To analyze the questions asked and give logical and effective answers it is important o first understand the Rent-to-own industry per say as well as find out what are the Strength and Weakness of Aaron’s visa-avis its competitors. For this purpose the following chapters will cover a brief of the Rent-To- Own industry followed by the SOOT analysis of Aaron’s. Two more key issues that have been raised in the case are whether Aaron could expand internationally as well as what should be the strategy of Aaron for its expansion in U. S. Markets.
For the said purpose it is imperative that we first understand the Political, legal and Social challenges that Aaron is currently acing and is likely to face in Future to draw out a possible viable solution. For this a PESTLE (Political, Economical, Social, Legal, Technological and Environmental) analysis is also being carried out in this case so as to offer a viable solution. Rent-to Own industry Brief: This unique concept sprang up in the U. S in the sass’s in response to the growing consumer need to obtain “big ticket” household products, such as furniture, appliances, electronics, etc.
Further, U. S. Being a consumer driven market as well as very high on credit sales led to this concept. This concept was able to target the Bottom of the Pyramid or the lower income groups of the U. S. Economy, enabling them get access to high valued household products which otherwise would be impossible for them to access. In this concept the customer or the target segment usually lives from paycheck to paycheck which makes it impossible for him/her to obtain newer appliances, furniture, electronics, etc. O cater to this segment all the above mentioned product are rented out to them for usage by the business. This invariably satisfies their need to obtain and use these products as well as generate pro Its Tort ten Dustless. Hurter, ten same customer also Is given an Upton to actually posses the rented item in due course of time with weekly/ monthly payment plans devised to suit their needs or return back the product with no questions asked.
What’s unique about this concept is that the customer does not need to have well established/sound credit ratings to obtain a high value product which are a must in case of Retail sales done on credit. Thus, put simply even a grocery vendor or a daily wage earner with very less or meager income can also have access to a 42″ inch television or leather furniture of the latest model which otherwise would be impossible for him. SOOT Analysis:- meaner the Strength, Weaknesses, Opportunity and Threat analysis of Aaron’s S. No.
Strength Weakness Opportunities Threats Old reputed company/brand, estate. 1955 Managerial Constraints Growth Opportunities outside U. S. E. G. Canada Criticism from Congressmen 2 Not averse to taking Risks Lack of Understanding of International Markets, Laws regarding Consumer Transactions and employment Diversification of Product Offerings Restrictive Laws in Developing Countries 3 Unique monthly rental Model with standard agreement terms of 12 months Not been able to penetrate many markets in the U. S. Due to state Laws/Policy Growth Opportunities inside U.
S. Criticism from Consumer advocates 4 Lesser/Lower Pricing than competitors in the industry ARMCO stores Restrictive Growth after 201 5 5 Large area for stores compared to counterparts Franchise Offerings Managerial Talent Maintenance like turnover 6 Wider selection of newer merchandise RACE tie – up with retailers Intestinal AT Laws at 7 really Level In Cleanliness of Stores top priority Income bracket reducing due to unemployment status increase which will further give boost to the Industry. Regressive Cross Subsidy 8
Brand Name ” Aaron Sales and Lease Ownership” 9 Own manufacturer of furniture which gives it a cost advantage 10 Flexibility in Payment Options and Fair collection Practices than Competitors 11 Success parameter metric of a store consists of ‘Customer Count’ 12 Timely Delivery, Pick up and maintenance 13 Aaron’s own ‘E-University 14 10 % projected growth rate till 2015 Pestle Analysis: Political + Economical + Social + Legal + Technological + Environmental o ca I nee political Analysis AT Aaron’s Business NAS Eden categorized into two main segments one being inside U. S. And one being International Market Inside U.
S. : 1 . Criticism from Congressmen stating Nature of Industry is predatory as it targets weaker sections of economies which pay higher rates of interest for products than regular retail credit sales. 2. Regulatory uncertainty in U. S. As a federal law has still not been enacted to regulate the industry which may classify the business as credit sales thereby regulating and capping the rate of interest levied with that of retail credit sales thereby killing the industry. 3. Each state has its own regulations and law framed for rent to own industry thereby restricting the growth of business and opening of new stores.
