Pay Day Loans
4. What are the prevailing key success factors (KSF) that most affect industry members’ ability to prosper in the marketplace?The prevailing key success factors are the competitive factors that were mentioned above. In more detail and order of importance, the brand’s image, effective advertisement, and pay day lending locations are the main success key factors. I believe that the brand’s image could help sway costumers into choosing a specific pay day loan service, Effective advertisement could also bring up market share, and Pay Day Lending locations could cater towards the demographic that most suits the industry.
5. What is Cash Connection’s strategy for competing in the financial services industry? Which of the five generic competitive strategies discussed in Chapter 5 most closely fits the competitive approach that Cash Connection is taking? What kind of financial performance has the strategy produced?Cash Connection’s strategy for competing the financial services industry involved catering towards demographics where they could set up new stores. Allen Franks realized that the first store always happened to make more profit than the latter stores, so he began placing stores in different locations. This proved to be successful in the late 1990’s but later the economic downturn and market saturation led to Cash Connection’s income demise in 2007-2009. The competitive approach that Cash Connection is taking is a focused differentiation strategy- since they focused on a niche market and offered members customized products (cash checking, pay day lending, western union tranfers). The financial performance for Cash Connection proved to be successful until the financial downturn where Income fell sharply due to the fast growing number of firms in the industry0 and other loans were trying to differentiate themselves. I believe that Cash Connection did not adapt to the market in time to have a successful financial performance after the late 1990’s.
6. What evidence suggests that Cash Connection’s strategy and business model are ethical and beneficial to customers and to society at large? Is there evidence to suggest that the company’s strategy and business model are neither ethical nor beneficial to customers and that the entire payday lending industry has few if any redeeming qualities?The evidence that suggests Cash Connection’s strategy and business model were ethical and beneficial to customers and society at large were two aspects: GDP growth, and costumer surveys compared to other financial instruments. GDP growth proved to be significant (2007- attributed 10 billion), and costumer surveys proved that many pay day loan customers were satisfied (70% +) only second to check overdraft protection, (behind other traditional bank instruments). In the case presented, there is no evidence to suggest the company’s strategy and business model was not ethical except for society’s reaction to short term loans that kept the poor, poor. I personally believe that borrowers did not realize the obscenely high fees they were dealing with and thought the convenience overvalued that fees associated with a payday loan.
7. What recommendations would you make to Allen Franks to ensure that Cash Connection pursues an ethical strategy and does not engage in ethical wrongdoing?
I would recommend Allen Franks to partner with a credit union in terms of providing more ethical pricings for short term loans with conditions that went further than government regulation (perhaps it would lead to less profit margins- but more market share). I think that this would help establish their credibility for being a sound and qualified business.