Coe’s - Play It Safe Home or Take a Risk Abroad

[pic 1]

SYNTHESIS

Coe’s, a lease-to-own chain of residential and household goods opened its 1000th store in South Tucson. Its CEO, Stan Windham visited the store and was assisted by the store manager, Aubrey Merrin who had been in the company for the last 10 years. In the light of the recession of the US economy, Aubrey voiced out to Stan how happy he is about working in a continuously growing company and provoked him about the idea of expanding to Mexico. This was backed up by a loyal customer from a local café who expressed her gratefulness to Coe’s.

Much as Stan would like to pursue the expansion, his CFO Carl Amirault opposed the thought pointing out it would be too risky and might be another failure investment like what happened in Puerto Rico. Carl cited other possible options to Stan – experimenting on their product and diversification of their services - before going global. Stan then consulted his father, Coe’s founder, to know what would be his decision given both sides. However, his father emphasized that Stan should make the decision since it’s his company now.

POINT OF VIEW

Aubrey Merrin – Coe’s employee for 10 years and opened the idea to expand to Mexico.

Stan Windham – CEO of Coe’s and would like to pursue the idea of going global.

Carl Amirault – CFO of Coe’s and opposes the idea of expansion pointing out it would be “too risky.”

The group is working on the perspective of Stan Windham. Once he gathered all the pertinent information to significant people in the company, as the CEO, he has to make the decision regarding the issue.

STATEMENT OF THE PROBLEM

Should Coe’s expand overseas or focus on the local market to ensure significant growth within the next 5 years? If they will expand, is Mexico or Europe be a good place for going global? If they will focus locally, what plans should they implement?

AREAS OF CONSIDERATION

Readiness for going global

Coe’s is ready to expand its business. They did it before in Canada in the 1990s which resulted to having 100 stores in Canada alone. What went wrong with the Puerto Rico venture is that Coe’s was not able to study the potential of the place and its people in dealing with the kind of services they provide resulting to skipped payments by customers.

Right time for overseas expansion

Since they have planted various number of stores in the US and Canada, one of the many ways to ensure growth, as expected by Coe’s investors, is to go overseas. It is stated in the case that there are plans for expansion either in Mexico or Europe as they speak.

Local opportunities and growth

New products aside from household items can be added to the product line. Also, Walmart customers who are denied due to no cash or credit capability can have an alternative. Placing Coe’s next to Walmart can attract these types of customers.

STATEMENT OF OBJECTIVES

1. To determine the possibility of going global that would make significant growth to the company and identify possible areas for international expansion
2. To create a comprehensive plan of penetrating and gaining market share internationally
3. To explore other opportunities or growth locally

ALTERNATIVE COURSES OF ACTION

ACA1: Expand to Mexico

Mexico is now considered as one of the emerging markets. With great understanding of its culture and customization of its service, Coe’s might become successful in expanding there. Many people in Mexico don’t have credit hence their business model will definitely thrive. The cost of starting the business there would be considerably low as transportation, labor, real estate etc are cheaper. Due to its proximity, logistics will never be an issue. The market and population are large  and the competition is weak. Regulatory environment might not be mapped yet but it would be less different than that of the US or even more laxed.

ACA2: Focus locally.

Carl Amirault suggested a business strategy of opening stores beside Walmart. With Walmart’s medium range prices, consumer will sometimes turn away. Like most products in the US, premium price is not the issue but the credit terms. If the credit terms will be better, a customer would not care if they are paying an extra 60 – 90 % compared to other retailers. It gives emphasis to high materialism and with this attitude, having the item is much more important.

With the recession coming into view, lot of professional will be having trouble with cash flow and would resort to a lease-to-own schemes to continue their way of life. In the US, materialism is very high so it does not matter if they don’t have the income as long as they can purchase what they want.