Cash Connection Case Analysis
Business Strategy – Section 4995 GN
Summer 2012
Case Analysis: Case #8
Cash Connection: Are Its Payday Lender Strategy and Its Business Model Ethical?
Assignment Questions:
1. What does a SWOT analysis reveal about the company’s overall situation?
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities and Threats involved in a project or in a business venture. It involves Specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. SWOT is an excellent business measure that can tell companies where they are and help them steer to where that wan to be in …show more content…
the future. (Wikipedia)
Strengths: Characteristics of the business, or project team that give it an advantage over others.
Weaknesses: are characteristics that place the team at a disadvantage relative to others.
Opportunities: external changes to improve performance in the environment.
Threats: External elements in the environment that could cause trouble for the business or project.
What does SWOT analysis reveal about Cash Connection?
Cash connections Strengths were that they were providing a service to low income families that needed a way to get cash before the regular payday rolled around. A weakness of Cash Connection was that that most people feel they preyed upon low income families and with an average APR rate of about 520%, I’d say that would be a big concern. A couple of opportunities that Cash Connection took advantage of were overdraft protection, credit card payments, quick access to money and bill pay. Threats to Cash connection were banks and the government. As the government and banks watch what they were doing and realized the market size they had gained, they began placing federal regulations and taxes on them that greatly impacted their business. The SWOT analysis reveals many good services that Cash Connection provides to people who need quick access to cash, but it also reveals a dangerous or unethical way to make a lot of money off of already low income …show more content…
families.
2. Are Cash Collection’s strategy and business model ethical or unethical? Why or why not?
Cash Collection’s strategy and business model are ethical. They are ethical because they are giving people the opportunity to obtain a loan when they wouldn’t be able to from a regular bank. Regular banks do not lend out small amounts of money to individuals. Especially individuals with low credit scores. Cash Collection gives the customer the best opportunity in meeting their financial obligations.
3. What evidence suggests the strategy and business model are ethical and beneficial to customers and to society at large?
The evidence suggests that this strategy is beneficial to both the customer and society as a whole.
For example, these loans act as a bridge for customer to be able to pay for unexpected costs that arise before their next paycheck. This could be a repair for their vehicle which they needed to have so they could get to and from work. The book shows how they have an impact on society. It showed that 40 billion dollars worth of credit was extended to customers in 2010. And they also generate revenue for the state and federal government through employment of citizens and by leasing the buildings they operated
from.
4. What evidence suggests the 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 book points out that their business model and strategy is unethical by saying that they “prey” on the poor. The example given is taking a 14 day loan at 20 dollars per 100 dollars. The book says this would equal a 520 percent annual interest rate. That would be true it the customer took the entire year to pay the loan off, but the loan is only for 14 days. If the customer paid the loan off in the two weeks allotted, then the interest rate would be 20 percent. A 20 dollar fee for 100 dollar loan due in two weeks equals 20 percent rate. The book says it is also bad for society as a whole also. Since they “prey” on the poor, they are responsible for more bankruptcies than any other industry. That is what I got from the video that the book provides. There is now way that payday lending is responsible for bankruptcies. They lend such a small amount compared to mortgages, credit cards, and car loans. This fallacy was entertaining enough to chuckle at. They tried to use payday loans as a scapegoat and failed to mention the real culprit of bankruptcies, which are people who do not know how to manage their money and live beyond their means. The real culprit is the consumer and the consumer does not want to take responsibility for their shortcomings.
Summer 2012
Case Analysis: Case #8
Cash Connection: Are Its Payday Lender Strategy and Its Business Model Ethical?
Assignment Questions:
1. What does a SWOT analysis reveal about the company’s overall situation?
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities and Threats involved in a project or in a business venture. It involves Specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. SWOT is an excellent business measure that can tell companies where they are and help them steer to where that wan to be in …show more content…
the future. (Wikipedia)
Strengths: Characteristics of the business, or project team that give it an advantage over others.
Weaknesses: are characteristics that place the team at a disadvantage relative to others.
Opportunities: external changes to improve performance in the environment.
Threats: External elements in the environment that could cause trouble for the business or project.
What does SWOT analysis reveal about Cash Connection?
Cash connections Strengths were that they were providing a service to low income families that needed a way to get cash before the regular payday rolled around. A weakness of Cash Connection was that that most people feel they preyed upon low income families and with an average APR rate of about 520%, I’d say that would be a big concern. A couple of opportunities that Cash Connection took advantage of were overdraft protection, credit card payments, quick access to money and bill pay. Threats to Cash connection were banks and the government. As the government and banks watch what they were doing and realized the market size they had gained, they began placing federal regulations and taxes on them that greatly impacted their business. The SWOT analysis reveals many good services that Cash Connection provides to people who need quick access to cash, but it also reveals a dangerous or unethical way to make a lot of money off of already low income …show more content…
families.
2. Are Cash Collection’s strategy and business model ethical or unethical? Why or why not?
Cash Collection’s strategy and business model are ethical. They are ethical because they are giving people the opportunity to obtain a loan when they wouldn’t be able to from a regular bank. Regular banks do not lend out small amounts of money to individuals. Especially individuals with low credit scores. Cash Collection gives the customer the best opportunity in meeting their financial obligations.
3. What evidence suggests the strategy and business model are ethical and beneficial to customers and to society at large?
The evidence suggests that this strategy is beneficial to both the customer and society as a whole.
For example, these loans act as a bridge for customer to be able to pay for unexpected costs that arise before their next paycheck. This could be a repair for their vehicle which they needed to have so they could get to and from work. The book shows how they have an impact on society. It showed that 40 billion dollars worth of credit was extended to customers in 2010. And they also generate revenue for the state and federal government through employment of citizens and by leasing the buildings they operated
from.
4. What evidence suggests the 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 book points out that their business model and strategy is unethical by saying that they “prey” on the poor. The example given is taking a 14 day loan at 20 dollars per 100 dollars. The book says this would equal a 520 percent annual interest rate. That would be true it the customer took the entire year to pay the loan off, but the loan is only for 14 days. If the customer paid the loan off in the two weeks allotted, then the interest rate would be 20 percent. A 20 dollar fee for 100 dollar loan due in two weeks equals 20 percent rate. The book says it is also bad for society as a whole also. Since they “prey” on the poor, they are responsible for more bankruptcies than any other industry. That is what I got from the video that the book provides. There is now way that payday lending is responsible for bankruptcies. They lend such a small amount compared to mortgages, credit cards, and car loans. This fallacy was entertaining enough to chuckle at. They tried to use payday loans as a scapegoat and failed to mention the real culprit of bankruptcies, which are people who do not know how to manage their money and live beyond their means. The real culprit is the consumer and the consumer does not want to take responsibility for their shortcomings.