GNC\u2019s business model is quite simple.\u00a0 In an increasingly health conscious world, it gives value to customers through providing high quality, trusted, nutritional supplements as well as helpful advice in identifying the correct supplements that fit their needs.<\/p>\n
Operating Model<\/strong><\/p>\n Go-to-market Strategy Enter Bodybuilding.com.\u00a0 Sports and performance supplements represent GNC\u2019s largest product Procurement Strategy Conclusion<\/strong><\/p>\n GNC operates in the very straightforward business of delivering quality supplements to customers.\u00a0 Yet its flawed procurement strategy has compromised the quality of its products, and its stubborn adherence to the brick and mortar model has eroded its customer base.\u00a0 It comes as no surprise that 2015 was such a challenging year for the company and upcoming years don\u2019t look to be any better.<\/p>\n Sources Specialty retailer's troubled performance this year symptomatic of an outdated and ineffective operating model<\/p>\n","protected":false},"author":990,"featured_media":7575,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-7572","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\n
\n<\/u>The way GNC reaches its customers is not much different today than it was when its first store opened in 1935.\u00a0 With a
\n![\"\"](\"https:\/\/upload.wikimedia.org\/wikipedia\/commons\/thumb\/2\/28\/GNCPromenade.JPG\/330px-GNCPromenade.JPG\")
network of 8,900 stores, GNC\u2019s primary method of serving customers is through the brick and mortar channel.\u00a0 In fact, its online presence is so small that the company does not even disclose the amount of sales coming from that channel.\u00a0 However, the rationale for having a brick and mortar presence in the nutritional supplements space is becoming less and less compelling.\u00a0 Supplements have a long shelf life, its use is easily predicted, and there is no need to try or test the product out before purchasing.\u00a0 It is the ideal product for online ordering.\u00a0 On the other hand, GNC would argue that the value of its brick and mortar presence lies in the service and helpful advice provided by its sales staff.\u00a0 After all, the vast array of nutritional and dietary supplements can be quite overwhelming for the layperson to navigate.<\/p>\n![\"\"](\"http:\/\/common.bbcomcdn.com\/images\/common\/bodyspace-share-icon.jpg\"){kind=icon}
category but Bodybuilding.com is rendering its offerings in that category obsolete.\u00a0 Instead of needing salespeople to explain the different supplements, Bodybuilding.com\u2019s online community provides a wealth of knowledge that any aspiring gym rat can access.\u00a0 And with almost 12 million members, it\u2019s the largest forum on the internet by membership.\u00a0 All of this supports a robust online store with pricing significantly below that of GNC\u2019s.\u00a0 Unless GNC dramatically reverses its strategy, it will continue losing share to its online competitors.<\/p>\n
\n<\/u>Since having a high quality, trusted product is a key tenet of GNC\u2019s business model, the company\u2019s procurement strategy represents another important aspect of its operating model.\u00a0 The company currently self-manufactures ~50% of its ![\"\"](\"http:\/\/www.jack3dmicro.org\/images\/jack3d-micro.jpg\")
product, with the remaining 50% sourced from third party suppliers.\u00a0 While the self-manufacturing has proven reliable and consistent, its third party products have caused multiple problems in recent years.\u00a0 In addition to the Oregon lawsuit this year, GNC was forced to remove all products containing the substance DMAA in 2013, causing a significant hit to sales.\u00a0 The damage caused by these incidents go far beyond just the in-period revenue hit, as GNC\u2019s reputation and brand suffers as well.\u00a0 Rather than being proactive in preventing these events by undertaking more stringent diligence of its suppliers, GNC has been extremely reactive. \u00a0In fact, even after the 2013 incident, GNC chose to continue doing business with the supplier at fault, USPlabs, and unsurprisingly, the lawsuit this year involved that exact same supplier.\u00a0 Finally, after two heavily publicized incidents, GNC announced that it would drop all USPlab products in November of this year.\u00a0 GNC\u2019s brand and reputation are its most important assets, yet the company has been alarmingly cavalier in maintaining them.<\/p>\n
\n<\/strong>GNC\u00a0Q3 earnings release
\nGNC 10K
\nBarclays equity research report
\nForumrankings.net
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\n<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"