Case Study: Play It Safe At Home, Or Take It Abroad?

Case Summary

Coe’s is a large lease to won store in the United States. The chain was established by Terry Windham at around 1950s after making an investment of $600 in 32 chairs that were to be rent out to auction. It started at this pace and the business later expanded to party equipment and sickroom gear. Later by 1970s, the company was able to adjust toward household and furniture goods. Stan Windham was the Chief Executive Officer of Coe’s chain and was son to Terry who opened the 1,000’s store that was located in South Tucson (Chu Para 1-6). Not focused on aspect of market saturation, like as Walmart and Mr. Rental, the company was excelling while it was differentiated from other rivals.

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As opposed to its rivals, Coe’s is drawled upon ownership providing short contract period and monthly payment schedule, free repairs and free delivery of items. The company has maintained a policy of training Coe’s managers in a manner that they will only approve lease agreements for individuals who have capacity of affording the payments. The policy has focused on identification of clients who aren’t aware on renting-to-own priory but with recession of the economy, there was fear of getting committed with large ticket of item at a go. In addition, Coe’s chain have been so attractive to customers since at a time when they cannot afford making payments, it is quite possible to recommence the contract without penalties after the financial condition is improved (Chu Para 5-7).

The current situation has been that investors want Coe’s chain to expand. One of the expansions that were undertaken in the 1990s was clearly successful in Canada and the stores are more than 100 in the country. However, Coe’s chain has experienced a failed expansion that was carried out in Puerto Rico some few years ago. This was the worst experience since many of the clients had taken products and failed to make their payments for the management to find them easily (Chu Para 6-8). Due to this, the company share price plunged and at such a time any decision that was to be taken needed sufficient reasoning.

Currently, Stan has been thinking of such as market like Mexico. In Mexico there are customer segment that are interested in Coe’s chain with potential demand for loan-to-own stores, since individuals may not have capacity of affording purchasing household items and in many instances they have no access to credit. In Coe’s company that is run by Stan and prior by his father, they maintained that they wished to assist as possible as they could to ensure there is access of goods needed. As well, the expansion to Mexico would reap benefits of being a relative inexpensive location incorporating low transportation, low cost of labour and real estate (Chu Para 9).

Central Issue

Coe’s chain has been a lease to won furniture company with operations in the United States. Currently, the company has been faced with the decision or question of whether it needs to expand or not. The central issue within the company has been whether it needs to open an operational business in Mexico. Generally, Coe’s chain has experienced greater success within the American market despite at once having experienced a failure in the Puerto Rico market. Coe’s Chain is a public company where its investor expects the firm to make successful expansion and it has capacity of growing and developing in other market rather than within domestic market. There is a face of risks that are associated with expansion to Mexico.

Conversely, the company seems to have maintained a positive client insight from the Mexicans who are in America who maintain that their families back in Mexico would greatly enjoy from Coe Company. Currently, the firm is in the decision making process. However, the company has taken several steps toward making the investment real. The company CEO Stan Windham has talked to the Store Manager Aubrey, former CEO Terry and to the CFFO Carl. CFFO made an advice that expanding to Mexico would be easier for the company than in any other European market, but it would be risky too. The outcome is yet to be known. Experts have expressed their opinion and advice and the point they have issued are validated. Half made decision of expanding whereas there are other who are saying don’t expand. In general, this has been an excellent hard decision to make since there are plenty of risks and uncertainties surrounding the expansion to a country that look similar but quite different from your country (Chu Para 11).

Basically, in this case study of Coe’s Chain, there are two crucial alternatives that are presented on either expanding to Mexico or domestically. However, expansion to the Mexico market, the company is anticipated to experience various risks. In fact, Mexico will be a different culture with differentiated market conditions. With this being the case, there is the need to make several changes within the company that would be suitable to meet the needs of the Mexico market. For instance, the company must understand that products that are being sold in the United States would not be well recognized or excellently perform in Mexico. In addition, the purchasing pattern of the population may be different with the two markets and the firm may be expected to adopt a different payment system such as a weekly basis rather than the common monthly basis payment. As well, there expansion to the market will entail consideration of different laws and economy. It is worth for the company to entirely invest in research more so on understanding the country laws and regulation that are relevant in accommodating a retail business. With the fact that the company initially failed in expanding to Puerto Rico, it must ascertain that it won’t afford a similar mistake.

