevant spokespeople

58. SWOT - Weaknesses
• Stagnant Brand
• Not enough resources used on technology
• High cost for consumers
• High capital costs
• Points system has become outdated

59. SWOT - Opportunities
• Adult and child obesity is on the rise
• Expanding to new markets
• Aging population
• Fitness programs becoming popular
• Obesity Health awareness
• High smart phone data usage

60. SWOT - Threats
• High competition in weight loss industry -
Quick fixes
• Fad diets less popular than they used to be
• Rivalry among Existing Competitors
• New Technology competitors
A fad diet is a weight loss plan or aid that promises
dramatic results

61. SWOT - Threats
• Weight Watchers in-person meetings are the
most important business unit. (Meeting fees
plus in-meeting sales made up 62% of Weight
Watchers revenue for FY2013.)
• This in-person, face-to-face business model is
being threatened by both digital or online
weight loss communities and by the new fad
of fitness trackers.

62. Current Corporate Strategies
• The company’s earnings press release had this telling
statement by Jim Chambers, the company’s President and
Chief Executive Officer: “While we still believe in our
underlying strategies, I am disappointed that we are not yet
where we hoped to be and our turnaround will take longer
than we had anticipated. Therefore, as we continue to
enhance our consumer offerings, we are taking more
aggressive steps to right-size our cost structure with a $100
million cost-savings initiative.”
• This (FY2014) was the fourth straight year of declining
meeting sales. How many years of declining sales does the
company need before they stop believing in their current
strategy?

63. Go Big Online (Corporate Concentration Horizontal
Growth Strategy)
• They have a lot of content and educational
material online, but WTW has not attempted to
replicate the social aspect of meetings online.
• This is the most crucial part of the Weight
Watchers experience and its value-add over other
competitors.
Suggestions

64. Suggestions
Go Big Online (Corporate Concentration Growth Strategy)
• Weight Watchers needs to embrace the digital age in a big way. Yes,
this might continue to cannibalize in-person meeting fees but it’s
better to erode your own sales then have a competitor do it.
• For Weight Watchers to give consumers the option to move their
entire meeting experience online. Let consumers attend the
meetings online. Focus on creating digital or electronic
communities. Make sure that everything a person gets from an in-
person meeting can be accomplished online.
• Note: Weight Watchers is starting to roll out: one-on-one support
such as virtual fitness coaches and nutritionists.

65. Wearables Activity Tracker
Embrace the Wearables Fad
Left: Up by Jawbone. funky and cool
Middle two are FitBits (clip and watch form) small
and sleek and convenient
Right: Weight Watchers point plus pedometer. a
giant misshapen marshmallow.

66. Wearables Activity Tracker
• Weight Watchers wants to use it to get people
into their meetings programs (online or in
person). But must pay for some type of
Weight Watchers program in order to use the
tracker.

67. • Weight Watchers uses it to get people into their
meetings programs (online or in person). But must pay
for some type of Weight Watchers program in order to
use the tracker.
• Make a nice sleek Activity Tracker and let consumers
use it without having to pay or sign up for a Weight
Watchers’ account.
• Weight Watchers has been successful in licensing their
brand to various food products. Likely to be successful
to apply that same brand savvy to wearables.
(Corporate Concentric growth strategy)
Suggestions

68. Other Suggestion - Corporate
Healthcare
• Weight Watchers strong in corporate healthcare, will
benefit the company and shareholders the most.
• Weight Watchers is subject to economic cycles as
weight loss programs are one of the first expenditures
consumers will cut in a downturn.
• Second, the company is subject to the fitness fad cycle.
The low carb diet phase took a big chunk out of Weight
Watchers enrollment numbers just like a recession
would.
• Corporate healthcare contracts represent a way for
Weight Watchers to smooth out revenue.

69. Proposed Concentration Growth
Strategy
• A subsidiary brand that will serve obese children and their families
and leverage their existing customer base, the majority of which are
women and mothers.
• Goal: generates 10% increase in revenues within 5 years.
Value Proposition:
• Addresses a new customer growing segment of obese and
overweight children
• Extends and serves an existing “mommy” customer segment
• Social initiative that extends Weight Watcher’s existing brand
positively
• Creates brand affiliation and partnership opportunities
• Creates Lifetime Customer by early adoption behavior

73. Stay Hungry, Stay Foolish
• Stay Hungry - Never be satisfied, and always
push yourself further.
• Stay Foolish - Do the things people say cannot
be done.

74. One last video

75. “Don’t ever let someone tell you, you can’t do
something. Not even me.”
~ Chris Gardner – On Pursuits Of Happyness

76. Jack Ng
Thank you for being
so wonderful!
Slide 76