Ibm Play It Safe Essay

2643 words - 11 pages


HBR Case study

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Play It Safe at Home,
Or Take a Risk
by Michael Chu

Case Study

Michael Chu is a senior lecturer at Harvard Business
School and a managing director of the IGNIA Fund,
a venture capital firm based in Monterrey, Mexico.

A U.S. lease-to-own chain considers whether
to test its business in Mexico. by Michael Chu

play it Safe at
Home, or take
A risk Abroad?

HBR’s fictionalized case studies present
dilemmas faced by leaders in real
companies and offer solutions from experts. This
one is based on the HBS Case Study “Aaron’s:
Household Goods for the U.S. Base of the
Pyramid” (case no. 311047) ...view middle of the document...

” He pointed
up at the celebratory banner that still hung

in the front of the store. “Everyone else
I know is talking about layoffs, not grand
Stan felt lucky, too. When his father,
Terry, opened the first Coe’s back in the
1950s, he certainly hadn’t set out to enter
a countercyclical industry. He’d invested
$600 in 32 chairs to rent out to auction
houses, and the business expanded from
there into party equipment and sickroom
gear. In the 1970s he shifted to residential
furniture and other household goods.
Terry prided himself on conservative
growth—when he was starting out, he
wouldn’t buy a second item in a category
(say, a sofa or a refrigerator) until the
first one had been rented—and he took a
“tough love” approach with his employees,
especially with his son. When Stan started
as an assistant manager, in 1984, the same
year Coe’s went public, Terry had expected
him to work harder than everyone else to
prove his worth. And Stan had. Coe’s now
took in over $2 billion a year in revenues.
Stan looked around at the room displays. “We thought this might be a tricky
location for us with Mr. Rental all over
South Tucson,” he said.
Aubrey nodded. “Yes, sir, I was worried
about that, too—market saturation. I’ve

FoR ARTICle RePRINTS CAll 800-988-0886 oR 617-783-7500, oR vISIT HBR.ORg

read about it. But we’re different from
Mr. Rental.”
Unlike many of its competitors, Coe’s
had always emphasized ownership: More
than half of its customers became owners
by the end of their leases, compared with
25% for Mr. Rental. Coe’s offered a monthly
payment schedule and a shorter contract
period (12 months versus four or five years),
which meant higher fees each month but a
lower cost of the eventual purchase. Also,
Coe’s managers were trained to approve
lease agreements only for people who
could afford the payments.
“Are we getting any of Mr. Rental’s customers?” Stan asked.
“Some. But I think our strong opening
is thanks to the recession more than anything. We’re seeing people in here who’d
never have considered Coe’s before—
wealthier folks who are nervous about
committing to big-ticket items outright.”
Aubrey greeted a customer, shaking the
young woman’s hand and offering balloons
from the Grand Opening display to her two
toddlers. He really had a way with people.
Ten years ago, Stan had debated about
hiring him, put off by his lack of sales experience. But Terry had said, as he always did,
“You can teach people to sell, but you can’t
teach them to smile.” And he’d been right.
Managers like Aubrey, who fostered immediate trust with customers, were much
more successful when it came to collecting
the monthly payments.
Once Aubrey had introduced the customer to a salesman, he returned to Stan.
“Can I ask you a question, sir?”
“Yes, Aubrey, as long as you stop calling
me ‘sir,’” Stan said with a laugh.
“I’ve been thinking about how well
Coe’s is doing here, with all the new

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