Analysis of the issues

After going through the case study, Stan is at a perfect position to ensure that the company go globally. Currently, the company is a good health in terms of financial and there are potential ways in which the company may gain growth opportunities presented in the United State market. Despite that, there are potential risks related with the regulatory environment as well as issues that have been imposed which may impact the overall operation of the business. This is the best time for Coe’s chain to experience other business model in other countries. In addition, the comment made by Carlos Daniel on the case that, “……Stan and his team need to establish other revenues for growth now while the company is doing well” is satisfactory (Chu Para 12).

As argued in the case, Mexico is an ideal market for Coe’s expansion for various reasons. Stan’s team has realised that the country (Mexico) does not have such a business model and there is higher demand for the services that are offered by Coe’s chain. With this being the case, the company has first mover merit chances in entering the Mexico market. With its current business model, the company will provide items in a manner that will fit the customer cash flow, enhance preservation of credit and give them allowance to eventually own the item acquired.

This will be a message that will be excellently received by large part of the clients, mainly the immigrants who do not have easier access of credit. Currently, Coe’s has various adverts, staff and consumers from Mexico. The idea to move to Mexico has been part of the company strategic plan and meeting for the company. In addition the idea of expanding to Europe has been live where there are same culture and economics pattern with that of United States. Such an idea may be good or bad. This is because there are various regulatory laws as well as fees that are increasing getting tight in the US and increased prices. Conversely, the worry of experiencing the same failure as that of Puerto Rico has been a great part of the debate and with postponing of the decision of global expansion.

According to analysis team it estimate that 35 % possibility of success in Mexico. Coe’s Company has been performing well domestically, enlarging may not be obligatory. Within the United States there is more domestic territory that may be explored. Conversely, there are various rivals within the United States. The market has been flooded and large parts of the customers have friends’ ad family in Mexico. The market has been fresh and there exists the need for rental companies in the country such as the case of Coe’s chain (Chu Para 9-11).

Alternative Solution

Within this case, there are only two alternatives that are available. It is either the company consider the option of expanding to Mexico or domestically. The alternative of expanding to Mexico would mean that the firm would be faced by various risks. Mexico has a different culture and different business model. Due to this, the company would be expected to initiate some serious changes to ensure it fit the market needs. As aforementioned in an example above, some of the products that are sold in the US may not be well accepted in Mexico. In addition, the purchasing pattern of the consumer may be different, and the firm would be forced to acclimatize a different payment plan (Rothaermel pp. 67).

Additionally, with option of expanding globally the company would face different economy, legislation and laws. In fact, the company must invest in research to make sure that it attains a clear understanding of Mexico laws and whether they fit a rental company. With failure experienced in Puerto Rico, the company cannot afford any other mistake. Investing in Mexico would mean the company brand would be highly recognized in overseas. More investors will have chances of investing in the company which would mean success for the company in terms of operation. However, investing in Mexico would offer new opportunities but may mean increased risk to the company. It is worth for the company to balance the drawbacks and benefits of investing in Mexico and how it binds with the company portfolio strategies (Rothaermel pp. 59).

Recommendation

The company need to invest in new market since this would entail diversification to another market. Such a move will offer Coe’s chain a counterbalance with the domestic holding of its portfolio which may assists in lowering the risks. In addition, Mexico has been researched to have less companies dealing with rental items that are less recognised within the market when compared to Coe’s chain (Rothaermel pp. 38). Global investment would entail greater expansion of the company menu investing options. There are higher chances of experiencing success than failure in the market. This will be enhanced by the company capacity to have some staffs and adverts that are made in Mexico. In fact, Mexico is among the ideal markets for Coe’s chain expansion which has been enhanced due to several reasons. The company must note that within Mexico there is no such business model and there has been increased demand for the company services. Such merits make it recommendable for the company to invest in Mexico (Rothaermel pp. 47). With the sufficient company model, it will be able to offer items to the customer in a way that will cater for the client cash flow where there will be enhanced preservation for credit terms and allowance of owning the item eventually.

 

 

 

Work cited:

Chu Michael. Play It Safe at Home, or Take a Risk Abroad. [Online] accessed on 1st November 2017< https://hbr.org/2011/10/case-study-play-it-safe-at-hom.html> February 2012.

Rothaermel, Frank T. Strategic Management Concepts and Cases. 2015. McGraw-Hill: Print.

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