Cash Connection

Only available on StudyMode
  • Download(s) : 939
  • Published : May 29, 2011
Open Document
Text Preview
Cash Connection

Payday Loans
Strategy, Ethics and Forces

1. What is Cash Connections strategy? 
* Differentiate itself from competitors to gain the largest piece of the $40 billion dollars of paid lending that the United States industry has to offer, while adhering to government restrictions and meeting customer’s needs. Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, C-114.

Which of the five generic strategies discussed in Chapter 5 most closely fits the competitive approach that Cash Connections is taking? * I choose a broad differentiation strategy as a best fit. Allen Franks seeks to produce a competitive edge by incorporating attributes and features that set his payday loan company apart from rivals in ways that buyers consider his services more valuable. Successful differentiation will allow his firm to: * increase sales by increasing customer base and

* increase brand awareness. Since the market is diverse, Cash Connections has the ability to broaden its horizons through the use of differentiation. Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, 136.

2. Is the company ethical or unethical - provide detailed evidence. I feel there are arguments for both sides. “Rolling over Debt” and “Touch and Go” practices along with the insanely high interest rates and target market (low-middle class segments) makes me lean towards the unethical side. Why is it that these creditors do not check their customers’ credit history? Because the majority of payday borrowers have an income problem and usually have bad credit, no access to credit or have current credit that is “maxed out.” Like Spiderman’s spider sense my sense of morals tingles when I think about payday loans. I am all for freedom of choice but feel angry when there are poor people in our society that are forced to make bad decisions that rich people can conveniently avoid. I strongly feel that these businesses are unethical on many social/moral levels. On the other hand, our text book discusses a 2004 survey by Cypress research group that discusses positive customer views and opinions on payday loan suppliers. I do not have enough information about the survey or financers of the survey to be swayed. Freedom of choice makes me feel these lenders could go about their business in an ethical way but lack of access to credit and education of their target market solidifies my unethical opinions of the industry. Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, C-114 and C-125-126. Reference: https://web.uncg.edu/bae/documents/cber/article12KUu5WyRZ.pdf

3. Complete a Porters Five Forces for the company.
Threat of New Entrants-LOW to MODERATE-It is not the capital costs of around $130k costs of opening a payday loan company as much as the government restrictions or “red tape” that is making it harder and harder to enter into and stay afloat the industry. Due to reports like the 2010 Payday Lending Report financed by the National People’s Action and watchdog group Public Accountability Initiative this could become high in the future. Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, C-114. Reference: http://blogs.wsj.com/economics/2010/09/14/report-blames-big-banks-for-payday-loan-growth/ Bargaining Power of Buyers-MODERATE-HIGH-The 10% of the population that is using payday loan services seem to be very dependent on the system which makes their bargaining power low but because the buyers have so many different payday loan companies to choose from, this...
tracking img