International Market: 1 . In many developing countries the employment laws are restrictive and there is lack of regulations regarding consumer transactions. 2. Unexplored markets have high percentage of Risk factors e. G. Peru where the business didn’t take off. 3. European Economy is facing huge debt crisis except for countries like Germany. 4. Countries like China and India have huge population and other South Asian Countries are turning into manufacturing hubs thus the profit margins may decline. Social: The social analysis is as follows: 1 . Huge criticism by Consumer Advocates inside U. S. Uh to Regressive Cross- upside. 2. Consumer Driven Markets in the U. S. Which gives rise to growth and profitability. 3. Aaron’s have moderate collections ways which enable to be ahead of its competitors 4. Asking for references of Mother and other family members during transactions which give better success rate in recovery in case of default of payments. 5. Helping people with bad credit to acquire/use household durable products. 6. Good growth opportunities in developing countries where high income wage bracket population is low. Legal: This factor has also been categorized in two parts which are as follows; In U.
S. 1. No regulatory law at the Federal Level thus posing an indefinite threat. 2. Every state having its own laws and regulations wherein 47 states have passed legislations classifying Rent to Own transactions as lease transactions and established disclosure requirements, regulating late fees and collection procedures as well as scrutinizing the contents of advertisements. 3. 3 states have termed the R. T. O business as credit transactions thereby restricting the entry of the industry into these markets which is supported by landmark Judgments in three states I. . Are Minnesota, New Jersey and Wisconsin International Markets 1 . In countries most developing countries there are few or no laws concerning consumer transactions or if they are they are mostly restrictive in nature. 2. Aaron tried venturing into South American Countries with its first setup in Peru but the business failed dramatically as it did not have proper understanding of Business. 3. In developed countries where consumer transaction laws are well framed it does have have an opportunity to explore such market. Answers 1 .
Aaron can explore more into the U. S. Market and focusing more on the Bottom of ten pyramid consumers as well as ten top AT ten pyramid Stetson AT ten collect Walt versifying its business and opening more of stores thus attracting more customer count. Other than going at 10% growth rate in ROOT business it could also look for growth in the direct retail business in states like Wisconsin, Minnesota, New Jersey. This would enable it to tap Market in these markets as well as help Aaron to grow much faster than 10 % annually.
Biggest assets of Aaron is having its own furniture manufacturing setup which gives it a cost advantage which could led it to diversify own direct retail business of furniture in these states as well as access to these markets . As of now Aaron Stores caters to both direct sales as well as rent to own businesses in the same stores. Now it could have exclusive retail stores like Wall-mart for these particular three states as well as other states thereby giving it access to the segment of economy which are of High Income bracket which due to Social beliefs may erstwhile not go to an Aaron Sore.
Thus we are Projecting about 150 exclusive retail Stores by 2014. Thereby giving Aaron an opportunity to increase its revenue in the direct sales bracket which as of now is very minimal. 2. A) Yes Aaron should expand globally considering its success in Canada. Further, it as an opportunity to get access to markets in developing countries where maximum of the population are in the average or less than average income. Thereby giving it access to huge markets in these countries. B) If Aaron were to go global it needs to identify countries where the markets are consumer driven as well as have supportive legal framework.
This is possible by doing in dept study of the consumer markets of these countries by a research company. Another way it for it to first gain access it these markets through direct retail sales like Wall-mart did in China. Thus it will give it an opportunity to gain access in these markets. Further after gaining an access in these markets it could later on go for backward integration and venture into the rent to own business in these countries through these already established retails store/ outlets.
This in turn will also give Aaron an opportunity to study the market dynamics of that country enabling it to decide whether ROOT business would work in these economies/ markets as well as help it make itself into a household brand name. Thus we are proposing to open 198 direct retail stores in countries like India and China where the laws are fairly favorable to businesses where collection transactions are involved. 3. Aaron should diversify into product which rapidly keep on evolving and which invariably are linked to social status.
These products could be Automobiles as well as technologically driven electronics gadgets like Cell phones. This would enable Aaron to gain more customers. Further to enter into these markets Aaron could devise another payment plan which could be quarterly or half yearly in case of Automobiles as newer and newer version of automobiles are unveiled every year with high prices. These vehicles are not easily accessible to the general public. Further, it would also enable Aaron to target the market segment with higher incomes.